Market Segmentation and Targeting

Market Segmentation, Targeting, and Positioning (STP)

  • STP: Market segmentation, targeting, and positioning are the core of marketing.

Market Segmentation

  • Market segmentation divides a market into well-defined slices, each with similar needs and wants.
  • Segmentation Variables:
    • Descriptive: Geographic, demographic, and psychographic characteristics.
    • Behavioral: Consumer responses to benefits, usage occasions, or brands.

Geographic Segmentation

  • Divides the market into geographical units like nations, states, regions, cities, or neighborhoods.
  • Tailors marketing programs to local customer groups.
  • Grassroots marketing: Focuses on making activities personally relevant to individual customers.

Demographic Segmentation

  • Uses variables like age, family size, gender, income, occupation, education, religion, race, generation, nationality, and social class.
  • These variables are often associated with consumer needs and wants and are easy to measure.

Demographic Variables

  • Age and Life-Cycle Stage: Consumer wants and abilities change with age.
  • Life Stage: Defines a person’s major concern.
  • Gender: Men and women have different attitudes and behaviors.
  • Income: Segmentation used in categories like automobiles, clothing, and travel.
  • Generation: Influenced by the times in which it grows up, sharing cultural, political, and economic experiences.
  • Race and Culture: Multicultural marketing recognizes different ethnic and cultural segments with distinct needs and wants.

Psychographic Segmentation

  • Divides buyers into groups based on psychological/personality traits, lifestyle, or values.
  • People within the same demographic group can have different psychographic profiles.

Behavioral Segmentation

  • Divides buyers into groups based on knowledge of, attitude toward, use of, or response to a product.

Behavioral variables

  • Needs and Benefits: Identifies distinct market segments with clear marketing implications.
  • Decision Roles: Initiator, Influencer, Decider, Buyer, and User.
  • User and Usage-Related Variables: Occasions, user status, usage rate, buyer-readiness stage, and loyalty status.
  • Occasions: Time of day, week, month, year, or other temporal aspects.
  • User Status: Nonusers, ex-users, potential users, first-time users, and regular users.
  • Usage Rate: Light, medium, and heavy product users.
  • Buyer-Readiness Stage: Unaware, aware, informed, interested, desire, and intent to buy.
  • Loyalty Status: Hard-core loyals, split loyals, shifting loyals, and switchers.
  • Attitude: Enthusiastic, positive, indifferent, negative, and hostile.
  • Multiple Bases: Combining different behavioral bases for a more comprehensive view.

Business Market Segmentation

  • Business marketers segment based on customer demographics, operating characteristics, purchasing approaches, situational factors, and personal characteristics.

Business Market Segmentation Variables

Industry, Company Size, Location, Technology, User/nonuser status, Customer capabilities, Purchasing function, Power structure, Urgency, Buyer-seller similarity, Nature of existing , Specific application Size of order, Attitudes toward risk, Loyalty General purchase policies, Purchasing criteria

Market Targeting Steps

  • Determine the need of the segment
  • Identifying the segment
  • Which segment is most attractive
  • Is the segment giving profit
  • Positioning for the segment
  • Expanding the segment
  • Incorporating the segmentation into your marketing strategy

Steps in Segmentation Process

  • Needs-Based Segmentation: Group customers into segments based on similar needs and benefits sought.
  • Segment Identification: Determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable.
  • Segment Attractiveness: Determine the overall attractiveness of each segment using criteria like market growth and competitive intensity.
  • Segment Profitability: Determine segment profitability.
  • Segment Positioning: Create a value proposition and product-price positioning strategy.
  • Segment Acid Test: Test the attractiveness of each segment’s positioning strategies.
  • Marketing Mix Strategy: Expand segment positioning strategy to include all aspects of the marketing mix.