MBA 6033

Marketing Management

CHAPTER 3
Market Segmentation,
Market Targeting & Market
Positioning

LEARNING OUTCOMES
At the end of this chapter students will be able to:
explain the first step of marketing strategies: market
segmentation, market targeting, and market positioning
discuss the levels of market segmentation
describe the types of market segmentation that used for
customer markets
analyze the criteria used for effective market segmentation
evaluate how companies position their products in the
minds of consumers

Steps of Marketing Strategy

Market segmentation: dividing market into

smaller groups of customers with similar needs,

characteristics and behaviors.
Market targeting: evaluating and selecting
groups/segments of customers to serve.
Market positioning: creating a clear,
distinctive position in the minds of consumers.

Levels of Market Segmentation

Mass Marketing
Mass marketing, mass production of one
product for all customers (eg. Model T
Ford only black colour, One type of Coke).
Now, consumers - stand out from crowd
Turn to micromarketing
segments, niches, local &
customization

Levels of Market Segmentation

Important

Segment Marketing

Market segment group with similar needs &

wants (eg. Car buyers luxury, design or lowcost)

Segment marketing better satisfy target

market & reflect competitors marketing

One way - identify preference segments

Levels of Market Segmentation

Niche Marketing
Niche - narrow group distinctive mix of benefits
An attractive niche characterized as:
Distinct set of needs
Pay premium for it
Do not attract competitors
Economies through specialization
Size, profit & growth potential

(Eg. Ferrari, Satria Neo; Perfumes Estee Lauder;

Coke -> Tarumi in Japan for elderly people))

Levels of Market Segmentation

Local Marketing
Local marketing - tailored to needs & wants
of local groups
Countries with strong regional differences (China

55 ethnic minority of 1.3 billion people)

Grassroots marketing - closest to customers as
possible (eg. Nike sponsor local school
teams)
Experiential marketing connect customers to
unique & interesting experiences (eg. Berjaya
Time square )

Levels of Market Segmentation

Customerization
Customization = one-to-one marketing
Customerization operationally driven mass
customization & marketing customization
Empowers consumers design product of choice, Eg:
Online firms provide Choice board: customer design
own products (Dell Computer)
Paris Miki Japanese eyeglass retailer
De Beers design own diamond ring

Questions for Discussion

1. Explain what is segmentation.
2. Choose one of the levels of
segmentation below and explain how it
can be implemented in a company:
a) Segment Marketing
b) Niche Marketing
c) Local Marketing
d) Customerization

Segmenting Customer
Markets

Geographic Segmentation

Divide market into different geographical units:

nations, states, regions, counties, cities or
neighborhoods
Mapping software - densest areas customer cloning
Geoclustering = geographic data + demographic
data
Captures increasing diversity of population

Segmenting Consumer Markets

Demographic Segmentation
AGE AND LIFE-CYCLE STAGE
Consumer wants & abilities change with age
But, target market for products may be
psychologically young

LIFE STAGE
Same in life-cycle may differ in life stage
Life stage
Persons major concern - divorce, second
marriage, caring older parents, new home:
Opportunities for marketers who can help
people cope with major concerns

Segmenting Consumer Markets

Demographic Segmentation

GENDER
Men & women - different attitude & behavior genetic makeup & socialization
Male-oriented markets - recognize gender
segmentation

INCOME
Long used in clothing, cosmetics, travel etc
May not predict best customers for product

Segmenting Consumer Markets

Demographic Segmentation
GENERATION

Growing up times - profound influence on generation

Cohorts - same major cultural, economic experiences outlooks & values

Marketers - use icons & images prominent in their experiences

SOCIAL CLASS
Strong influence on preference in cars, clothing,
leisure activities & retailers
Design for specific social classes
Tastes of social class change with years

Segmenting Consumer Markets

Psychographic Segmentation

Psychographics
Use psychology & demographics to better understand
consumers
Psychographic segmentation groups based on - lifestyle,
personality, values
Same demographic group can have different psychographic
profiles
Buyers into groups knowledge, attitude, use, response to
product

DECISION ROLES
Easy to identify buyer for many products
But buying roles change

Segmenting Consumer Markets

Behavioral Segmentation
BEHAVIORAL VARIABLES
Occasions: time of day, week, month, year or any defined aspects
of life
Buyers - occasions need/buy product
Extend activities linked to holidays to other times of year
Benefits:
Buyers grouped benefits they seek
User Status:
non-users, ex-users, potential users, 1st time users, regular
users of a product.
Market leaders - attract potential users
Small firms - attract users from leader

Segmenting Consumer Markets

Behavioral Segmentation
Usage Rate:
light, medium & heavy product users
Heavy users
Small % of market but high % total consumption
Loyal to only one brand or lowest price
Burger King targets at Super Fans (age 18 to 34), who eat
an average of 16 times a month.
Loyal Status
- Consumer Loyalty: brands (BMW); Stores (AEON);
Companies (Petronas)
- Macolytes: fanatically loyal Apple product users

Buyer- Readiness Stage

Stages in the adoption process:
Awareness, interest, evaluation, trial, and adoption

Question for Discussion

1. Choose one and explain how
companies could implement the
following types of segmentation:
a) Geographic segmentation
b) Demographic segmentation
c) Psychographic segmentation
d) Behavioral segmentation

Consumer Market Segmentation

Geographic:
Regions
Size/density
Climate

Demographic:
Age/generation
Gender
Family size/lifecycle
Income
Occupation
Religion
Ethnic origin

Psychographic:
Social class
Lifestyle
Personality

Behavioral:

Occasions
Benefits
User status
Usage rate
Loyalty status
Readiness state
Attitude toward
product

Business Market Segmentation

Demographic:
Industry
Company size
Location

Operating
variables:
Technology
User/non-user
status
Customer
capabilities

Situational
factors:
Urgency
Specific application
Size of order

Purchasing
approaches:
Purchasing
organization
Power structure
Existing relationships
General policies
Purchasing criteria

Personal
characteristics:
Buyer-seller similarity
Attitude towards risk
Loyalty

Criteria for Effective Segmentation

To be useful, market segments must be:
Measurable:
Size, purchasing power, and profiles
can be measured
Accessible:
Segments can be reached & served
Substantial:
Large enough to be profitable
Actionable:
Programs can be developed to attract
and serve the segments

Market Targeting
Three factors used to evaluate segments:
Segment size and growth
Structural attractiveness
Competition, substitute products, power
of buyers/suppliers
Company objectives and resources

Selecting Market Targeting

Factors to be considered:
Company resources
Product variability
Products life-cycle stage
Market variability
Competitors marketing
strategies

Selecting Market Targeting

Factors
Company Resources
Product variability
Products Life-Cycle Stage
Market Variability
Competitors Marketing
Strategies

Adoption of Strategies
Limited Concentrated Marketing
Undifferentiated for standard
products
Differentiated / Concentrated Design
Undifferentiated introduction
stage
Differentiated mature stage
Undifferentiated same taste,
amount
Differentiated different taste,
amount
Engage differentiated strategy
when

Positioning for Competitive

Advantage
Product position: the way the product is
defined by consumers on important
attributes, relative to competing products
Competitive advantage: an advantage
gained over competitors by offering (and
delivering) greater value
Sources of differentiation:
Product
Service
Marketing channels
People
Image

Focus in Differentiation
Unique selling proposition (USP):
aggressively promoting one benefit to
the target audience
Differences should be:
Important
Distinctive
Superior
Communicable
Pre-emptive (take measures to
prevent)
Affordable

Positioning

Strategy
Positioning
the act of designing
companys offering & image
to occupy a distinctive place
in the minds of target market

REFERENCE:
Kotler et. al., (2013). Marketing
Management: An Asian Perspective,
Pearson.

End of
chapter 3
Quality is not
an act, it is a
habit.

~ Aristotle ~

THANK YOU