3.4 Market Segmentation and Targeting

Market segmentation is all about dividing customers into groups with similar needs. It's like sorting your closet - you put similar clothes together to find what you need faster. This helps businesses tailor their products and marketing to specific groups.

Segmentation uses factors like where people live, how old they are, and what they like to do. By focusing on specific groups, companies can make their marketing more effective and give customers exactly what they want.

Market Segmentation: Concept and Importance

Definition and Process

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• Market segmentation is the process of dividing a market into distinct groups of buyers with different needs, characteristics, or behaviors who might require separate products or marketing mixes
• This process allows companies to better satisfy the needs of their customers by tailoring their product offerings, prices, distribution channels, and promotional efforts to the specific requirements of each segment

Benefits and Outcomes

• Effective market segmentation can lead to increased customer satisfaction, loyalty, and profitability for a company
• It helps companies identify underserved or untapped market segments, allowing them to develop new products or services to meet the needs of these segments (niche markets)
• By focusing on specific segments, companies can allocate their resources more efficiently and effectively, leading to better returns on investment
• Market segmentation enables targeted marketing efforts, reducing waste and increasing the effectiveness of marketing campaigns

Bases for Market Segmentation

Geographic and Demographic Segmentation

• Geographic segmentation divides the market based on geographical units such as nations, states, regions, counties, cities, or neighborhoods, considering factors like population density, climate, and cultural preferences
• Demographic segmentation divides the market based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, and nationality
• Examples of demographic segments include baby boomers, millennials, high-income households, and college-educated professionals

Psychographic and Behavioral Segmentation

• Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality characteristics, considering factors like attitudes, values, and interests
• Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product, considering factors like occasion, benefits sought, user status, usage rate, loyalty status, and readiness stage
• Examples of psychographic segments include environmentally conscious consumers, luxury seekers, and adventure enthusiasts
• Examples of behavioral segments include heavy users, brand loyalists, price-sensitive buyers, and first-time buyers

Target Market Selection Process

Evaluating and Selecting Market Segments

• Evaluating market segments involves assessing the attractiveness of each segment based on factors such as size, growth, profitability, competition, and alignment with the company's objectives and resources
• Selecting target market segments requires choosing one or more segments to enter based on the evaluation of segment attractiveness and the company's ability to serve those segments effectively

Targeting Strategies

• A company can consider three main targeting strategies: undifferentiated marketing (mass marketing), differentiated marketing (segmented marketing), and concentrated marketing (niche marketing)
• Undifferentiated marketing involves ignoring segment differences and targeting the whole market with one offer, which can be cost-effective but may not fully satisfy any specific segment
• Differentiated marketing involves targeting several market segments and designing separate offers for each, which can create more total sales but also increases costs
• Concentrated marketing involves focusing on a large share of one or a few submarkets, which can be highly profitable but also carries higher risk

Positioning Strategies for Target Markets

Positioning Concept and Requirements

• Positioning is the act of designing a company's offering and image to occupy a distinctive place in the minds of the target market, emphasizing the distinguishing features and benefits that set the product apart from competitors
• Effective positioning requires a clear understanding of the target market's needs, preferences, and perceptions, as well as the competitive landscape
• A company can position its product based on specific product attributes, benefits, usage occasions, user categories, or competitors (eco-friendly, luxury, convenience)

Perceptual Mapping and Positioning Statements

• Perceptual mapping is a technique used to visualize the positioning of a company's product or service in relation to competitors based on key dimensions that are important to the target market
• Developing a positioning statement can help guide the development of the marketing mix and ensure consistency in marketing communications
• A positioning statement should clearly articulate the target market, the product category, the key benefit, and the basis for differentiation

Repositioning

• Repositioning involves changing the positioning of a product or service in response to changes in the market, competition, or customer preferences
• Repositioning may require modifications to the product, price, distribution, or promotion to align with the new positioning strategy
• Examples of repositioning include shifting from a budget to a premium brand, targeting a new age group, or emphasizing different product benefits