Market Segmentation Fundamentals

Market Segmentation

• Understanding market segments can help companies define customer needs and wants, design specific marketing strategies, and allocate marketing resources.
• Segmentation involves dividing potential customers into groups for better understanding.
• Targeting focuses on identifying the most likely customer segments and directing marketing efforts to satisfy them.

Objectives of Segmentation

• Improve understanding of prospective customers and how to serve them.
• Reduce risk in marketing decisions by targeting appropriate segments.
• Increase marketing efficiency by directing efforts towards specific segments based on their characteristics.

Criteria for Effective Segmentation

• Substantial: Market segment large enough for profitability.
• Measurable: Segment size and purchasing power clearly identifiable.
• Differentiable: Segments respond differently to different marketing strategies.
• Accessible: Ability to reach and serve the segment.
• Actionable: Ability to attract and retain customers in the segment.

Bases of Segmentation

• Geographic: Location-based (e.g., city, region, climate).
• Demographic: Characteristics like age, gender, income, education, ethnicity.
• Psychographic: Lifestyle, values, interests, personality traits.
• Behavioral: Purchase behavior, usage rate, brand loyalty.

Combining Segmentation Bases

• Geo-cluster approach: Combining demographics and geographic data to identify location clusters of customers.
• Geographic + Behavioral: Identifying segments based on location and purchase behaviour.
• Demographic + Lifestyle/Behavioural: Combining demographic characteristics with lifestyle or purchase behaviour.

Examples of Segmentation - Toyota

• African-American consumers: “Strut” campaign by Burrell to emphasize African American culture and values.
• Asian-American consumers: “Captivating” campaign by InterTrend aims to appeal to Asian American core values.
• Hispanic consumers: “Rebellious” and “Striking” campaigns by Connil target relevant cultural elements.
• Transcultural Mainstream Market: “Thrill” campaign by Saatchi & Saatchi caters to a broader, non-specific segment.

Selecting Target Markets

• Targeting involves evaluating each segment and identifying the most attractive ones.
• Factors for selecting target markets:
  • Growth potential
  • Level of competition
  • Strategic fit
• Target-Marketing Analytics: Provides data on the target market's size, lifestyle, revenue, etc.
  • Google Analytics provides valuable tools for this.

Target Marketing Strategies

• Undifferentiated (mass) marketing: Targets the entire market without specific differentiation. (Example: Walmart, Target)
• Differentiated marketing: Targets large groups within the total market with tailored strategies. (Example: Procter and Gamble, Marriott)
• Niche marketing: Targets smaller, specialized segments with high penetration. (Example: Luxury brands)
• Micromarketing: Targets individual customers or highly localized microsegments. (Example: Etsy, Groupon)

Ethical Issues in Target Marketing

• Ethical Concerns: Marketing to children and older adults, rise of "tween" consumers, "Sephora girls," reverse mortgages, potential violation of privacy.
• Ethical Implications: All target marketing strategies should consider ethical consequences.

Creating a Persona

1. Define features and benefits of the product.
2. Develop a character representing the target market based on those features and benefits.
3. Identify specific characteristics of the persona that reflect their needs and wants.
4. Explain how those characteristics align with the product's value proposition.

Explore the critical concepts of market segmentation and targeting in this quiz. Understand how to define customer segments, develop tailored marketing strategies, and enhance marketing efficiency. Learn the key criteria for effective segmentation to improve business outcomes.