Chapter 3 : Market Segmentation and Positioning
When the marketer treats the entire population as a single segment and offers a standardized good or service offering to the entire market, it is called mass marketing. Mass marketing is also called undifferentiated or aggregate marketing.
Target Marketing or STP
Target marketing involves dividing the potential market into distinct sets and sub-sets of consumers (called segments), and then focusing on one or more segments that can be reached with a marketing mix.
Identifying like-minded clusters of groups such that the groups are homogenous within, and heterogeneous with other groups is called segmentation.
Selecting the most viable segment(s) to cater to and designing the marketing mix accordingly is called targeting. Targeting involves evaluating the viability of each segment, and then selecting one or few market segment(s) to serve better in a superior manner.
Creating a distinctive image of the good/service offering in the mind of the consumer, such that the latter relates himself and his need/want to the product and/or brand is called positioning. The image so created should relate to the need/want as well as portray uniqueness and/or superiority over other competitive offerings.
A market segment may be defined as a group of customers who are similar to each other on certain bases. They are expected to behave in a similar manner towards a good and service offering and/or towards a single marketing program.
Market segmentation is the process of identifying distinct groups and or sub-groups of customers in the market, who have distinct needs, characteristics, preferences and/or behaviours, and require separate good and service offerings and corresponding marketing mixes, programs and strategies.
A consumer market is defined as an end-user market. The good and service offering is bought by the consumer for his personal use. This is also called Business to Consumer transaction, or B2C.
A business market is defined as a market that buys, transforms/processes and sells further, either for further transformation/processing or, for consumer use. This is also called a Business to Business transaction, or B2B.
As the name suggests, this form of segmentation comprises one segment only. The marketer caters to the entire market with a single offering and the same marketing mix. Single segmentation is similar to mass marketing or undifferentiated marketing.
Differentiated segment marketing
In differentiated segment marketing, the marketer selects two or more segments, and he approaches these segments with differentiated offerings and corresponding marketing mixes and programs.
When the marketer caters to just one segment although the product could appeal to others, it is known as concentrated marketing. The small segment is generally a sub-group within the whole segment. This form of segmentation is also known as focused or niche marketing.
Local marketing is a form of micro-marketing where the marketer caters to local customer groups.
Individual marketing, is a form of micro-marketing where the marketer caters to the customer individual and personalizes the marketing mix. So the segment comprises one individual and it is individual-to-individual marketing. This is also called customization.
Demographic variables for Market Segmentation
Demographic variables for Market Segmentation comprise demographics, geography and psychographics. Demographics include age, gender, income, education, occupation, family size, family life cycle, generation, social class, religion, nationality, culture and sub-culture. Geography includes location/country, state, city/metro/density of population, region, climate and terrain. While psychographics is the study of lifestyle and specifically relates to AIOs, other bases of segmentation may also be included like, viz., needs and motivation, perception, personality, attitude, involvement and lifestyle.
Behavioral variables for Market Segmentation
Behavioral variables for Market Segmentation comprise the day-to-day consumption pattern and behavioral dimensions within consumers’ vis. a vis., the good and service offering like consumer awareness, benefits sought /uses/needs/motivation, buying occasions /purchase situations, buying/usage frequency, buying readiness stage, loyalty status, usage rate and shopping orientation
While individual bases for segmentation exist, segments are mostly identified on a combination of bases. Commonly used bases of segmentation are a combination of (i) psychographic/demographic; (ii) geodemographics; and, (iii) VALS: Values and Lifestyles.
The target segment is the group(s) of customers that the marketer decides to serve. It comprises buyers, both actual and prospects, who share common needs, wants and preferences.
Viability of the Segment
The segment that the marketer decides to target must be viable. A segment is regarded to be viable if it is measurable, substantial, accessible, differentiable, actionable and stable.
Also referred to as concentrated marketing, in a single-segment concentration, the marketer decides to cater to a single segment only.
Selective specialization or Multi-segment
In selective specialization or multi-segment specialization, the marketer caters to two or a few segments with different marketing mixes. It offers varied good and service offerings with separate marketing mixes to the various segments.
When the marketer deals with varying products in the same product line, and adapts the good or service offering to sell to several different market segments, it is called product specialization.
In market specialization, the marketer deals with one specific market only, and he tries to meet many needs of a particular customer group.
Full market coverage
Here the marketer caters to the entire market. A full market coverage could assume two forms, differentiated and undifferentiated. In the differentiated form, the marketer would operate in the whole market and offer different products for the various segments. In the undifferentiated form, also known as mass marketing, the marketer would treat the market as a single segment and offer a single product.