Market Segmentation and Targeting

Market Segmentation

Definition: Market segmentation means dividing a big group of consumers into smaller groups who share similar needs.

Purpose: This helps companies focus their products and marketing efforts on specific groups.

Importance: In a highly competitive market, companies need to target segments they can succeed in instead of trying to serve everyone.

Niche Market

Definition: A niche market is a smaller part of a larger market, focusing on a specific group of consumers with unique preferences.

Characteristics:

  • Smaller and identifiable compared to overall market.

  • Often faces little competition as they meet specific needs.
    Example: The SUV category can be split into regular and luxury SUVs.

Advantages: Niche marketers can charge higher prices because they understand the special needs of their customers better.

Bases for Segmenting Consumer Markets

  • Geographic Segmentation: Dividing the market by locations (like countries, regions, cities).

  • Demographic Segmentation: Grouping consumers based on factors like age, gender, income, family size, and education level.

  • Psychographic Segmentation: Classifying buyers by social class, lifestyle, and personal characteristics.

  • Behavioral Segmentation: Grouping based on how people interact with a product (like when they buy it or why they use it).

Market Targeting

Evaluating Market Segments:

  • Segment Size and Growth: Look at potential sales and growth.

  • Segment Structural Attractiveness: Identify factors affecting profitability, such as competition.

  • Company Objectives and Resources: Make sure the segment fits with company goals and available resources.

Types of Market Segments:

  • Undifferentiated Marketing: Offers one product to the whole market.
    Example: Coca-Cola's original single product.

  • Differentiated Marketing: Targets different segments with unique strategies for each.
    Example: Procter & Gamble with different laundry detergent brands.

  • Concentrated Marketing: Focuses on one or a few segments to build specialized knowledge.
    Example: Volkswagen's focus on the economy car market in the 1950s.

Positioning for Competitive Advantage

Definition of Positioning: How consumers view a product compared to its competitors.

Importance: A clear position helps define what a product means to consumers, affecting their purchasing decisions.

Positioning Strategies:

  • Product Attributes: Highlighting specific product features (like Honda promoting low prices, and BMW promoting performance).

  • Benefits: Emphasizing key benefits the product offers (like Crest promoting cavity reduction).

  • Against Competitors: Positioning directly in comparison to rival brands (such as VISA against American Express).

Competitive Advantage

Definition of Positioning: This is how customers see a product compared to other products.
Importance: A clear position helps people understand what a product is about, which influences their buying choices.
Positioning Strategies:

  • Product Features: Showing off specific features of the product (for example, Honda highlights low prices, and BMW emphasizes performance).

  • Benefits: Focusing on key benefits the product gives (like Crest advertising cavity reduction).

  • Comparison with Competitors: Positioning a product directly against similar brands (like VISA against American Express).
    Unique Selling Proposition (USP): The USP is what makes a product special compared to others. It shows the unique benefits that customers can’t find elsewhere. A good USP tells customers why they should pick that product over others and highlights the special features that meet their needs or wants.