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MARKET SEGMENTATION

Market
the set of all actual and potential buyers of a product

Mass marketing
the seller produces, promotes, distributes, and prices a single product for all buyers

Compare the notion of mass marketing with the terms untargeted marketing and undifferentiated marketing that are used in some textbooks.

Market segmentation
dividing the market into distinct groups of buyers, each group with different needs, characteristics, or behavior who might require separate products of marketing mixes

dividing the total market into distinct groups of buyers with similar needs within each group

In recognizing the existence of market segments or in creating market segments, we are looking for segments that are homogeneous within segments and heterogeneous between segments with regard to prospective customer behaviors.

Market segment
individuals, groups, or organizations with one or more similar characteristics with respect to product needs

Target market
a set of buyers who share common needs or characteristics that the company decides to serve


BASES AND VARIABLES FOR SEGMENTATION
(household consumer markets)

  • Geographic
    • nation
    • state/province
    • region
    • county
    • city
    • neighborhood, zip code
    • -etc.

  • Demographic
    • age
    • gender
    • family size
    • stage in family life cycle
    • income
    • occupation
    • education
    • religion
    • nationality/ race/ ethnicity
    • -etc.

  • Psychographic
    • social class
    • lifestyle
    • personality
    • activities
    • interests
    • opinions
    • -etc.

    Psychographic segmentation has to do with dividing the population into homogeneous groups on the basis of personality and lifestyle profiles.  Personality has to do with individual differences between people.  Lifestyle has to do with how a person lives.  Sometimes we are interested in an AIO inventory - activities, interests, and opinions.  A commercial product based on psychographic segmentation is VALS -- values and lifestyles analysis.

  • Behavioral
    • consumer knowledge
    • use of product (e.g., frequency and amount)
    • attitude toward product class
    • response to marketing mix
    • -etc.

  • Benefit
    • dividing the market into groups according to the different benefits that consumers seek from the product
    • e.g., usage rate, loyalty, user status

Would you target most of your promotional budget toward brand loyal, heavy users of your product, or toward occasional users?


NICHE MARKETING
A focus on one, usually small, market.

We generally use this term to describe a market that other players donít especially want.  If you are a small player in the market, you might not have the resources to compete against the established major players.  You might, however, be able to do business effectively and profitably in small, specialized segments that these competitors cannot easily, efficiently, or profitably serve.



MICROMARKETING
A form of target marketing in which companies tailor their marketing programs to the needs and wants of narrowly defined geographic, demographic, psychographic, or behavioral segments.

A marketer target all people who live in a particular city block to receive an advertising piece in the mail - reaching such a small segment is an example of micromarketing.  In some cases, this segment is too small to be profitable; in others, it might be the most effective way to reach only those people who are most likely to have an interest in a particular product.

Note that micromarketing is not necessarily the same as niche marketing.


ASSESSING SEGMENTATION EFFECTIVENESS

  • measurable
    it must be possible to identify members of and characteristics of the segment

  • accessible
    segment must be able to be reached with promotion and distribution

  • substantial
    segment must be profitable, large enough in size

  • actionable
    firm must be able to perform the marketing program associated with segments

Note that what is accessible, substantial, and actionable is different for different organizations.  A particular segment might not be accessible, substantial, or actionable for a large industry competitor, but might be easily accessible and actionable as well as substantial and profitable to a smaller niche player. 


POSITIONING

Product position
the way the product is defined by consumers on important attributes

the place a product occupies in consumers' minds relative to competing products

Market positioning
arranging for a product to occupy a clear place in the minds of target consumers

formulating competitive positioning for a product and a detailed marketing mix

To assist in formulating segmentation and positioning strategies, marketers can use positioning maps or perceptual maps.  By plotting where market needs exist and where competitors are doing business, you can visually see where might be the best place to position your own products.  On the basis of what you see on a perceptual map, you might reposition your product through a change in product, price, promotion, or distribution strategies.

Consider a pizza shop located near a college campus.  If it recognizes that it is in a location that is considered not so desirable for people who have families, then it should consider positioning its business more toward the needs of students.  If it recognizes that students are interested in low prices, then it should position more toward lower price products than higher price products. 


                        more expensive
                              |
         * LITTLE ITALY RESTAURANT
                              |
                * MAMMA MIA'S |         * MAMMA MIA'S
                  (west side) |          (east side)
                              |
            * PIZZA HUT       |   * SCAPPARATI'S
                              |
  family                    * JO JO'S             student
   ---------------------------+---------------------------
  oriented    * TONI'S BUFFET |                   oriented
                              |   US
                              |   [#] ---------->[X]should
                              |   NOW                be
                              |                     here
                              |
                              |
                              |* FRED'S SLICE-O-TERIA
                              |
                        less expensive



Is it better to position a product away from competitors or to use a head-to-head positioning strategy?

Sometimes you would position on top of competitors because that is where the market needs are - that's why everyone is doing business there and not somewhere else on the map. Other times, you might realize that you cannot possibly compete against strong established market players and you should look for consumer needs or market niches that are positioned elsewhere on the map.


PRODUCT DIFFERENTIATION
offering a product which is perceived by consumers to be different on some important characteristics from the offerings of competitors

Not necessarily the same as segmentation.

With our pizza shop above, if we were competing head to head with a competitor and we both made a good product for that market, our shop might compete by simply pointing out how our product is different.  If we advertise our pizza as the one delivered in a purple box, we attract the notice of customers, even though we are not necessarily able to convince them that we are better. 


edited 21 JUN 05