Market Segmentation Types & Importance

Segmenting

• Divides the total market into smaller groups with similar needs and wants

Demographic Segmentation

• Divides the market based on variables like age, gender, family size, income, occupation, education, religion, race, generation, and nationality.

Geographic Segmentation

• Divides the market based on geographical units, including nations, states, regions, countries, cities, and neighborhoods.

Psychographic Segmentation

• Divides the market based on social class, lifestyle, or personality characteristics.

Behavioral Segmentation

• Divides the market based on consumer knowledge, attitudes, uses, or responses to a product.

Importance of Market Segmentation

• Enables a company to better understand its target market
• Helps employ the best ways to reach the target market instead of trying to serve too many markets simultaneously
• Enables the development of a positioning and marketing mix strategy to satisfy a focused range of customer needs and wants.
• Leads to a more efficient use of financial, communication, and distribution resources

Ways to Segment the Market: Needs and Wants

• Segmentation by needs and wants is based on consumers’ functional needs.

Ways to Segment the Market: Socio-Demographics

• Demographics are quantifiable statistics of a population, answering "Who are you?" and "How much do you earn?"
• Market segmentation often starts with demographics because needs, wants, and usage are closely tied to demographics, and data is easily available.

Ways to Segment the Market: Psychographics

• Divides a market into groups based on social class, lifestyle, or personality characteristics, addressing "What do you do?" and "How much do you spend?"
• Includes activities like work, hobbies, shopping, sports, and social events, as well as interests like food, fashion, family, and recreation
• Considers opinions about themselves, news, business, and products

Ways to Segment the Market: Consumer Behavior

• Enables grouping buyers based on their product knowledge, attitudes, usage, and responses, often assessed via a UAI study/survey that examines usage, attitude, and image.

Targeting

• Involves evaluating market segment attractiveness and selecting segments to enter

Positioning

• Defines how consumers perceive a product's important attributes relative to competing products

Differentiation and Positioning

• Once an organization chooses its market segments, it must define a value proposition to create differentiated value and desired positions

Competitive Advantage

• Gained over competitors by offering greater customer value, often through lower prices, more value, or benefits justifying higher prices.
• Effective positioning relies on differentiating the company’s market offering
• Requires delivering and communicating the chosen position to target customers, supported by the entire marketing program.
• Forms the basis of differentiation, which determines the positioning strategy

Types of Differentiation

• Differentiation by Product
• Differentiation by Services
• Differentiation by Personnel
• Differentiation by Image

Product Positioning

• The way the product is defined by consumers on important attributes relative to competing products

Positioning Strategies

• Product attributes
• Benefits offered
• Usage occasions
• Classes of users
• Directly against competitors
• Product classes

Positioning Statement

• Summarizes a company's or brand's positioning using the formula: To our is that by .
• Example: For active young men wanting to smell fresh after workouts, Irish Spring soap provides the best odor protection
• Example: For startups under $100K revenue wanting a larger presence, On Target Marketing offers creative, affordable promotions
• Apple leads the technology industry with the most innovative products
• Apple emphasizes technological research and advancement and takes an innovative approach to business best practices considering the impact of the products and processes on its customers and the planet.
• For athletes needing high-quality, fashionable athletic wear, Nike provides top-performing sports apparel and shoes made of the highest quality materials
• Nike's products are the most advanced in the athletic apparel industry due to Nike’s commitment to innovation and investment in the latest technologies.