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Chapter 4

Market segmentation,

targeting and positioning

Targeting?

Segmentation?

Position?

Three main learning objectives

Market segmentation

This is the process of dividing the total market into several smaller similar groups.

All members in a group have similar factors that influence their demand.

Benefits of segmentation

Identify and satisfy specific benefits

• Efficiently use limited resources

• Select target market.

• Action the market segmentation plan.

Limitations of segmentation

LimitsMass production

increaseExpenses

LimitsStandardisation

Segmentation limits: • Mass production, which offers economies

of scale.• Standardisation of service, which

increases delivery speed and efficiency.Segmentation increases:• Expense through production and

marketing of products to only specific groups of the market.

• Promotion, administrative and inventory costs.

Limitations of segmentation

Bases for segmentation

Bases for segmentation

Demographic

Psychographic

Behaviour

Geographic

Marketer

Population• People constitute a market.

•Marketers analyse the population and its geographic and demographic distribution as the first steps to understanding the consumer market.

Bases for segmentation• Geographic — The city size, urban/ suburban/

rural population distribution and climate.

• Geographic distribution—frequently divided into rural, urban and suburban.

-Rural-Suburban-urban

–Age.–Gender.–Family life cycle.

–Education.– Income distribution.

–Ethnicity.

Demographics—the vital statistics that describe a population. In particular:

Relevance of consumer demographics

• Infant market (0–4 yrs).• Child market (5–12 yrs).• Teenage market (13–16 & 17–20).• Young adult/Young family market (21–

39).• Middle-aged market (40–55).• Mature-age market (55–65).• Over 65s.

Age

GenderMale

Female

Family life cycle

• Single parent and two-parent families.• Young couples with no children.• Family (usually 2 adults, 2 young

children).• Family with teenagers.• Multicultural (or mixed) family.

Family life cycle will determine the purchase behaviour

Consumer income

• Upper class• Middle class• Lower class• …..

Class name Social status Occupation of head of household

% of populati

on

A Upper middle Higher managerial or professional

3

B Middle Intermediate managerial, or professional

14

C1 Lower middle clerical, junior managerial,

administrative

27

C2 Skilled working Skilled manual workers 25

D Working Semiskilled and unskilled workers

19

E Those at lowest levels of subsistence

Pensioners, widows, casual or lower-grade

workers

12

Psychographic — Personalities, lifestyles, social class including activities, interests and opinions (AIO).Behaviour towards products.

Benefits desired or sought.Product usage rate.

Social influences

• Culture.• Social class.• Reference groups.• Families and other households.

– Core values, attitudes and beliefs.

– The family as a buying unit.

Culture difference

Color Red, Yellow, White, Purple

White, Black Red, Black

number 6,8,9,10 7,

4,7 3,13

Class name Social status Occupation of head of household

% of populati

on

A Upper middle Higher managerial or professional

3

B Middle Intermediate managerial, or professional

14

C1 Lower middle clerical, junior managerial,

administrative

27

C2 Skilled working Skilled manual workers 25

D Working Semiskilled and unskilled workers

19

E Those at lowest levels of subsistence

Pensioners, widows, casual or lower-grade

workers

12

Market segmentation process

• 1. Identifying the needs and wants of customers.

2.Identifying the different characteristics between market segments.

3.Estimating the market potential.

Identify the needs and wants of customers

what they need?

Identify different market segments

Identify characteristics that distinguish particular segments from others.

Business persons need first or

business class instead of economy

class.

Estimate the market potential

• Forecasting of market demand will determine:

Market potential

Sales potentialMarket demand

Market share.

Conditions for effective segmentation

A segmentation process must meet 3 conditions:

1. The characteristics used to categorise customers must be measurable and the data obtainable.

2. The segment itself must be accessible through existing marketing institutions with a minimum of cost and waste.

3. A segment must be large enough to be profitable.

Where is the market?

Targeting

Resources

goals & image

profit

Target market strategies

• The target market should be compatible with an organisation’s goals and image.

• The marketing opportunity presented by the segment must match the company’s resources.

• The business must generate a profit if it is to continue its existence.

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

Companymarketing

mix

Companymarketing

mix

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

Companymarketing

mix

Companymarketing

mix

Company mix 1Company mix 1

Company mix 2Company mix 2

Company mix 3Company mix 3

MarketMarket

• VolksWagenwerk 。

Polo

Beetles

Passat

Pheaton

Touran

Positioning

Definition:• Customers’ image or perception of a

particular brand or company

How is my image?

Positioning strategies

Class or attribute

Price & Quality

competitor

Cappuccino from Starbucks

Beef sandwiches from McDonalds

Iphone 4 from Apple

N95 from Nokia

Camry from Toyota

5 series from BMW

Neverfull bag from LV

1.Brief introduction of the product

2.Identify target market of the product