Chapter 3

Market Segmentation
 Learning Objectives
*Objective 1: Define the major steps in designing a customer-
driven marketing strategy: market segmentation, targeting,
differentiation, and positioning.

*Objective 2: List and discuss the major bases for segmenting

consumer and business markets.

*Objective 3:Explain how companies identify attractive

market segments and choose a market-targeting strategy.

*Objective 4: Discuss how companies differentiate and position

their products for maximum competitive advantage.
Market Segmentation
Thus, most companies have moved away from mass
marketing and toward target marketing: identifying
market segments, selecting one or more of them, and
developing products and marketing programs tailored to
each. Instead of serving the whole market

Market segmentation:
is dividing a market into smaller segments of buyers with
distinct needs, characteristics, or behaviors that might
require separate marketing strategies or mixes.
In this section, we discuss these important
segmentation topics:

• Bases for Segmenting consumer markets

• Requirements for effective segmentation
Variables of Segmenting Consumer Markets:
• Geographic segmentation
Dividing a market into different geographical units,
such as (nations, states, regions, countries, cities,
or even neighborhoods) population intensity and
climate example; tea in egypt & Saudi arabia
• Demographic segmentation
Dividing the market into segments based on
variables such as age, life-cycle stage, gender,
income, occupation, education, religion and race.
Example; shoes, cosmetics.
• Psychographic segmentation
Dividing a market into different segments based on
social class, lifestyle, or personality characteristics
Example; Tobacco producing companies.
• Behavioral Segmentation :
Behavioral segmentation separates customers into groups
based on their product knowledge, attitudes, usage, or
responses. Many marketers believe that the best place to
start when creating market segments is with behavior
variables.

• Occasion segmentation:
Dividing the market into divisions based on occasions (
regular and special) user status (non-user, ex-user, potential
user first time and regular) Loyalty (non-loyal , moderate,
strongly loyal).
 Using Multiple Segmentation Bases
Marketers rarely limit their segmentation
analysis to only one or a few variables.
Rather, they often use multiple
segmentation bases in an effort to identify
smaller, better-defined target groups.
• Requirements for Effective
Segmentation
Requirements for Effective Segmentation
Clearly, there are many ways to segment a market, but
not all segmentations are effective.
For example:
buyers of table salt could be divided according to their
hair color but obviously does not affect the purchase of
salt. Furthermore, if all salt buyers bought the same
amount of salt each month, with same price, the company
would not benefit from segmenting this market.

Measurable: The segment size, purchasing power, and

profiles of the segments can be measured.

Accessible: The market segments can be effectively

reached and served
Substantial: The market segments are large or profitable
enough to serve. A segment should be the largest possible
homogeneous group worth pursuing with a tailored
marketing program.

Differentiable: The segments are conceptually

distinguishable and respond differently to different
marketing mix elements and programs. If men and women
respond similarly to marketing efforts for soft drinks, they
do not constitute separate segment.

Actionable: Effective programs can be designed for

attracting and serving the segments. For example,
although one small airline identified seven market
segments, its staff was too small to develop separate
marketing programs for each segment.
Market Targeting
Market segmentation reveals the firm’s market segment
opportunities. The firm now has to evaluate the various
segments and decide how many and which segments it can
serve best.

Market targeting:
Evaluating each market segment’s attractiveness
and selecting one or more segments to enter.
Evaluating Market Segments
In evaluating different market segments, a firm must look
at three factors:
➢ Segment size and growth rate:
a company wants to select segments that have the suitable
size and expected to growth in the future.

➢ structural attractiveness:
The market segment has to be structurally attractive in
terms of potential profits.
For example,
a segment is less attractive if it already contains many
strong and aggressive competitors or if it is easy for new
entrants to come into the segment. The existence of many
actual or potential substitute products may limit prices
and the profits that can be earned in a segment.
➢ Company objectives and resources:
Some attractive segments can be dismissed quickly
because they do not match with the company’s long-run
objectives. Or the company may lack the capabilities
and resources needed to succeed to deal with them
whether financial, physical or human.
Targeting Strategies:
After evaluating different segments, the company must
decide which and how many segments it will target.
Target market :
consists of a set of buyers who share common needs or
characteristics that the company decides to serve.
1. Undifferentiated strategies:
The company ignore differences among market segment and del
with the market as a whole through a single offer, the company
concentrated on similarities in consumers needs, wants rather
than differences.
Example: For, Coca cola comp.
2. Differentiated strategy:
According to this strategy the company decided to selects more
than one market segment at least two segments to deal with.
Example:
3. Concentrated strategy:
according to the concentrated marketing strategy , the market
is segmented first, then only one segment os selected to be
served.
Example: Rolls Royce.
 Differentiation and Positioning

• Positioning has been defined as “the art and science of

fitting the product or service to one or more segments of
the broad market in such a way as to set it meaningfully
apart from competition.

• As you can see, the position of the product, service, or

even store is the image that comes to mind and the
attributes consumers perceive as related to it.

Take a few moments to think about how some products

are positioned and how their positions are conveyed to
you.
• is the place it has in comparison to competitors' products. Marketers strive to
create distinct market positioning for their goods.
• Products are manufactured in factories, but brands are created in consumers'
minds.
DEVELOPING A POSITIONING STRATEGY
1- Positioning by Product Attributes and
Benefits
A common approach to positioning is setting the brand apart from
competitors on the basis of the specific characteristics or benefits
offered. Sometimes a product may be positioned on more than one
product benefit. Marketers attempt to identify salient attributes
(those that are important to consumers and are the basis for making a
purchase decision).

Product attributes are the components of a product that describe its

features. Product attributes are concrete, objective, and can be
observed.

The attributes of a product don’t change. But which attributes you

choose to show will vary depending on campaign, customer, or brand.
 2- Positioning by Price/Quality
Marketers often use price/quality characteristics to
position their brands. One way they do this is with ads that
reflect the image of a high-quality brand where cost, while
not irrelevant, is considered secondary to the quality
benefits derived from using the brand. Premium brands
positioned at the high end of the market use this approach
to positioning.
Another way to use price/quality characteristics for
positioning is to focus on the quality or value offered by the
brand at a very competitive price.
 3- Positioning by Use or Application

Another way to communicate a specific image or position

for a brand is to associate it with a specific use or
application.
For example, meal replacement supplements can be of
use to anyone lacking time or wanting a quick convenient
meal. There are also meal replacements designed
specifically for people who want performance in the
gym, so high in calories and added vitamins and
minerals. Other meal replacements are for people on a
diet, so they are low in calories and would not provide
much energy for somebody’s workout.
Often the former meal replacement target males and the
diet low-calorie option target females. Both are meal
replacements, but different positioning.
 4- Positioning by Product Class
Often the competition for a product comes from outside
the product class. For example, airlines know that while
they compete with other airlines, trains and buses are also
viable alternatives. Rather than positioning against
another brand, an alternative strategy is to position
oneself against another product category.

The toilet soap Dove positioned itself apart from the

soap category as a cleansing cream product, for women
with dry skin.
 5- Positioning by Competitor

Competitors may be as important to positioning strategy

as a firm’s own product or services. Advertisers used to
think it was a cardinal sin to mention a competitor in
their advertising. However, in today’s market, an
effective positioning strategy for a product or brand may
focus on specific competitors. This approach is similar to
positioning by product class, although in this case the
competition is within the same product category.