segmentation and targeting strategies

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SEGMENTATI

ON AND

TARGETING

STRATEGIESCONSUMER BEHAVIOUR (311)

BY: ANKITA GAUR 05

MBA 2012 MEENU

GUPTA 29 MBA 2012

SAKSHI GUPTA 45 MBA

2012


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Market Segmentation

What is MARKET?

A market is a place which allows the purchaser and the seller to invent and gather informations

and lets them carry out exchangeof various products and services. In other words the Meaning

of Market refers to a place where the trading of goods takes place. The place can be a market

place or a street market. A market is thus by definition comprises people or business with

potential interest, purchasing power and willingness to spend the money to buy a product or

service that satisfies need. The following diagram illustrates this concept.

2

Total

populatio

Felt

need

Intee!te

d

Mone"

to Bu"

#illin$ne

!! to

Ma%et
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xample! Tatas have started producing a Mercedes "en# car here in India. Many individuals

have a need for car but they may not need a luxury car like Mercedes. They are happy with a

santro or chevy spark or Maruti. $ome might be interested in a luxury car, but may not be

interested in Mercedes as it may attract the attention of tax authorities. They may prefer luxury

cars like %onda city, &ord &iesta, 'ctavia and so on. $ome may be interested in Mercedes but

they are not able to afford a price of (s.)*lakh. Thus, the market for Mercedes is a very small

portion of luxury car markets, which is a small portion of the total car markets.

What is market segmentation?

+ets us first see what market segmentation means is!

Markets are Heterogeneous; Segmentation divides them into Homogeneous Sub-Units

The market for a product is nothing but the aggregate of the consumer of that product. e also

know that consumer of a product vary in needs, motivates, characteristics, and buying behavior.

It means that the market for a product is essentially a heterogeneous unit. Markets break up the

heterogeneous market for product into several sub units, or sub markets, each relatively more

homogeneous within itself, compared to market into a number of sub markets- distinct sub units

of buyer , each with relatively more homogeneous characteristics, is known as market

segmentation.

It is the onsumer !ho are Segmented" #ot $rodu%t" nor $ri%e

It would be useful to provide one important clarification right at the beginning. Markets,

sometime, speaks of product segments and price segments and use these expressions as

synonymous with market segments. This can leads to a wrong understanding of what market

segments, or for that matter, the process of market segmentation as a whole, actually connote.

e have to be clear that in market segmentation, it is the consumers who are segmented, not the

product, nor price. Market is about people who consume the product, not about the product thats

gets consumed. &or example, in segmentation of the passenger car market, it is not the passenger

cars product/ that are segmented, but it is the consumer-buyer of car that is segmented. $imilar

is the position about the price segments. Taking the passenger car instance again, it is not the

cars that are segmented with price as the base, but it is the buyer of cars that are segmented, with

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their price preference for car as the base. e do speak about 0price slots in segmentation. "ut it

does not mean that the price slots constitute the segments. hat it signifies is that different offers

are made available matching the differing price preference of the consumer segments involved.

01rice slots and specific products offers thereof are 2ust a derivative of segments of consumers.

It is the consumer, who invariably defines the segments, not product, nor price slots.

xample! Titan Wat%hes

Arrives in three broad Segments

The (ich

The Middle

The +ower

Titan &rings out a Wide Range o' (''er to Serve the )i''erent *a+ue Segments

&or the 3old lovers!

Titan offered to this segment an all gold watch4 the Aurum and (oyal

lines.

&or the More than 'ne $egments!

&


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Titan made those who wanted more than one watches into a separate

segment ad tempted them by offering a wide range of models. It offered them matched

ones dress and occasions.

&or the youth -the outdoor lovers!

Titan viewed them as a lifestyle segment and offered them the

fast track.

&or 5esigner $egment!

Titan also adopted the designer segment and offered them all designer

and hand assembled watches, the uro collection, designed by uropean designers.

&or the 6hildren

Titan adopted children 7 those between 8 to 9: years as o separate segment

5ash for ;ids/

&or omen $eeking &ashion within the Middle4income 3roup!

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Titan offered the (aga (ange for this segment which was meant

exclusively for women.

Wh, segment the market?

Market segmentation benefits the market in several ways.

a%i+itates Right hoi%e o' Target Market

$egmentation helps the marketer to pick up his target market properly. It does this by

enabling him to distinguish one customer group from another within market and by

showing him, which segments of the market match his situation and should, hence, form

his target market.

a%i+itates E''e%tive Ta..ing o' the hosen Market

$egmentation enables the markets to crystalli#e the needs of each of the chosen segments

and make offer that match them. hen buyers are handled after segmentation, the

response from each segment will be more homogeneous. This in turn, will help the

marketer develop marketing offers-programmers that are most suited to each segments.

They can adapt the offers to the target segments the, achieves the speciali#ation re


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$egmentation also makes the marketing more efficient and economic. It ensures that the

marketing effort is concentrated on selected and well4defined segments. After all, for

most firms, the resources would benefits if its efforts were concentrated on selected

segments4 the ones that match the firms resources and are most productive and

profitable.

He+.s Identi', /ess Satis'ied Segments and on%entrate on Them

$egmentation also helps the marketer to asses to what extent existing offers in the market

matches the needs of different customer segments and which are the less satisfied

segments.

Market %an be segmented using severa+ bases 0 A market- consumer population for a

product can be segmented using several relevant bases. The ma2or ones include!

3eographic

5emographics

$ocio4cultural

1sychographic

"uying "ehavior

Ma%etSe$*entat

ion

+e*o$ap,i-

.eo$ap,i- So-io/Cultual

Bu"in$ !"-,o/$ap,i-!


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1eogra.hi% Segmentation

$egmentation of consumer based on factors like climate #one, continents- country, region, state,

district, and urban-rural area, constitutes geographic segmentation. Marketer, who operate

globally, often segment the market segments the market by continents-country-region in the first

instance, and then go for segmentation on other bases. =ational markets within a country like

India, often segment the market by region, state, district and urban-rural area, in the first

instance, and then go for segmentation on other bases.

xample! 3eographic decides the product consumption pattern. 1eople in coastal areas of

;onkan and 3oa relish rice, a staple grain there and fish abundantly available from sea. $outhern

are found of coffee and north Indians like Tea. 1eople down south use talc excessively, and

apply it even on face, perhaps aspiring to fairer like their counter part in the north. hen we sale

our product to international market. 1roducts are made according to their need. (asna

international gives instant syrup when dissolves in glass of water, and does not contain a lot of

sugar. 6omplexion creams like fair and lovely sells only in India.

)emogra.hi% segmentation

$egmentation of consumer based on variables such as race, religion, community, language, age,

stage in family cycle, gender, marital status, family si#e, occupation, economic


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position-income-purchasing capacity level, and social status ,of the consumer demographic

segmentation.

Age0 It is essentially a case of age based segmentation of a market.

E2am.+e0Amu+ has segmented his .rodu%t in di''erent age grou.

or kids0 Amul kool, chocolate milk, =utramul energy drink.

or 3outh0 Amul cool kafe.

or !omen4s and o+der .eo.+e0 Amul calci>, Amul $hakti energy drink

1ender0 3ender is another key variable-base under demographic segmentation. There is

substantial evidence that men and women differ in buying behavior and it their

persuasive messages. omen tend to be slower to make decisions and exhibit greater

uncertainty about their decisions. And, they are also more persuadable.

E2am.+e0 Adidas targets !omen in India

3erman shoe maker Adidas is trying to develop the women segment in

India for its products.

Emami segmented its .rodu%t in gender

omens! =aturally fair
http://www.amul.in/award/lists/images/amul.jpg


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Men! &air and handsome

$ur%hasing %a.a%it,0 In the segmentation context of several elements of demographic,

purchasing capacity is perhaps the most significant one. "uyers preferred price range is

often related to purchasing capacity.

E2am.+e0 #okia

It deals with wild variety and wild range.

=okia *8?? price (s.*@?

=okia 9)? price (s. )??

=okia =@) price (s.9*, ??

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=okia =B price (s **,@?

&udget %ar segment-

It is the largest segment in Indian market. %ere the entry level starts from (s 9. to ) lakh.

Maruti 566 and (mniare the dominant players in these segments. ith the launch of Tata

#anowith a price range of 9lakh the outlook of this segment has changed. This segment is

sometimes referred to as the small car segment. 6ompetition in this segment is extreme in Indian

market.

Maruti 566 7&udget ar Segment8

om.a%t %ar segment4

It lies between budget car and family car. 1referred price range is between (s ) to :. lakh.

Maruti 9en" iat Uno" Tata Indi%a" Santro" Mati: is some of the dominant players in this

segment.

Maruti 9en 7om.a%t %ar segment8

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)ae!oo Mati: 7om.a%t %ar segment

ars o' %om.a%t segment

ami+, %ar segment4

The purchasing capacity of buyers of this segment is somewhat higher than that of the budget

and compact car segment. 1rice ranges between (s :. to 8 lakhs. Maruti Esteem" )ae!oo

ie+o" and HMontessabelongs to this segment. In India cars that are sold in India as 0"udget

6ar and 06ompact 6ar do not meet their purpose, especially in term of space, that they turn to

0the family car segment.

)ae!oo ie+o 7ami+, ar segment8

$remium %ar segment4

This segment represents the buyer who re


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(.e+ Astra 7$remium %ar segment8

Su.er +u2ur, sa+oon segment4

"uyer in this segment looks for a real super premium segment car. Mer%edes &en: E


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E2am.+e0 Dee Televisions deals with variety of channels regional channel, sports channel,

movie channel.

Mc5onald has both veg and non veg burger. Mc5onald has veg burger for vegetarian and

nonveg burger for non vegetarian.

$s,%hogra.hi% segmentation

1sychographic $egmentation groups customers according to their life4style and buying

psychology. Many businesses offer products based on the attitudes, beliefs and emotions of their

target market. The desire for status, enhanced appearance and more money are examples of

psychographic variables. They are the factors that influence your customersE purchasing decision.

In psychographic segmentation, elements like life style, attitude, self4concept and value system,

form the base.

/i'e st,+e0 Fust as purchasing capacity forms a ma2or base under demographic

segmentation, life style forms a ma2or base under psychographics segmentation.

E2am.+e0

a'@ o''ee )a,

They choose lifestyle oriented, urban consumers as target with youth.

They make coffee an 0experience and provide a special experience to chosen segment.

665 has estimated that presently 8?G of the footfalls in its )?? outlets belong to

students between the ages of 9 to *: years. The 665 are targeting students and trying to

establish a space in their lives.

$s,%hogra.hi% segmentation he+.s in .ositioningre.ositioning" +aun%h o' ne!

.rodu%ts and brand e2tension0$egmentation consumer based on psychographic rest on

identifying consumer state of mind and hence helps in piecing together a more inclusive

1&
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profile of target consumer. It is therefore, particularly, useful in positioning-repositioning

of product and in new product launch and brand extension.

&u,ing &ehavior Segmentation

Markets can be segmented on the basis of buyer behavior as well. $ince all $egmentation is in a

way related to buyer behavior, one might be tempted to ask why buyer behavior4based

segmentation should be a separate method. It is because there is some distinction between

buyers characteristics that are reflected by their geographic, demographic and psychographic

profiles, and their buying behavior. Marketers often find practical benefit in using buying

behavior as a separate segmentation base in addition to bases like geographic, demographics, a

psychographics.

The primary idea in buyer behavior segmentation is that different customer groups expect

different benefits from the same product and accordingly, they will be different in their motives

in owing it and their behavior in buying it. Hariables of buyer behavior are!4

&ene'it sought0 - uality - economy - service - look etc of the product.

E2am.+e0=estle has found a separate segment atta noodles as distinct from the maida noodles.

Usage rate0 - %eavy user - moderate user - light user of a product.

User status0 - (egular - potential - first time user - irregular -occasional.

/o,a+t, to brand0 - %ard core loyal - split loyal - shifting - switches.

(%%asion(%%asion0 - %olidays and occasion stimulate customer to purchase products.

Attitude to!ard o''ering0Attitude to!ard o''ering0 4 nthusiastic - positive attitude - negative attitude - indifferent -

hostile.

E2am.+e0$hampoos, soap and all &M63 products buying behavior segmentation is used.

Mu+ti-+eve+ Segmentation0 A Market %an be segmented" using severa+ bases in su%%essionMu+ti-+eve+ Segmentation0 A Market %an be segmented" using severa+ bases in su%%ession

hile discussing about bases of segmentation we must discuss about multi4level segmentation,

as it is not as through segmentation bases discussed above are mutually exclusive and a market

1'


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can be segmented only with one particular base, on either - or basis. $ince customer

characteristic are spread over several variables, any market can be segmented through several

bases. 5ifferent bases can be used in combination in segmenting a given market. They 2ust have

to be relevant for the concerned market. Actually, the different bases can be used in succession in

a suitable order, and the market can be segmented at multi4levels.

&or example, a market can be segmented using the demographic base in the first instance,

followed by the psychographic base and the buyer behavior-benefit base. 'r, the market can be

segmented using volume as the base in the first instance, followed by the

demographic-psychographic-buyer behavior-benefit base. Assuming for example, that the firm

first carries out volume segmentation of its market, it can know who the heavy user of its product

are, but it cannot know the purpose for which they buy the product. The firm can then pick up

the heavy users and carry out a multi4level segmentation, and continue its probe more deeply.

$ince each of these bases has several sub4bases, the numbers of levels in which a market can be

segmented are indeed numerous. Actually, the aim should always be to go as deep as possible in

segmenting the market so that segments that are most attractive and most suited can be chosen

Mu+ti-+eve+ segmentation enab+es better se+e%tion o' target market and better %hoi%e o'

marketing mi2

Multi4level segmentation enables the marketers to choose his target market better. It also helps

him to make the winning strategy and strike the right product offer and the right marketing mix.

ith the information generated from multi4level segmentation, he can obtain a deeper

understanding of the customers in each segment, their needs, buying motives and buying

behavior. %e can understand in what way each of the different segments want the product to be,

he can then tailor his product, marketing offer and promotional appeal, to fit the individual

segmentJ he can select the priced, distribution method-channels, media vehicles, advertising

massages and sales appeal, which will be appropriate.

E2am.+e o' 1enera+ Motors0-

3M has identified about :? different 0customer needs and correspondingly, :? different market

segments in which it would present with its vehicles. &or example, it has targeted the 1ontiac at

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active, sports4oriented, young couples, the 6hevrolet at price4conscious young families, the

'ldsmobile at affluent families, and the "uick at older, more conservative couples.

A)*A#TA1ES ( MARKET SE1ME#TATI(#

Harious advantages of market segmentation are!4

%elps distinguish one customer group from another within a given market.

&acilitates proper choice of target market.

&acilitates effective tapping of the market.

%elps divide the markets and con


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hether market segmentation is successful or not can be evaluated by the following


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consideration. The popular segment will be accessible only to the firm with a cost

advantage, since price is a ma2or determinant in this segment. 1remium segment will be

accessible only to firms, which en2oy a differentiation advantage, and which are also

marketing savvy. +iril of %industan +ever has a commanding position in this segment. At

the upper end of the segment, %++s 1ears and 5ove are well entrenched. $everal other

brands of different companies are competing in the segment. The firm has to take due

note of this reality. At the same time, analysis also reveals that new brands do keep

entering the segment every now and then, and some of them do manage to stay. $o, the

firm has no reason to believe that the premium segment is not accessible to it, unless it is

convinced that it is very weak in marketing. Is it compatible with the firms resources and

capabilities! 4 %aving reached the conclusion that the premium segment is si#eable,

growth oriented, profitable and accessible, the firm has to now find out if the segment

matches its resourcesK &or some firms, the popular segment may be the natural choice

and for others, the premium segment. And, for some other choosing both. The premium

segment is a highly competitive segment. 'nly firms endowed with strong resources and

an aggressive marketing strategy-culture can fight and survive in the market. The firm

therefore has to assess whether the particular segments are compatible with its resources

and capabilities.

MARKET TAR1ETI#1

I#TR()UTI(#0 - There was a time when finding the best customers was like throwing darts

in the dark. Target marketing changed all that...TodayEs savvy marketers know that finding their

best prospects and customers hinges on well thought out targeted marketing strategies.

1


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5efining a target market re


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6hoosing the target market usually follows multi4level segmentation using different

bases.

6hoosing the target market involves several other tasks in addition to

segmentation. +ooking at each segment as a distinct marketing opportunity.

valuating the worth of each segment sales-profit potential/.

valuating whether the segment is!

5istinguishable.

Measurable.

$i#able.

Accessible.

3rowing.

1rofitable.

6ompatible with the firms resources.

xamining whether it is better to choose the whole market, or the only a few segment,

and deciding which ones should be chosen.

+ooking for segments, which are relatively less satisfied by the current offers in the

market from competing brands.

6hecking out if the firm has the differential advantage - distinctive capability for serving

the selected segments.

valuating the firms resources and checking whether it is possible to put in the

marketing programmes re


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Target marketing tailors a marketing mix for one or more segments identified by market

segmentation. Target marketing contrasts with mass marketing, which offers a single product to

the entire market. Two important factors to consider when selecting a target market segment are

the attractiveness of the segment and the fit between the segment and the firm's objectives,

resources, and capabilities.

Attra%tiveness o' a Market Segment

The following are some examples of aspects that should be considered when evaluating the

attractiveness of a market segment!

$i#e of the segment number of customers and-or number of units/.

3rowth rate of the segment.

6ompetition in the segment.

"rand loyalty of existing customers in the segment.

Attainable market share given promotional budget and competitorsE expenditures.

(e


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Market segments also should be evaluated according to how they fit the firmEs ob2ectives,

resources, and capabilities. $ome aspects of fit include!

hether the firm can offer superior value to the customers in the segment

The impact of serving the segment on the firmEs image

Access to distribution channels re


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speciali#ation strategy and offering new products to its existing market segment. 6hoosing the

target market is a part of marketing strategy formulation, the other two parts being positioning

and marketing mix formulation. ithout right targeting, the firm cannot formulate an effective

strategy. It is through careful segmentation and targeting that firm pick up right group of

consumers. Also, it is through this process that the firm gain vital knowledge about the need and

buying behaviour of the consumer in each segment and the differences between one segment and

the other. And, it is by using this knowledge that the firm develops marketing programmes that

match the specific re


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large, and it might be wise to find a niche within those target markets. Therefore, the firm must

then focus on a particular type of food market, such as a food production firm who wants to

package its products for selling. Thus by targeting its product for its targeted market, the firm can

decide its si#e on the basis of it.

RESU/TS ( WR(#1 TAR1ETI#1 STRATE13

Ineffective augmentation and targeting led to wrong product offers, inappropriate marketing

appeals, wrong pricing, and overemphasis on the brand name. =o firm can offer single product to

satisfy all the segment. &or example, in Indian market many M=6s offered single product to the

entire segment. The offer did not suit middle class as such. They suited only the premium

segment. =aturally, the firms were unable to gather worthwhile volumes. As the firm did not

target those segments and as they failed to make product offers that were appropriate for them,

the end result was poor. &or this reason firms like (eebok, (ay4ban, and +evi did not showed

satisfactory result for


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segmentation and targeting strategies

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