CHAPTER: 9

(PHILIP KOTLER)

IDENTIFYING MARKET SEGMENTS & SELECTING

TARGET MARKETS
Small opportunities are often the beginning of great
enterprises.
Target marketing requires 3 major steps.
Segmentation
Targeting
Positioning
1. Market Segmentation
Identifying distinct group of buyers who might require
separate products and/or marketing mixes.

2. Market Targeting
Selection of one or more market to enter (target).
3. Market Positioning
Establish & communicate, the product distinctive
benefits in the market.
Mass Marketing Concept

Manufacturer is engage in the

mass production, mass
distribution and mass promotion of
one product for all buyers
e.g. Coke, Pepsi “one size fits all”
Ford company similarly sells
(One product and
color sold for many years)

Mass marketing have an effect of lower cost, lower

prices & higher margins.
Segmentation is done because, there are number of buyers
which constitute the market and buyer differs in many ways .

LEVELS OF MARKET SEGMENTATION

Segmentation can be done on four different levels
Segments

Niches

Local areas
Individuals (Individual Segmentation).
 1-Segment Marketing
 Marketing segment is a large identifiable group
within a market.
 Segments are made due to buyer differences in
wants, purchasing power, geographical buying
attitudes and habits i.e. customization (Variation).
 Consumer belonging to the same segment is
assumed to be quite similar in needs and wants.
 Yet they not identical some need additional
features and benefits.
2-Niche Marketing
Nicheis more narrowly defined group, typically a small market whose
needs are not being well served.
Marketers usually defines niches by dividing a segment into sub

segment. (Who has got some distinctive set of traits with in a group
(segment).
Segments are large and thus attract many competitors on the other

hand; Niches are fairly small

and normally attract only one or a few
competitors.

 e.g Toyota 1.6 GLi Auto transmission.

◦ Niche are priced more for time specialty
offence and differentiation. There are Riches in Niches.
Sub-sub division.
◦ Nicher is provider of a product to niche
3-Local Area Marketing
Target marketing is shifting towards
local marketing just to satisfy
individual needs in the market.
There are many disadvantages but variation in product
will satisfy the individual customer needs.

4-Individual Marketing
 Ultimate level of segmentation leads to Segmentation of
one. It is also known as “Customized marketing”
 One to one marketing. (Job shop concept) eg:tailors
 (Expensive but effective)
Mass customization
is the ability to prepare on a mass basis individually designed products
and communications to meet each customer’s requirements. Concept
of individuality.

Self marketing is a form of individual marketing.

It is a form individual marketing in which customer takes

more responsibility of deciding which product and brands

to buy.
A person gets information from the internet and get the

views of people. (With no sales people involved for

promotion of the product) and then decides on his own to
buy the product or not.
So he has taken more responsibility for taking decision in

buying the product. He has done more self marketing e.g.

orders via phone and computers.
Patterns in segments can be defined by preference in it i.e.
(preference segment) if products are offered what will they buy.
Homogeneous segments in which nearly all buyers have same

preferences.
Diffused segments customer preferences are scattered

throughout the space.

Clustered preferences market might reveal distinct preferences

clusters called natural market segments.

In this type company entering into the segment has
three options.
1. It might position in the center hoping to appeal
to all groups
2. It might position in the largest market segment
(concentrated marketing).
3. It might develop several brands each position in
a different segment.

If first firm only introduces one brand, competitor

will enter and introduce brands in other segments.
Undifferentiated Marketing 
is a strategy in which market segments differences are
ignored and one product or service is offered to the
entire market.
Concentrated Marketing
is a strategy whereby a product
is developed and marketed for
a very well defined and specific
segment of the consumer
Population.
STEP 1:SURVEY STAGE
Customer survey is done, and as the aim is to know motivations,
attitudes and behavior.
Researcher do exploratory and focus group interviews.

After knowing this researcher make questionnaires to collect the

data on.
 Attributes and theirs importance,
 Brand awareness and Brand ratings,
 Product usage patterns,
 Attitudes towards product category,
 Demographics, geographic, psychographics and media
graphics of the respondents.
 All general data concerned with customer preferences.
 For analysis different statistical techniques are
used e.g. Factor analysis to remove highly
correlated variables, Cluster analysis
 dividing a big data in to specified no of groups
such that data in each group is homogeneous.
 (Game theory, multiple regression,
mathematical programming queuing model
etc.)
 Group is than defined terms of profile it shows.
 Profile includes attitudes behavior demographics;
psychographics etc are basis for profile making).
 Market segmentation is done once, must be
change periodically because of change in market
segments

 e.g. PC first marketed those people who admired speed and

power but now, market segment is changed and like other
companies (dell and gate way) they are offering e-mail and
user friendly packages which is now priority for the segment.
 One way to discover new segments is to investigate
the attributes that consumer examine in choosing a
brand, Process is known as market partitioning.
 brand dominant price/type/brand dominant
hierarchy
 If consumer first decide on the manufacturer and
then on its car division is (brand dominant
hierarchy ( Japanese car than Toyota than Corolla).
 Similarly segments can be made like
 price dominant
 type dominant etc:
Two factors are considered
Consumer Characteristics
Geographic
Demographic
Psychographics.

Consumer Responses
benefits sought
(satisfaction)
use on occasions (brands)
These two factors are the cause of segmentation of consumer markets
(Researcher divide market on these two above mentioned variables).
Geographic segmentation

 Nations
 States
 Regions
 Geographical units
 Countries
 Cities
 Demographic Segmentation

Age
Family size (influential/position)
Family life cycle stage
(old, young, children).
Income
Occupation
Education
Religion
Race
Generation (has its own characteristics)
Nationality
Consumer wants and preferences are highly associated with consumer
demographics. Hence it is a popular way of distinguishing or
segmenting markets.
(e.g Age is a Poor indicator of lifestyle characteristic as 40 can be
young energetic person 40 can be old business executive.)
 Life styles
 Personalities
 People exhibit more life styles is shown by division of
classes.
 Brand personalities corresponds to consumer personalities
 Example: ford motors has different personality than
Chevrolet.
 Occasion
 Buyers can be distinguished on the basis of occasions
they develop to buy a product or need is developed
(massage, promotion, children, acquisition of home).
 Benefits
 Derived from products can be different i.e. benefits
from traveling.
 To meet the family, Adventure, Education, Shopping
(fun)
 User Status
 Non user
 Ex-user
 Potential user
 First time user
 Regular user
 Consumers are divided on the basis of knowledge
of product.
 Attitude towards product
 Use of product
 Response to a product

Behavioral variables
 Occasion Loyalty status
 Benefit Buyer readiness stages
 User status Attitude
 Usage rate
Usage Rate
 Light
 Medium
 Heavy

Loyalty Status

 Hard core loyal represent the class of buyers in the

market.(lower, middle and upper).
 Split loyal will tell the product largest competitors.
 Shifting loyal’s will tell product weaknesses
Buyer Readiness Stage.

Unaware Aware
Informed Interested
Desire of the productIntentions to buy

Attitude
Enthusiastic. Positive
Indifferent Negative Hostile
 Average consumer concept is gone
 Limiting target market to big size has failed
 now manufacturer is turning to small potential market
with different buying habits.

GEO-CLUSTERING
One of the most promising development in multi
attribute segmentation is geo-clustering it reflects
socioeconomic status and life style of a neighborhood
inhabitants
e.g Cal traits Inc has developed a geo-clustering approach called
PRIZM.
Potential rating index by zip Markets,
It classifies over 500,000 US residential
into 62 distinct life style grouping.
Clusters have different
titles called PRIZM.
Blue blood estates, home town retired, winners circle
Latino America, cashmere and country club, baby
boomers, etc.
In the cluster the average buying habits are the
same.

Example baby boomers:

These ageing baby boomers live the good life in the suburbs in
farm houses, they like to by Mercedes, read Golf digest and buy
high end TV’s.
(average income $ 22,900.)
 Company first try to target one market and
than expand.
 Easily accessible market to penetrate
 then geographical market
 extensive distribution strategy (distributing a

product on grocery stores)

MODEL -1
Robertson and Barich identified three business segments.

1-FIRST TIME PROSPECT

Customer who have not yet purchased. They want to buy from the
sales person they know and they rely on.
2-NOVICES.
Who have already purchased a product. they need manuals hot
lines, a high level of training and knowledge able sales reps.
3-SOPHISTICATES:
Customer who wants speed in R&M product customization, and
high technical support.
4 Business segments (Introduced)
A- PROGRAMMED BUYERS:
Product is not very imp to their operation they by as a routine
purchase item, paying full price and receiving below average service.
(highly profitable segments for vendors).
B- RELATION SHIP BYERS
Product is moderately imp, they are knowledge able about competitive
offerings.
They get a small discount and a modest amount of service.
They prefer vendor service.
C- TRANSACTION BUYERS
Product is very imp, to their operations.
They are price and service sensitive.
They receive about 10% discount and above average service.
They are knowledgeable for competitive offerings and ready to switch
for better price even at the sacrifice of services.
D- BARGAIN HUNTERS
Byers who see the product as V- imp
demand deepest discount and
highest service they are aware of
alternative suppliers, bargain
hard, and are ready to switch of
the slightest dissatisfaction.
Company needs here buyers for
volume purposes as they are not
much profitable.
One his to be careful as many buyers are
Cross shopper.
1) Cross dresser 2) Cross eater
(Shop an expensive suit but look for cheap under garments)
Not all segmentation are effective
market must be;

Measurable
Substantial (large + profitable enough to serve)
Accessible (effectively reached and served )
Differentiable (conceptually distinguished segments and
Married and unmarried people if corresponds to the
product in a similar manner then they are in a same
segment)
Actionable (effective programs can be made to serve the
segment)
Once the segments are defined now its upto the company that which
one is to target first.
Process of evaluation and targetting marketing segments.
1- EVALUATION THE MARKETING SEGMENTS:
Size,growth, profitability
Over all attractiveness of the segment

Objective and resources

2- SELECTING THE MARKETING SEGMENTS;

In many segments which or how many segment must be focused can
be decided by; (5 patterns of target marketing selection)
 Single segment concentration
 Selective specialization
 Product specialization
 Mkt specialization
 Full market coverage
A- SINGLE SEGMENT CONCENTRATION:
E.g VW concentrates on small Car mkt
More profitability
More knowledge of segments need
higher risk also.
B- SELECTIVE SPECIALIZATION:
Number of segments are selected
money maker segments (mostly)
There is minor synergy presents in the segment
difference
Diversified risk
Multi segment coverage.
C- PRODUCT SPECIALIZATION:
Making a product which will be sold on many segments
Product/failure can cause damage.

D- MKT SPECIALIZATION
One group
Satisfying their all needs .
E- FULL MARKET COVERAGE:
All customer group are target
large firms do this.
Firm ignores differences and goes after the whole market with one
marketing offer.
Buyers needs are given preferences then the buyer differences.
Mass marketing and mass distribution is needed. eg Coca-Cola , Pepsi
(Standardization concept).
DIFFERENTIATED MARKETING:
Firm target different segment
with different strategy for each segment
customization concept
But cost of the product is higher
Product modification cost, manufacturing
cost, Administrative cost, inventory cost
promotion cost.
Additional consideration in evaluating
and selecting segments
Segment interrelationships and super segments.
When selecting more then one segments.
should pay attention on segments relation ships in
technology, cost, performance.
SUPER SEGMENTS
Is a set of segment sharing some exploitable similarity?
Toothpaste aqua fresh
Anti cavity
Whites teeth
Fresh breath.
So the company must target those people in a segment which
exactly demands these 3 things
5- SEGMENT BY SEGMENT INVASION PLANS
To hide from competitor your next segment move.
One segment should be largest and capture that
Than go towards other
1st penetrate slowly into the competitor that they do not get
aware
& then seeing the situation and opportunity give a full attack
on segment.
6- INTERSEGMENT CO-OPERATION
Many segment for example
segments Manager

Manger S1 ------------------------------- Manager S2

Co-operation