Market Segmentation

Markets Overview
- Markets consist of organizations that sell to consumer and business markets.
- Companies recognize they cannot appeal to all buyers and must identify parts of the market they can serve best.
- In a competitive landscape, firms need to segment the market rather than compete in the entire market.
Market Segmentation
- Market segmentation involves dividing a large market into smaller, identifiable, and reachable segments.
- Buyers differ in various ways: wants, resources, locations, and attitudes, which necessitates segmentation.
- Segments can be identified based on similarities within a group.
Niche Market
- Segment marketing can include large identifiable groups (e.g., luxury car buyers vs. economy car buyers).
- Niche marketing focuses on subgroups defined by specific traits and benefits sought.
- Niche markets are smaller and often attract fewer competitors, allowing businesses to charge premium prices (e.g., Ferrari).

Market Segmentation Approaches
- There is no single way to segment a market; marketers experiment with various variables.
A. Geographic Segmentation
- This involves dividing markets by geographical units such as nations or cities.
B. Demographic Segmentation
- Groups are defined based on demographic variables like age, gender, family size, income, and education.
- Demographic factors closely correlate with consumer needs, making them a popular segmentation base.
- Examples include different marketing strategies based on age and lifestyle stages.
C. Psychographic Segmentation
- This involves classifying buyers based on social class, lifestyle, or personality traits, influencing preferences for goods.

D. Behavioral Segmentation
- Groups buyers based on knowledge, attitudes, uses, or responses to a product.
- Examples include occasion-based purchasing and benefits sought.
- User status segmentation considers non-users, potential users, and regular users.
Market Targeting
- Firms evaluate segments and decide which to target.
Evaluating Market Segments
- Factors for Evaluation:
  - Segment Size and Growth: Analyze data on sales and growth rates.
  - Segment Structural Attractiveness: Consider competition strength in a segment.
  - Company Objectives and Resources: Ensure that segments align with company strengths.

Selecting Market Segments
- Companies must choose which segments to serve based on evaluation.
Marketing Strategies:
- Undifferentiated Marketing: One product offered to the whole market (e.g., Coca-Cola with one product version).
- Differentiated Marketing: Separate strategies for different segments (e.g., Procter & Gamble with multiple detergent brands).
- Concentrated Marketing: Targeting a large share of one or more submarkets (e.g., Volkswagen in economy cars).

After targeting segments, a company must determine its desired positioning.
Product Positioning: The perception a product holds in the consumer's mind in relation to competitors.
Positioning Strategies:
- Products may be positioned on attributes, benefits, or against competitors (e.g., VISA vs. American Express).

Identifying Competitive Advantages:
- Companies must demonstrate their unique value proposition, differentiate offers.
- Forms of Differentiation:
  - Product Differentiation: Variations in product features and designs.
  - Service Differentiation: Enhancements in service delivery (e.g., convenience of drive-throughs).
  - Personnel Differentiation: Advantage through skilled and well-trained staff.

Companies should decide on how many differences and which attributes to promote.
Positioning Focus:
- Many agree that promoting one main benefit (USP) is more effective.
Differentiate on multiple factors only if necessary (e.g., Steelcase on delivery and support).

Criteria for Differences:
- Importance: Delivers highly valued benefits.
- Communicability: Differences must be easily communicated to buyers.
- Affordability: Benefits should remain affordable for consumers.
- Profitability: Changes must be profitable for the company.