Thursday, December 9, 2010

Market Segmentation

Market Segmentation
Process of defining and sub-dividing a large homogenous market into clearly identifiable 
segments having similar needs, wants, or demand characteristics. Its objective is to design a 
marketing mix that precisely matches the expectations of customers in the targeted segment. Few firms are big enough to supply the needs of an entire market, most must breakdown the total demand into segments and choose the one or few the firm is best equipped to handle. Four basic factors that affect market segmentation are (1) clear identification of the segment, (2) 
measurability of its effective size, (3) its accessibility through promotional efforts, and (4) its 
appropriateness to the policies and resources of the firm. The four basic market segmentation-
strategies are based on (a) behavioral (b) demographic, (c) psychographic, and (d) geographical differences.







 Positioning



Falling in love! As entrepreneurs, we do it every day. Our passionate belief in, and commitment 
to, our product (or service) makes all things seem possible. The most successful entrepreneurs 
learn to transform their passion into position.
Positioning is a perceptual location. It's where your product or service fits into the marketplace. 
Effective positioning puts you first in line in the minds of potential customers.
As individuals, we continually position ourselves. The responsible older sibling, the class clown, 
a number cruncher, a super genius are all examples of positioning. These identifiers help us 
define ourselves and distinguish our abilities as unique and different from other people.
Positioning is a powerful tool that allows you to create an image. And image is the outward 
representation of being who you want to be, doing what you want to do, and having what you 
want to have. Positioning yourself can lead to personal fulfillment. Being positioned by someone 
else restricts your choices and limits your opportunities.
That's why it's so important for entrepreneurs to transform their passion into a market position. If 
you don't define your product or service, a competitor will do it for you. Your position in the 
market place evolves from the defining characteristics of your product. The primary elements of 
positioning are:
  • Pricing. Is your product a luxury item, somewhere in the middle, or cheap, cheap, cheap.
  • Quality. Total quality is a much used and abused phrase. But is your product well produced? What controls are in place to assure consistency? Do you back your quality claim with customer-friendly guarantees, warranties, and return policies?
  • Service. Do you offer the added value of customer service and support? Is your product customized and personalized?
  • Distribution. How do customers obtain your product? The channel or distribution is part of positioning.
  • Packaging. Packaging makes a strong statement. Make sure it's delivering the message you intend.
Positioning is your competitive strategy. What's the one thing you do best? What's unique about 
your product or service? Identify your strongest strength and use it to position your product.
The product Nyquil was conceived as a superior daytime cough suppressant. Unfortunately, it 
made people drowsy. Determined to recoup product development costs, the side affect of 
drowsiness was then transformed into a powerful positioning strategy. Nyquil became "the night 
time, coughing, sniffling, sneezing so you can rest" medicine. Nyquil created and owned the 
nighttime cold remedy market.
As the Baptist minister of my childhood would say at the conclusion of a lengthy sermon, "I've 
said all that to say this". Positioning, when used effectively, can help you be first in the mind. 
Being first in mind equals ownership. Market ownership allows you to be a big fish in a small 
pond. When you're a big fish, you can always increase the size of the pond.




Targeting


After the process of segmentation the next step is for the organisation to decide how it is going 

to target these particular group(s). There are three targeting options an organisation can adopt.




Option 1


Undifferentiated marketing - Sometimes referred to as mass marketing the firm may decide 

to aim its resources at the entire market with one particular product. Coca Colas original 
marketing strategy was based on this form. One product aimed at the mass market in the hope 
that a sufficient amount of buyers would be attracted., although there are now changes in their 
product line to cater for growing dietary and caffeine free needs of consumers.
 

Option 2 




Differentiated marketing strategy - Where the firm decides to target several segments and 

develops distinct products/services with separate marketing mix strategies aimed at the varying 
groups. An example of this would be airline companies offering first, business (segment 1) or 
economy class tickets (segment 2) , with separate marketing programmes to attract the different 
groups. 

Option 3


Concentrated Marketing:
 Where the organisation concentrates its marketing effort on one 

particular segment. The firm will develop a product that caters for the needs of that particular 
group. For example Rolls Royce cars aim its vehicles at the premium segment, same as 
Harrods within the UK.
 







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