MARKET SEGMENTATION &

TARGETING
MARKETING MANAGEMENT
BBAH
Why is Segmentation
even more important today?
The argument for mass marketing is that it creates
the largest potential market, [and] leads to the
lowest costs, which in turn can lead to lower prices
and higher margins.




Some [experts] claim that mass marketing is dying.
Most companies are returning to micromarketing
at one of four levels: segments, niches, local areas and
individuals.
Level 1: Segments marketing
Segment marketing offers key benefits over
mass marketing
But, even a segment is partly a fiction, in that
not everyone [in the segment] wants exactly the
same thing.
Andersun & Narus suggested the idea of flexible
market offerings comprising:
A Standard option and
Discretionary options.
Examples of flexible offerings range from
automobiles (Toyota) to sandwiches (Subway).
.
Level 1: Segment Marketing
Kotler: We can characterize market segments
in different ways. One way is to identify
preference segments:
Homogenous preferences: all consumers have
roughly the same preferences;
Diffused preferences: consumers vary greatly in
preferences i.e. scattered, not concentrated;
Clustered preferences: natural market segments
emerging from groups of consumers with shared
preferences.
Niche: a customer group seeking a distinctive mix of
benefits niche is created through sub-segmentation.
Level 2: Niche Marketing
Colgate Herbal toothpaste
contains cloves (a household
remedy), mint (refreshing taste)
and tulsi (having curative
properties) and caters to a
niche.
Characteristics of an attractive niche:
Products cater to distinctive needs;
Premium pricing is common;
Absence of competition - limited market;
Economies effected through specialization.
Level 2: Niche Marketing
Larger companies like IBM have lost pieces of their
market to nichers.
As marketing efficiency increases, niches that were
seemingly too small become profitable.
In the apparels business plus-sized fashion has
become a growing niche. Plus-size clothes are also
available for professional business attire.
Hallmark cards do niche marketing: segmenting by
age, event & ethnic lines but operate on a global
basis.
Level 3: Local area or Grassroots
Marketing
Local area marketing - also referred to a
grassroots marketing is another interesting trend.
Student Biryani: an ideal example
of a successful local marketing
venture. A famous national brand
today, Student Biryani is now going
niche: catering to ethnic Pakistani
food market abroad.
Nikes initial success was based on grassroots
marketing: sponsorship of local school teams, expert-
clinics, providing sporting gear to college students etc.
From Local Area to Niche Marketing:
Story of Student Biryani

The idea of Caf Students was conceived & realized in
1969, by the Late Haji Mohammad Ali.
From humble beginnings, over 40 years, patience &
hard work resulted in a gradual but significant growth
in business.
In 1976, first infrastructural
improvement was made - first outlet
opened in Saddar with seating
capacity of a hundred people.
Two years ago, an outlet was opened
in Dubai.
Company now exploring market
potential in Gulf, UK, USA & Europe.
Level 4: Individual Marketing
Segments of one, customized marketing, one-to-one
marketing: expressions that have assumed new meaning;
Internet the enabler, increasingly relied upon by
companies & businesses for mass customization.
Problems associated customized marketing:
1. Not suitable for every company;
2. Often customers do not know what they want from a
product until they see it in finished form.
Success with customized marketing:
Paint companies like ICI Dulux Paints;
Levis Jeans;
Subway sandwiches.
Traditional bases for Segmenting Consumer
Markets
Descriptive characteristics:
1. Geographic: In South Asia division of market into
rural and urban is critical.
Significant difference in literacy levels, income &
spending power, infrastructure availability;
Social and cultural orientations vary;
Buying pattern, habits, attitudes and preferences
for goods and services are divergent.
Traditional bases for Segmenting
Consumer Markets
Descriptive characteristics:
2. Demographic: age, family size & life cycle,
gender, income, education etc.
TV Channels for Children, Women and for people
interested in news, nature, science, social sciences;
Banking & insurance products for children or the
elderly;
Skin-care products, hair-wash products, personal
care products, dental products: tooth powder or
toothpaste (herbal or non-herbal);
Generation X and Generation Y products.
Traditional bases for Segmenting
Consumer Markets
Descriptive characteristics:
3. Psychographic: psychology, personality, lifestyle,
motivation and values.
Food products: Halal or Vegetarian or Organic;
Apparel and accessories: Branded, unbranded;
ornate or functional;
Associations & affiliations: Clubs, social service
organizations.
VALS (values & lifestyles classification) a popular
framework for psychographic segmentation. Basis:
Motivations & Resources.
VALS (values & lifestyles classification)
Behavioral Segmentation
Decision Roles in buying:
Initiator
Influencer
Decider
Buyer
User
Marketers also sometimes divide buyers on the basis
of their knowledge of, attitude toward, use of, or
response to a product.
Behavioral variables:
Occasions,
User status,
Usage rate,
Loyalty status,
Buyer-Readiness,
Attitude.
Effective Criteria for Segmentation
Not all bases of segmentation, not all types of
segmentation are useful.
To be useful, one or more of the following five
criteria must be met. Segmentation should be:
1. Measurable
2. Accessible
3. Differentiable
4. Actionable.
Possible Patterns of Target Market Selection
In evaluating different market segments, firms look at
TWO factors:
1. the segments overall attractiveness
2. the company's objectives & resources.
P = Product; M=Market
M1 M2 M3
P1
P2
P3
Single-segment
Concentration
M1 M2 M3
P1
P2
P3
Selective
Specialization
Possible Patterns of Target Market Selection
Single-segment
Concentration
Single-Market
Specialization
In evaluating different market segments, firms look at
TWO factors:
1. the segments overall attractiveness
2. the company's objectives & resources.
P = Product; M=Market
M1 M2 M3
P1
P2
P3
M1 M2 M3
P1
P2
P3
Possible Patterns of Target Market Selection
In evaluating different market segments, firms look at
TWO factors:
1. the segments overall attractiveness
2. the company's objectives & resources.
P = Product; M=Market
M1 M2 M3
P1
P2
P3
Full Market
Coverage
Approaching each country uniquely with a
single global advertising platform

Segmentation at HSBC
HSBC: approaching each country uniquely
with a single Global platform
HSBC the worlds local bank - a globe
spanning financial institution with unique focus on
serving local markets.
Second largest bank with 100 million+ customers,
9,500 branches in 79 countries.
Our position as the worlds local bank enables us to
approach each country uniquely, blending local knowledge
with a worldwide operating platform.
Chairman, Sir John Bond
The HSBC Example: approaching each
country uniquely with a Global platform
One TV spot showed how a US businessman hitting a
hole-in-one at a golf course in Japan, instead of
simply offering drinks at the clubhouse, ended up
buying expensive gifts for them as per Japanese
custom. The ad closed with a shot of his partners
wearing the expensive looking new clothes &
watches.
HSBCs worlds local bank ad campaign
demonstrated how different cultures interpret the
same object or event.
The HSBC Example: approaching each
country uniquely with a Global platform
Winner of the most knowledgeable cabbie
competition in New York, organized by HSBC paid
to drive an HSBC branded BankCab for an entire
year.
In Malaysia HSBC offered a no-frills smart card to
students from under-served communities to go through
college.
The HSBC Example: approaching each
country uniquely with a Global platform
HSBC was ranked 26
th
on the Interbrand/ Business Week
global brand ratings.