Segmenting and

Targeting Markets

© iStockphoto.com/Rubberball
Chapter 1 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1
 Market Segmentation

Describe the
characteristics
of markets and market
segments
 A Market Is...
1) people or organizations with

2) needs or wants, and with

3) the ability and

4) the willingness to buy.

A group of people that lacks any one of these

characteristics is NOT a market.
 Market Segmentation
People
Peopleor
ororganizations
organizationswith
withneeds
needsor
orwants
wants
Market
Market and
andthe
theability
abilityand
andwillingness
willingnesstotobuy.
buy.

AAsubgroup
subgroupofofpeople
peopleorororganizations
organizationssharing
sharing
Market
Market one
oneorormore
morecharacteristics
characteristicsthat
thatcause
causethem
them
Segment
Segment to
tohave
havesimilar
similarproduct
productneeds.
needs.

The
Theprocess
processofofdividing
dividingaamarket
marketinto
into
Market
Market meaningful,
meaningful,relatively
relativelysimilar,
similar,identifiable
identifiable
Segmentation
Segmentation segments
segmentsor
orgroups.
groups.
 The Concept of Market Segmentation

5
The Importance of Market Segmentation

Explain the
importance
of market
segmentation

6
 The Importance of
Market Segmentation
 Markets have a variety of product needs and
preferences

 Marketers can better define customer needs

 Decision makers can define objectives and

allocate resources more accurately
• Is of which company?
Was of GSK (Glaxo Smithkline), sold to HUL ($3.1 billion)

• Other brands - ?
Boost, Maltova, Viva

• Market Share?
43%

• HFD Market ?
5500 crore

• How old?
More than 100 years (early 1900s, local mfg – 1958)

• Competitors?
Bournvita (11%) and Complan (9%)
• Horlicks growth stagnated. They did brand extension? by launching
biscuits in 1992, but that hardly added to the topline

Segmentation and Target Strategy

• Launched Junior Horlicks (Vanilla & Chocolate) – 1995
• In 2003, it offered its newly formulated Horlicks to the National Institute of Nutrition (NIN) at
Hyderabad, which conducted research to prove its effect on the growth of children and
identified three key benefit areas to do with bone health of children, muscle health and their
ability to focus better
• This led to the Taller, Stronger, Sharper campaign

• Thus the brand was now positioned as a drink for children whereas till 1990s it
was a family drink.
• Launched Horlicks Lite (diabetes, health conscious) – 2005. (A low fat, low sugar drink, 36%

premium)

• Women Horlicks (health conscious urban working women) – 2008 (Growing at more than
65% YOY, 36% premium)

• Junior Horlicks (20% premium)

• Mother Horlicks (27 vital nutrients) – 2014 (for pre & post pregnancy, 107% premium)

• Brand Extensions – Biscuits, Foodles (instant noodles, pasta), Nutribar

• Horlicks Asha – Rural markets

• Horlicks Gold - 2011 ??

10 © 2013 by Cengage Learning Inc. All Rights Reserved.

Other GSK products??
Key OTC products which GSK distributes are well established brands,
like Crocin, Eno, Iodex and Sensodyne. It is also in vaccines business.

Distribution Strength
Its marketing & distribution network comprises of over 700 distributors
and a direct coverage of over 8 lakh retail outlets
• iball Aasaan –

Segment - ?
Target - ?
Positioning - ?

• 60 years and above, old persons living alone

• Print Ads, TV, availability, low price

• An emergency device with

easy to use and safety features
 Bases for Segmenting
Consumer Markets

Describe the bases

commonly used
to segment
consumer markets
Bases for Segmentation

Geography
Geography

Demographics
Demographics

Psychographics
Psychographics

Benefits
Benefits Sought
Sought

Usage
Usage Rate
Rate
Geographic Segmentation

• Region of the country - North, South, East, West

• Market size - Tier I, Tier II and so on

• Market density - Rural and Semi Urban

• Climate – Extreme, Coastal

Demographic Segmentation

Age
Age

Gender
Gender

Income
Income

Family
FamilyLife
LifeCycle
Cycle
 Age Segmentation
• Tweens (9-12 yrs) –
Decision makers in ?
- Toys, story books, chocolates, ice cream, biscuits etc.
• Teens –
- Maggi, Lays Chips, Kurkure, Aerated drinks, digital games, music,
fast food, apparels, cosmetics
• Generation Y (20s-30s-40s)
- Mobile, e-commerce, automobiles, consumer durables, apparels,
cosmetics
• Middle age (40s-60s)
- health, children's education, careers and marriage
• Retired
- Lesser needs, still in business will show similar traits to middle
age
Millennial (Gen Y)

Print advertising is more effective with 30-40 year olds than with
any demographic younger than them.

What may be the reason for this?

This is a result of their being raised without the internet and social media and a
thousand-and-one television channels. More of this demographic reads magazines
and newspapers, and they are more competent when it comes to language.
 TIME TO ZOOP
•Entered the market with the brand “Dash” in 1999.
•Segment?
- Children, 6-14 years
•It flopped. Why?
Premature entry. Not the right time. Parents didn’t spend that much on kid’s accessories

•Re-entered market in 2010 under the brand name Zoop. Is very popular now
•Trendy colors. Different design for girls and boys
•Limited edition of Toy Story characters
•Scheme of goofy bands free with purchase of each Zoop watch
•Available in Titan exclusive showrooms, LFRs and MBOs
• Titan is India’ largest watch brand

• It has 60 per cent of the organized market for watches

• It has segmented the market finely. How?

• Sonata
for the masses
• Fastrack
for the youth
• Raga
for women
• Nebula (made in 18-carat gold)
for the affluent
• Swiss-made Xylys
for the connoisseur
• Titan Edge (touted as the world’s slimmest watch)
for the trendy
 The Death of HMT
Reason for demise: 3T’s
Technology, Titan and Timidity

•1970s – HMT in technical collaboration with Citizen had an

enviable brand
“HMT had
•Met only a fraction of market demand. Entry of Allwyn (with
Seiko) also didn’t make much impact
been the
•Entry of Titan (factory visits allowed, retd.exec.director of HMT
timekeepers
appointed as Chief of Mfg Operations to the nation.
•80:20 mix for mechanical and quartz – earlier plan. Changed to Titan became
100% quartz
•Great employees with good aesthetic senses (in house designs) the wrist
•HMT responded with various options in quartz as a knee jerk
stylists”
reaction. Could not match the design and price of TITAN
 Gender Segmentation
• Men & Women have diff. attitudes and behave differently
• Major areas that company identify – clothing, cosmetics, fashion
accessories, magazines, automobiles etc.
• Urban Men are now more inclined to personal grooming –
fairness cream, face wash, deodorants etc. Market size of around
2500 crs. Major players?
Gillette, Garnier, Vaseline, emami
• Two wheelers (33% of total sales) - Women
Bajaj Wave, TVS Scooty, Honda Activa, Kinetic Flyte
• Apparels – Van Huesen, Allen Solly were primary men clothing brands.
Now have launched women range too. Why?
• Women are the main decision makers for family purchases
soap, shampoo, powder, food items, toothpaste, fresheners etc.
 Road to
Resurgence
• Scooters dominated Indian roads for 40 years. (Bajaj, LML)
• 1998-99 when motorbikes overtook them. It went to near oblivion:
Why?
Fuel Efficiency, Better balance, Speed, Regulatory norms
'Fill it. Shut it. Forget it‘ – Hero Honda Splendor

• In 2014/15, the scooter market grew 25 per cent, while

motorcycles' sales growth was only two per cent
• Responsible for the turnaround? Which company?
• HMSI: 58% mkt share, TVS & Hero Motocorp
• Why?
gearless, stable, electronic start, working women,
tubeless, tyres, unisex appeal
29
 Income Segmentation

• Determines consumer wants

• Determines buying power
Rolex, Omega, Tag Heuer, Rado
Fossil, Swatch, Titan Xylys
• Retailers can appeal to:
– Low-income (Big Bazaar, Next)
– High-income (Wills Lifestyle,
Marks n Spencers, Nilgiris)
– Both (Lifestyle, Pantaloons, Westside)
Family Life Cycle
Family Life Cycle
• Gender, Age and Income often do not explain
consumer behavior
• FLC stage is a critical parameter
• For eg. Single men spend most on?
branded apparels, footwear, eating out, movies,
liquor etc
Married men mostly on
kitchen appliances, household items, furniture,
consumer durables etc.
• Middle aged people apart from caring about their
children’s education and career also start planning for
old age and retirement.
This is where Insurance companies pitch in.
(Investment for younger generation and security
for
older)
 Psychographic
Segmentation

Psychographic
Psychographic
Segmentation
Segmentation

Market segmentation on the basis of

personality, motives, lifestyles, and
geodemographics.
Bases for Psychographic
Segmentation

Personality
Personality

Motives
Motives

Lifestyles
Lifestyles

Geodemographics
Geodemographics
 Personality and Motive
Segmentation
Personality
Personality
Reflects a person’s traits, attitudes, and
habits – eg. Clothes, eating habits

Motives
Motives
Marketers might appeal to emotional, rational,
or status motives, among others. – Baby
products and insurance (emotional motive), Maruti
and Hero (rational motives), Mercedes, Audi (Status
motive)
 Lifestyle Segmentation
 How time is spent, Importance of things around them, Beliefs,
Socioeconomic characteristics
 Environment conscious (CFC, e statements)
 Health conscious (Fat free curd, milk, low sugar biscuits etc.)
 Social status – The position that you enjoy in a society or how you
want people to perceive you. For eg. Maruti Alto to a 5 star dining
restaurant!
 Geodemographic Segmentation

Geodemographic
Geodemographic
Segmentation
Segmentation
Market
Marketsegmentation
segmentationininwhich
which
consumers
consumersare aregrouped
grouped
according
accordingto todemographic
demographic
variables,
variables,such
suchasasincome,
income,
lifestyle
lifestyleand
andgeographic
geographic
variable,
variable,such
suchasaspost
postcode
codeor
or
zip
zipcode. 
code. 

For eg. Nokia sold rugged yet sleek phones in rural markets.
MTR India sells specific products (madras rasam powder, Pulyogre powder,
Mango Avakai pickle etc) in specifics part of Chennai and other towns
of Tamilnadu)
LG – Rural Market Focus
About 73% of India's population lives in rural areas 35% of the
rural population own a color television set, 5% own refrigerators
and 1% own a washing machine

Rural spending is, of course, dominated by necessities, which means disposable

income is still small but the number of households is large.

Moreover, there are pockets of prosperity in rural India that are the drivers of rural
growth. Can you identify?

“Punjab and Kerala can compare favorably with urban areas. Punjab, of course, has
three crops, which makes it a highly developed area, while Kerala is special because
the entire state is almost urban, the rice-growing belt in Tamil Nadu, the sugarcane
belt in Maharashtra and coastal areas in Andhra Pradesh.” In 2008, we put a team in
place that surveyed each of these wealthy rural pockets.

The government is investing a lot of money in education, into improving literacy rates.
That will mean building hundreds of schools and colleges, which in turn will produce
thousands of educated men and women.

So what??
So what did LG do?

•LG has the widest distribution network across the country. We have 70 remote-
area offices, which are extensions of the branch office, 40 branches, eight regional
offices all over the country.

For example, mobile service vans reach out to people in the remotest
villages, so we remain connected with the consumer even after our
products have been bought.

•Colors are a major differential and we work with color specialists to design rural
products. Rural people like brighter, beautiful colors, urban people prefer more
classic colors, like grey or white, with a metallic finish.
Durability is also very important. For example, we've introduced plastic
bodies, instead of metal, for washing machines geared for supplies to
coastal areas to guard against the high corrosive content of salt in the
water supply.

Also, we have tailored our designs to suit rural conditions. Often, rural
areas have erratic electricity supplies and they tend to be dry and dusty,
so product design has to meet those demands. For example, our
refrigerators have built-in voltage stabilizers to protect the compressor
from fluctuations in electricity supplies.

The most popular first-time purchases are televisions. Recently we've

come up with low-end, 14-inch TVs. Also, refrigerators and washing
machines. These are the three products we see people buying when
they get married. We call this the "marriage package" campaign, which
we launched two to three years ago.
 Benefit Segmentation
Benefit
Benefit
Segmentation
Segmentation
The process of grouping customers
into market segments according to
the benefits they seek from the
product.

• People have different needs and seek different benefits from the products
• Eg, Shampoo – What all benefits you can list down?
Cleaning, Moisturizing, Shining, Bouncy Hair, Anti Dandruff, hair type suitability
• Soap - What all benefits you can list down?
Freshness, Germicidal, Moisturizing
• Washing Powder - What all benefits you can list down?
Ezee (delicate fabric), Surf Excel Matic Top (less lather, top loading).
• Shoes – Benefits?
Running, Indoor gym, Sports (tennis, cricket), walking
 Usage-Rate Segmentation
Dividing
Dividingaamarket
marketby
bythe
theamount
amount
Usage-Rate of
Usage-Rate ofproduct
productbought
boughtor
orconsumed.
consumed.
Segmentation
Segmentation (Cellphones,
(Cellphones,India
India/ / Automobiles,
Automobiles,USA/
USA/
Heavy
Heavycard
cardusers
users/ /Frequent
Frequentflyers)
flyers)

AAprinciple
principleholding
holdingthat
that20
20
80/20
80/20 percent
percentof
ofall
allcustomers
customersgenerate
generate
Principle
Principle 80
80percent
percentof
ofthe
thedemand.
demand.(loyalty
(loyalty
programmes,
programmes,customer
customerretention)
retention)

Enables marketers to focus efforts on heavy users or to develop

multiple marketing mixes aimed at different segments
 Strategies for Selecting
Target Markets

Discuss strategies for

selecting target
markets
Strategies for Selecting
Target Markets

Target
Target A group of people or
Market
Market organizations for which an
organization designs,
implements, and maintains a
marketing mix intended to
meet the needs of that group,
resulting in mutually satisfying
exchanges.
 Strategies for Selecting
Target Markets

Undifferentiated Concentrated Multisegment

Strategy Strategy Strategy
Undifferentiated Targeting
Strategy

A marketing approach that

views the market as one big
market with no individual
segments and thus
uses a single
marketing mix.
 Undifferentiated Targeting Strategy
Advantage:

 Potential savings on production and

marketing costs i.e economies of scale

Disadvantages:

 Unimaginative product offerings

 Company more susceptible to competition

Undifferentiated
Strategy

Commodity Products:
Products Flour, Rice, Sugar, Pulses*, Salt*

• *Segmentation exists. Where?

• Maruti 800 used to come in limited colors. Charged extra for white
 “Any customer can have a car painted any colour
that he wants so long as it is black” – Henry Ford

• Launched in 1908, by Henry Ford’s Ford Motor company

• The first affordable automobile
• By 1918, half of all the cars in the US were Model Ts.
• From 1908 to 1913, the Model T was not available in black but rather
only grey, green, blue, and red
• Black was cheap, durable
• 30 different kind of black used till
1927 (end of production)
 Paint Industry – India

•FY 17-18: 50000 cr; estimated: 70000 cr by 2021-22

•Major Players –
Asian Paints, Nerolac, Berger Paints

•Undifferentiated strategy?

•Decorative
- exterior wall paints, interior wall paints, wood finishes,

household
- higher margin, seasonal demand
- price sensitive segment
- HD paints, emulsion, enamel

•Industrial
- automotive coatings, powder coatings and protective
coatings
- automobiles, engineering and consumer durables
- technology intensive
Market Share of 40%
in
Top 5 players in India Industrial
Paints
Concentrated Targeting
Strategy
Advantage:

 Concentration of resources
 Meets narrowly defined segment
 Small firms can compete
 Strong positioning

Disadvantages:
 Segments too small, or
changing
 Large competitors may
Concentrated
Strategy market to niche segment

7
 Concentrated Targeting
Strategy
A strategy used to select one
Concentrated
segment of a market for targeting
Targeting Strategy
marketing efforts.

Niche Marketing:
Concentrating all marketing efforts on a small but specific and
well defined segment of the population
Eg. Porsche, Audi, Rado, Louis Vuitton, Gucci, Prada
 Multisegment Targeting
Strategy

Multisegment A strategy that

Targeting chooses two or
Strategy more well-defined
market segments
and develops a
distinct marketing
mix for each.
 Multisegment Targeting
Strategy
Advantage:

 Greater sales volume, higher profits,

larger market share

Disadvantages:
 Higher costs (product design,
production cost, promotion cost,
inventory cost)
 Cannibalization
Multisegment
Strategy
Cherry Picking
 One-to-One Marketing

Explain one-to-one
marketing
One-to-One Marketing

One-to-One
One-to-One
Marketing
Marketing is...
is...

Individualized
Individualized

Information-Intensive
Information-Intensive

Long-Term
Long-Term

Personalized
Personalized
One-to-One Marketing Trends

• One-size-fits all marketing no longer relevant

• Direct and personal marketing efforts will grow to

meet needs of busy consumers.

• Consumers will be loyal to companies that have

earned—and reinforced—their loyalty.

• Mass-media approaches will decline as technology

allows better customer tracking.
 Catalogue
Catalogue Sales
Sales (Direct
(Direct Marketing)
Marketing)

• No need of physical store locations

• One big warehouse required
• No. of staff required is less
• Shopping at the comfort of your home
• Helps targeting existing customers – address, contact number, types of
products earlier purchased, personalization
67
68
 Positioning

Explain how and why firms

implement positioning
strategies and how product
differentiation
plays a role
Positioning is…

developing a specific marketing mix to influence potential

customers’ overall perception or a brand, product line, or
organization in general.

1.Position is the place a product, brand, or group of products occupies in

consumers’ minds relative to competing offerings.

2.Positioning assumes that consumers compare products on the basis of important

features.
Product Differentiation

Product Differentiation is…

a positioning strategy that some firms

use to distinguish their products from
those of competitors.
 Product Differentiation
(attributes/features/quality/technology)
• First toothpaste based on Gel
• Calcium carbonate with glycerin
• Bright red, Blue and Green
• Colgate (mkt leader) had to copy

• Range of non stick cookware

• DuPont’s Teflon, the best for non stick property

• New Ariel with Carezymes

• Superior cleaning power
Southwest Airlines: Point to Point shuttle service for the domestic traveller

LG AC with anti bacteria, LG refrigerator (Infra Red lamp-prevents

protein degeneration, anti bacteria shiled with silver ion technology,
ice beam door cooling)

Aristocrat : Suitcase with wheels

Can you differentiate with respect to Customer Care & Service?

QSR – Major Players in India
Why is Dominos the Leader?

Product, Price, Place, Promotion, People, Process

Segmentation, Targeting, Positioning

Positioning Strategies
Firm uses a variety of bases for positioning:

1. Attribute, Product Feature, Customer benefit

•IFB was the first company to introduce front loading washing machine

•Ezee was the first detergent for woollen clothes

•Himalaya products are differentiated as Herbal healthcare products for its

entire range (soaps, shampoos, face wash, medicines, hand sanitizers, pain
balms etc.)

• Maruti – Fuel efficient cars, Hyundai – feature rich cars

• Eno – Fast Relief in 6 seconds

Positioning Strategies
2. Price and Quality

•Indigo & Spicejet (budget), Vistara (Premium)

•Micromax, Karbon, Lava, Xiomee (budget)
•Sony products (Price & Quality)
•Hitachi (Price and Quality)

3. Use or Application

•Vicks Vaporub – All day relief if applied at night

•Good Night Naturals – Herbal, moisturizing and mosquito repellant
•Fevi Stik – No need to use tongue
•Fevicol – Best product for joining anything

4. Product User

•Nutralite, Amul Lite - Low fat

•Madura Garments – Loiuss Philippe (premium, sophisticated formal wear),
Van Heusen (formal executive wear 25-45 yrs), Allen Solly (premium casual
wear), Peter England (Value for money)
Positioning Strategies
5. Competitor Positioning

•Pepsodent vs Colgate

•P&G Mystery Shampoo vs HUL Dove

P&G – Hoardings:  'A Mystery Shampoo!! 80% women say is better than anything else‘

HUL – Hoardings: 'There is no mystery. Dove is the No.1 shampoo'. Dove is one of the
four brands in HUL's shampoo portfolio’

Pepsi vs Coke – 1996 World Cup official sponsor (Coke),

Pepsi (Nothing official about it)

6. Emotional Positioning

•TATA Tea’s Jaago Re campaign

•“Hamara Bajaj” campaign
•Saurav Ganguly, Yuvraj Singh campaign
•HDFC Life “ Sar Uthake Jiyo”
 Repositioning

Repositioning is…

changing consumers’ perceptions of a

brand in relation to competing brands.
• Earlier TV ads targeted children - featured a group of children going to a magical place
called McDonald land where the grass was made of Fries and there were Milk Shake Volcanoes.
• Considered to be an “Obese Fast Food Joint”
• Court cases, lawsuits and bad press forced them to “reposition themselves” to a
“Fine Food Establishment”

HOW THEY DID IT ??

• Introduced new items in the menu - carrot sticks, fruit bags, salad and sandwiches as well as
drinking water, milk and fresh juice.
• The website drastically changed with the front page showing healthier chicken wraps and links to
nutrition and exercise.
http://www.mcdonalds.com/us/en/home.html
• New Ad - Three middle-aged women coming in to try the new caser-salads at a trendy looking
McDonald's restaurant

• McDonald's have also teamed up with various sports centers to give football coaching and other
activities to children – Used the concept of “Covert Advertising”

• Restaurant design and interiors underwent a change - comfortable armchairs and wireless Internet
connections, plasma TV's offering news and sports, The inside has gone dark orange and terra
cotta with wooden and brick like interior and seating, giving the place warmth and simplicity 

• Plastic packaging to bio-degradable packaging

 Maruti Omni – Product Positioning
• MUV or Car?
• Competitors?
 Maruti Omni – Brand Positioning
• Within MUV category, positioned as low priced, high space brand
• Could not sustain in this category as competitors were more spacious and
had tougher body
 Maruti Omni – Re-Positioning
“ The most spacious car for the family”
-Fifth door as point of entry for kids
-Huge space at the back
 Milkmaid
• Introduced in 1912 as a substitute for milk to be used in tea and coffee

• In 1980s sales stagnated

• A well planned advertising campaign repositioned milkmaid as an ideal

ingredient in sweets (kheer, ladoo, halwa, pies, kulfi, ice creams etc.),
cakes and other preparations

• The brand leverages upon the inner desires of modern women to create
something for her family 

• The brand turned mundane kitchen into a space of creativity, stimulation

and control.
COMPLAN – POSITIONING ISSUES

•Launched by Glaxo during WWII

•Then launched it for mass market, doctors recommended it. Came to be
known as a sick man’s drink
•Then positioned against milk. Carried 23 nutrients which milk did not. So
positioning was “superior to milk, nature’s best nutrition to children". Still the
sales did not pick up (taste not good for children)
•Only Complan with 23 nutrients is the complete health drink for the body and
also came up with chocolate and other flavours
COMPLAN – POSITIONING ISSUES

•Initially, the new ads showed that Complan was for the following
•Child – the problem eater, Young executive – too busy to eat, grandpa – too ill
to eat, young housewife – nourishment
•So the entire family had use for Complan
•Later focused mostly on children’s nutrition and growth.
•Whose Brand?
Heinz India (Now sold to Zydus Wellness for 4595 crs)
•Other Brands??
Ketchup, Glucon D, Nycil, Sampriti Ghee
Powder Power
 Powder Power
• Pediasure turnaround started in early 2000 when
competition in the form of Horlicks, Complan, Boost,
Bournvita and Milo was at its peak

• Sales dropped for all of them except Pediasure in the

next few years

• Consumers started moving to non-packaged, less

processed food

• How did Pediasure survive this?

 Pediasure Strategy
• Pediasure didn’t compete with Market leaders

• They found out a product line gap

• All the drinks targeted kids above 6 years of age. No one was selling
between 2 to 6 years. This is called micro-segmentation

• Where do parents go in this age range?

“Pediatricians”

• Abbot reaches almost 90-95% registered pediatricians in the country

• 100 million households in India have kids in this range

• Pediasure then launched the SureMoms program. Largely urban,
aware, mobile and willing to spend on high quality nutrition. Use of
blogs, forums, waiting rooms of Pediatricians

• Launched in all chemist chains (60-70%). Constant engagement with

mothers and then launched in supermarkets, large stores and online

• Pull was so strong that Pediasure didn’t spend much on retailers

margin (the basic 9%)