Market Segmentation

Market Segmentation

If the demand forecast looks good, the company next decides how to enter the market. The market consists of many types of customers, products and needs,

The marketer has to determine which segments offer the best opportunity for achieving company objectives. Consumers are grouped in various ways based on

geographic factors (countries, regions, cities); demographic factors (sex, age, income, education); psychographic factors (social classes, lifestyles); and behav­ ioural factors (purchase occasions, benefits sought, usage rates). The process of dividing a market into groups of buyers with different needs, characteristics or behaviour, who might require separate products or marketing mixes, is market

murkci segmentation segmentation.

Dividing a market into Every market has market segments, but not all ways of segmenting a market

distinct groups of buyers are equally useful. For example, Panadol would gain little by distinguishing

teitft different needs, between male and female users of pain relievers if both respond the same way to

characteristics or marketing stimuli. A market segment consists of consumers who respond in a

behaviour, laho might require separate

similar way to a given set of marketing stimuli. In the car market, for example, products or marketing consumers who choose the biggest, most comfortable car regardless of price make

up one market segment. Another market segment would be customers who care mainly about price and operating economy. It would be difficult to make one

market segment model of car that was the first choice of every consumer. Companies are wise to

A group of consumers focus their efforts on meeting the distinct needs of one or more market segments.

who respond in a similar 'way to a given

• Market, To/'gcfing set of marketing stimuli.

After a company has defined market segments, it can enter one or many segments market targeting of a given market. Market targeting involves evaluating each market segment's

The process of attractiveness and selecting one or more segments to enter. A company should

evaluating each market, target segments in which it has a differential advantage over its competitors;

segment's al.tracCi'oeness and selecting tine or

where it can generate the greatest customer value and sustain it over time. A more segments to enter. company with limited resources might decide to serve only one or a few special

segments; this strategy limits sales, but can be very profitable, Alternatively, a company might choose to serve several related segments ­ perhaps those with different kinds of customer, but with the same basic wants. Or perhaps a large company might decide to offer a complete range of products to serve all market segments. The closely linked processes of market segmentation and targeting are

both developed in Chapter 9. Most companies enter a new market by serving a single segment, and if this proves successful, they add segments. Large companies eventually seek full market coverage. They want to be the 'General Motors' (GM) of their industry. America's GM says that it makes a car for every 'person, purse, and personality'. Similarly. Japan's Seiko is proud of its range of 2,500 watches designed to cover

product position consumer segments across the world. The leading company normally has

The way the product is different products designed to meet the special needs of each segment.

defined by consumers nn important attributes ­

the place the product

• Positioning

occupies in Consumers' minds relative to

After a company has decided which market segments to enter, it must decide competing products. what 'position' it wants to occupy in those segments. A product's position is the

108 • Chapter3 Strategic Marketing Planning

Market positioning: Red Roof Inns positions on value ­ it doesn't 'add frills that only add to your bill.' In contrast, Four Seasons Hotels positions on luxury. For those tci/to can afford it, Four Sea­sons offers endless amenities ­ such us a seamstress, a valet and a

'tireless individual who collects your shoes each night and returns them at dawn, polished to perfection'.

place the product occupies in consumers' minds. If a product were perceived to

be exactly like another product on the market, consumers would have no reason to buy it.

market positioning Market positioning gives a product a clear, distinctive and desirable place in Arranging for a product

the minds of target consumers compared with competing products. Marketers to occupy a clear,

plan positions that distinguish their products from competing brands and give distinctive and desirable

them the greatest strategic advantage in their target markets. For example, Ford place relative to

says, 'Everything we do is driven by you'. Renault builds cars that 'take your competing products in

breath away', Mitsubishi's are 'designed to be driven'. BMW is 'the ultimate driving tlie minds of target

machine'. Rolls­Royce cars are 'Strictly for the wealthy arrived individual', while consumers. Formulating

competitive positioning the equally luxurious Bentley is 'The closest a car can come to having wings'. for a product and a

Such simple statements are the backbone of a product's marketing strategy. detailed marketing mix.

In positioning its product, the company first identifies possible competitive advantages upon which to build the position. To gain competitive advantage, the company must offer greater value to chosen target segments, either by charging lower prices than competitors or by offering more benefits to justify higher prices. However, if the company positions the product as offering greater value, it must deliver greater value. Effective positioning begins with actually differentiating the company's marketing offer so that it gives consumers more value than is offered by the competition.

The company can position a product on only one important differentiating factor or on several. However, positioning on too many factors can result in consumer confusion or disbelief. Once the company has ehosen­a desired pos­ ition, it must take steps to deliver and communicate that position to target consumers. Chapter 10 focuses on positioning and tells how the company's entire marketing programme should support the chosen positioning strategy.

The Marketing Process • 109