Unit 3 – Market Segmentation, Targeting

and Positioning

By

Assistant Prof. Rajit Panickar

 Market Segmentation - Meaning

Market segmentation refers to aggregating prospective buyers into groups or segments

with common needs and who respond similarly to a marketing action.

Market segmentation enables companies to target different categories of consumers

who perceive the full value of certain products and services differently from one
another.

Market segmentation seeks to identify targeted groups of consumers to tailor products

and branding in a way that is attractive to the group.

Markets can be segmented in several ways such as geographically, demographically, or

behaviorally.
Need of Market Segmentation??...
 Need of Market Segmentation

1. A male and a female would have varied interests and liking towards different
products, a kid would not require something which an adult needs.

2. A school kid would have a different requirement than an office goer, market
Segmentation helps marketers to bring together individuals with similar choices
and interests on a common platform.

3. Market Segmentation helps marketers to devise appropriate marketing

strategies and promotional schemes according to the tastes of the individuals of a
particular market segment.
 Need of Market Segmentation

5. Market segmentation helps marketers understand the target audience’s needs

and adopt specific marketing plans accordingly.

6. Market segmentation helps marketers understand the target audience’s needs

and adopt specific marketing plans accordingly.

7. Market segmentation helps organizations target the right product to customers

at the right time.
Benefits of Market Segmentation??...
 Benefits of Market Segmentation

1. Higher Rate of Success

Market segmentation means to study your market, to be more precise it helps to
divide a bigger market into smaller modules and lets the marketers know the
potential of the market/consumers which reduces the risk of loss and thus there
are higher chances of success for the business.

2. Increases Profitability
Market segmentation is a very effective process for business and it helps the
business to target particular segments of the market and thus helps to find better
business opportunities pertaining to that particular market segment.
 Benefits of Market Segmentation

3. Increases Competitiveness
As the target market is known to the business, the competition in the market will
increase and the marketing team will come up with new innovative ideas to
promote their brand better to stand out among the competitors.

Different offers and discounts will help the marketing team to attract more
consumers and knowing your consumers better will help gain brand loyalty.
 Benefits of Market Segmentation

4. Retention of Customer
Once the business knows the consumers, their needs can be catered to and the
customer’s experience with the market brand will help to connect with the
product/service like the hospitality sector.

5. Creates and Provides Market Opportunities

The market segments where the consumers are less satisfied with the other
brands are the opportunity areas for the company to focus on and to establish its
brand.
 Benefits of Market Segmentation

6. Effective Market Campaigning

As the business knows the consumers and their needs, the marketing team can
customize or personalize its marketing campaign accordingly and organize its
strategies as per the need of the market which is directly proportional to the
success of the business.

7. Wise and Efficient Use of Resources

Market segmentation helps to save unnecessary time and effort engaged in the
marketing campaign by identifying the potential areas of the market.
 Benefits of Market Segmentation

8. Higher Customer Satisfaction

Market segmentation directs or guides the company to make its market­ing efforts
consumer and market-oriented in a specific market segment, and lets the
companies serve the consumers better, increasing customer satisfaction which is
the ultimate goal of the business.

9. Cost-Efficient
Efficient market research and market segmentation help to save a lot of time,
money, and resources invested in the marketing campaign. Also as the customers
are grouped as per their needs, commonalities, choices, statuses, etc. it becomes
easy to target the audience for marketers.
 Benefits of Market Segmentation

10 . Know your Customer Better

Market segmentation helps to study the market needs and potential consumers
which reduces the risk of loss or unsuccessful marketing campaigns.

As the market research is done in advance before the campaign the chances of
being successful are more as the segmentation of the market helps the marketers
to do their homework for marketing.

Marketers can strategize and plan their campaigns as per the generic needs of the
potential consumers as per the market research.
 Types of Segmentation

1. Geographic Segmentation 3. Psychographic Segmentation

2. Demographic Segmentation 4. Behavioural Segmentation

 Geographic Segmentation

Geographic segmentation involves segmenting your audience based on the region

they live or work in.

This can be done in any number of ways: grouping customers by the country they
live in, or smaller geographical divisions, from region to city, and right down to
postal code.
Geographic Segmentation – Parameters to Segment
 Geographic Segmentation – Parameters to Segment

1. Location
Segmenting by location gives you a lot of options.

It could be a city, a town, a different country, or even a continent.

This can also be used to identify a new geographic location your business may wish
to expand into.

2. Climate
People don’t buy winter tires in Dubai, so, segmenting by climate helps you identify
areas where the climate is appropriate for your product or service.
 Geographic Segmentation – Parameters to Segment

3. Culture
When addressing your target market you need to account for cultural variations
and sensitivities.

For example, in Western cultures, white symbolizes purity, elegance, peace, and
cleanliness.

However, in India white represents death and mourning

 Geographic Segmentation – Parameters to Segment

4. Population
A brand may choose to focus on a densely populated city area, for example, a
fitness chain wouldn’t set up a gym in a rural area.

You can also overlay demographic information here to find target audiences.

5. Urban, Suburban, and Rural

These three different environments all need different and specific marketing
strategies as customer needs are different.

Those in cities and suburbs tend to have more purchasing power than in rural areas,
so products can be more expensive.
 Geographic Segmentation – Parameters to Segment

6. Language
Not every country in the world wants or can be marketed to in English.

If you’re running a marketing campaign it will be essential it’s done in the local
language.

You’ll need to make sure you’re ready to enter a market if all your marketing
messages are going to need to be changed.
 Geographic Segmentation – Parameters to Segment

7. Time Zone
Time zone refers to the local time of a country.
Geographic Segmentation Examples??...
 Examples of Geographic Segmentation

Example 1: Segmenting based on climate and season

If you’re targeting an area that is consistently hot, or perhaps for the duration of
summer months you could get a bit more creative. The best example is that of Coca-
Cola, a campaign which they had done in Texas whereby they had set up a billboard on
which the temperature was being shown, and right next to the temperature they had
written ‘reasons to refresh to yourself’.
 Examples of Geographic Segmentation

Example 2: Segmenting based on Cultural Preferences

Different regions will have different values that determine whether or not
customers decide to make a purchase.

In some cases, these values will be determined by the dominant local religion or
long-standing traditions and customs, but in other cases, they can be more esoteric
local habits that nonetheless need to be understood and catered for.

From an advertising point of view, it’s also important to consider local culture. A
recent example of this is Toyota’s TV adverts for its new car the Camry in America.
 Examples of Geographic Segmentation

Example 4: Segmenting based on Cultural Preferences

Different regions will have different values that determine whether or not
customers decide to make a purchase. In some cases, these values will be
determined by the dominant local religion or long-standing traditions and
customs, but in other cases, they can be more esoteric local habits that
nonetheless need to be understood and catered for.
From an advertising point of view it’s also important to consider local culture. A
recent example of this is Toyota’s TV adverts for its new car the Camry in
America.

In total four commercials were made to target different demographics across America.
 Examples of Geographic Segmentation

Example 3: Segmenting based on population density

Another variable to consider is the density and type of the population in the area
you’re targeting.

People living in urban areas have very different experiences than those in
suburban, exurban, or rural regions.

Being able to segment by population density is especially useful for high-end

tech gadgets like hands-free lighting systems or advertising for high-end cars like
BMW or Audi.

Demand for such products is more in the urban areas rather than the suburban or
rural areas.
Examples of Geographic Segmentation
 Demographic Segmentation

Demographic segmentation groups customers and potential customers together

by focusing on certain traits such as age, gender, income, occupation & family
status.

It’s an accessible form of market segmentation, as it requires fewer data points to

implement than psychographic or behavioral segmentation.

There are plenty of ways to segment markets using demographics.

Demographic Segmentation – Parameters to Segment
 Demographic Segmentation – Parameters to Segment

1. Segmenting based on Age

People of different ages often have very different desires and expectations, it is
important to take this into account as you plan your marketing strategy.

For example, a tour and travel brand will take out different ads according to the
age group of the people it is providing that service.

Let’s say, for people above 40, they will include features like Peace of Mind and
VIP door–to–door travel service, etc., whereas, for the younger crowd, people
belonging to the age group of 20 – 30 they will include features like fun-filled
activities, heavy discounts for booking on selected periods, etc.
 Demographic Segmentation – Parameters to Segment

2. Segmenting based on Gender

Effective gender marketing isn’t about playing up gender stereotypes, but about
presenting clear, effective, and targeted marketing.

For example, products such as beauty creams, sanitary napkins, etc. are only for
women, these are products that can only be targeted to girls and would be of no
use to any man or a boy.

Products such as shaving creams, razors, etc. are certain products that can only
be used by men.

All these products are specifically for boys and are of no use to women.
 Demographic Segmentation – Parameters to Segment

3. Segmenting based on Income & Occupation

Marketers find this tool useful as people in different income brackets can have
drastically different approaches to making purchases.

Those in lower brackets are more likely to be swayed by good value, whereas
those with more disposable income will be happier to spend more for a better
product.

Compare the adverts of Maruti and Mercedes.

Demographic Segmentation – Parameters to Segment
Demographic Segmentation – Parameters to Segment
 Demographic Segmentation – Parameters to Segment

4. Segmenting based on Cultural Background

Demographic segmentation also allows us to group our customers by ethnicity,
religion, and nationality.

This is perhaps most useful for those in the food sector, particularly for
businesses selling food or products from specific cuisines.

Brands like Zomato and Swiggy will change their food offerings according to the
various festivals which are celebrated.
 Demographic Segmentation – Parameters to Segment
5. Segmenting based on Family Status
We can find group of demographic traits in the home – looking at marital
statuses, family structure for instance, how many children a family has, and the
life stages of those in each family.

This could include things like how far each child is into their education, whether
the person is renting their home or owns etc.

For example, a department store presented brilliantly conceived Back to School

marketing campaign during the COVID-19 pandemic that both spoke to parents’
needs to buy equipment for the new school year, but also acknowledged the very
specific and unique situation they were facing – highlighting that children might
be heading back to school, but might also just be logging on for remote learning
at home.
Demographic Segmentation – Parameters to Segment
 Demographic Segmentation – Parameters to Segment

6. Segmenting based on Ethnicity

Ethnicity is the quality or fact of belonging to a population group or subgroup made
up of people who share a common cultural background or descent.

With a wide variety of ethnicities and religions, it's important to consider these
groups in marketing.

Each culture has unique interests and preferences that can impact buying habits and
marketing responses.
Demographic Segmentation Examples??...
 Psychographic Segmentation

Psychographic segmentation is defined as a market segmentation technique

where groups are formed according to psychological traits that influence
consumption habits drawn from people’s lifestyles and preferences.

It is mainly conducted on the basis of “how” people think and “what” they aspire
their life to be.

Any organization which intends to understand its consumers’ thought process

can divide its target market according to this segmentation method.

Examples of such psychological traits are social status, daily activities, food
habits, and opinions on certain subjects.
Psychographic Segmentation – Parameters to Segment

Personality

Attitudes Lifestyle

Psychographic
Segmentation

Activities,
Interests and
Opinions Social Status
(AIO)
 Psychographic Segmentation – Parameters to Segment

1. Personality
Market researchers can conduct a segmentation based on personality to form a group
of people with similar personality traits.

New products/services can be launched to cater to various personalities and new

features also can be developed for the analyzed personalities.

A few defined personalities are: creative, emotional, friendly, introvert, extrovert,

etc. helping organizations filter their customers in a systematic manner.

In the past, many laptop, car, and perfume brands implemented their customers’
personalities for better marketing activities.
 Psychographic Segmentation – Parameters to Segment
2. Lifestyle
Product resources can be saved if segmentation is done on the basis of lifestyle,
and product development can be made more credible.

For example, if a shoe manufacturer intends to design shoes for various sections
of the market such as athletes, office-goers, students, etc.

Dividing groups according to customers whose lifestyle revolves around cycling

or running, those individuals who prefer formal shoes, and similar other
segmentation.

This way, the manufacturer can produce shoes that cater to every lifestyle, which
in turn will help in building a brand that develops shoes for every market
segment on the basis of lifestyle.
 Psychographic Segmentation – Parameters to Segment

3. Social Status
In most cases, the social status of people primarily decides the products they use
and their preferences (in general).

Each social class has its choice of clothes, shoes, food, cars, electronics, etc.

For example, elitists would generally prefer solitaires, luxury cars, holiday
homes, etc.

A luxury car brand would target only the elitists and not middle-class people.

This segmentation type can be helpful for brands that have a niche
product/service to offer which will not be helpful to all social classes.
 Psychographic Segmentation – Parameters to Segment

4. Activities, Interests, and Opinions

This psychographic segmentation is based on what activities are the customers
inclined towards, which topics are they enthusiastically interested in, or what are
their opinions about specific matters.

These parameters are called AIO (Activities, Interests, and Opinions).

Depending on the preferred AIO, a researcher can determine preferred products

and services and build marketing strategies to cater to varied activities, interests,
and opinions.
 Psychographic Segmentation – Parameters to Segment
5. Attitudes
Each prospective customer will have a different attitude which can be a variable
for psychographic segmentation.  

Groups are created by dividing customers on the basis of thoughts and attitudes,
it is an intangible parameter that provides insights into the basic nature of a
customer.

Each customer exhibits different attitudes – a person belonging to a high-income

group will prefer dining at premium restaurants and drive a Mercedes Benz and a
middle-class individual will be bothered more about saving a few extra bucks
and not on luxury.

A marketer has to keep these points in mind while deciding the target market for
an upcoming product feature or a new product. 
Psychographic Segmentation Examples??...
 Behavioural Segmentation

Behavioral segmentation refers to a process in marketing that divides customers

into segments depending on their behavior patterns when interacting with a
particular business or website.

These segments could include grouping customers by:

i. Their attitude toward your product, brand, or service
ii. Their use of your product or service
iii. Their overall knowledge of your brand and your brand’s products
iv. Their purchasing tendencies, such as buying on special occasions like
birthdays or holidays only, etc.

Behavioral segmentation offers marketers and business owners a more complete

understanding of their audience, thus enabling them to tailor products or services
to specific customer needs.
Behavioural Segmentation – Parameters to Segment
 Behavioural Segmentation – Parameters to Segment

1. Segmentation based on Purchase and Usage Behavior

Segmenting by purchase behavior disentangles the varying trends and behavior
patterns that customers have when making a purchase decision.

This form of behavioral segmentation provides insight into the buying stage that
your customer might be in, their role in the purchasing process, the obstacles
they are facing, the incentives they’re most likely to respond to, and much more.
 Behavioural Segmentation – Parameters to Segment

2. Occasion or Timing-Based Segmentation

Occasions could include national holidays like Independence Day, a holiday
season like Diwali, or life occasions, such as a wedding, new house, or vacation.

Occasion-based purchasing can also occur in a customer’s daily routine.

Purchases like a pizza party after work and a Starbucks coffee are all types of
occasion-based purchases as they are only bought at precise times.

Grouping customers using this form of segmentation involves monitoring a

customer’s purchasing behavior to establish a pattern so that you preempt the
targeting process.  
 Behavioural Segmentation – Parameters to Segment

3. Benefits Sought Segmentation

Segmenting by benefits sought refers to dividing your audience based on the
unique value proposition your customer is looking to gain from your product or
service.

Even when purchasing something as mundane as toothpaste, we lean towards

different value propositions: Some may be looking for whitening benefits while
others seek comfort for their sensitive gums.

Dividing consumers based on these factors embody the benefits sought by

segmentation.
 Behavioural Segmentation – Parameters to Segment

4. Segmentation based on Customer Loyalty

Loyalty-based segmentation measures the level of loyalty a customer has with
your brand, either through a rewards program, number of purchases, or general
engagement with your marketing efforts.

Using loyalty-based behavioral segmentation helps you to zero in on existing

repeat customers, their needs, behavior patterns, and more.

Besides generating repeat revenue from your business, loyal customers are
incredibly useful in terms of referrals, word of mouth, and feedback.
Behavioural Segmentation Examples??...
 Levels of Market Segmentation

1. Mass Marketing (Same Product to All Consumers)

2. Segment Marketing (Different Products to One & More Segments)

3. Niche Marketing (Different Products to Subgroups within Segments)

4. Micro Marketing (Products to Suit the Tastes of Individuals or Locations)

Criteria for Effective Segmentation

M
Measurable

A
Accessible

S
Substantial

D
Differentiable

A
Actionable
 Criteria for Effective Segmentation

1. Measurable
The size and purchasing power of your market should be measurable, meaning
there is quantifiable data available about it.

A consumer’s profile and data provide marketing strategists with the necessary
information on how to carry out their campaigns.

2. Accessible
Accessibility means that customers and consumers are easily reached at an
affordable cost.

This helps determine how certain ads can reach different target markets and how
to make ads more profitable. 
 Criteria for Effective Segmentation

3. Substantial
To market a brand marketers should maintain its data in a substantial manner.

They should clearly define a consumer’s profile by gathering data on their age,
gender, occupation, socio-economic status, and purchasing power.  

4. Differentiable
When segmenting the market, you should make sure that different target markets
respond differently to different marketing strategies.

If a business is only targeting one segment, then this might not be as much of an
issue. 
 Criteria for Effective Segmentation

5. Actionable
Lastly, your market segments need to be actionable, meaning that they have
practical value.

A market segment should be able to respond to a certain marketing strategy or

program and have outcomes that are easily quantifiable. 
 Market Potential

Market potential is the valuation of the sales revenue from all the supplying
channels in a market. 

Market potential is the population that is interested in the product/service that is

being made or offered by an organization.

In other words, market potential is the potential money making capability of a

firm if it capitalizes all advantages and everything goes its way.

It is usually measured in sales units or sales volume or the potential revenue.

 Market Share

Market share is the percent of total sales in an industry generated by a particular

company.

Market share is calculated by taking the company's sales over the period and
dividing it by the total sales of the industry over the same period.

Market Share = Total Company Sales / Total Industry Sales

This metric is used to give a general idea of the size of a company in relation to its
market and its competitors.

The market leader in an industry is the company with the largest market share.
 Target Market

A target market is a group of people that have been identified as the most likely
potential customers for a product because of their shared characteristics such as
age, income, and lifestyle.

Identifying the target market is a key part of the decision-making process when a
company designs, packages, and advertises its product.

The target market can also inform a product's specifications, packaging, and
distribution.
 Criteria for Selection of Target Market

• Size - How large is this market?

• Expected Growth - How much growth or profitability from this market?

• Competitive Position - Low competition equals attractive market.

• Cost to Reach - Is this market accessible with our tactics?

• Compatibility - How aligned is this market to our goals?

 Segment Marketing

The term market segment refers to people who are grouped together for
marketing purposes.

Market segments are part of a larger market, often lumping individuals together
based on one or more similar characteristics. 

Marketing professionals approach each segment differently, but only after they
fully understand the needs, lifestyles, demographics, and personality of the target
consumer.
 Niche Marketing

Niche marketing is defined as channeling all marketing efforts towards one well-
defined segment of the population.

There is one important thing to understand that ‘niche’ does not exist, but is
created by smart marketing techniques and identifying what the customer wants.

A niche market is one in which there is a limited number of customers but those
customers are prepared to spend money on the type of quality of product they
want.
 Local Marketing

Local marketing refers to the marketing strategies a business uses online to get

their products or services in front of people in their local area and engage new
and potential customers within a specified radius with the intention of turning
them into loyal customers.

Typically, local marketing is used by businesses that have a physical storefront in

their community, such as restaurants, bars, spas, medical offices, etc.
 Mass Marketing

Mass marketing is a strategy which is directed towards attracting a huge portion

of the audience.

It aims to address the highest number of potential customers while ignoring

niche demographic differences.

The strategy involved in this type of marketing strategy focuses on a higher

volume of sales at lower prices so as to obtain maximum exposure for the
product.
 Long Tail Marketing

Long tail marketing is a business strategy of equaling or exceeding the market

demand of a hit product by stocking, offering, and marketing many less-demand
volume niche products.

Unlike the usual strategy of product promotion, the long tail strategy focuses
more on inventory management and selling multiple less popular products to
generate as much profit from the long tail as the hit head.
Long Tail Marketing
 Long Tail Marketing - Examples

eCommerce
The long tail strategy works perfectly for eCommerce marketplaces like Amazon
which makes 57% of its books sales from long-tail searches.

Entertainment Platforms
While Netflix uses the popular superhits to get many people to subscribe to it,
it’s AI-powered personal recommendation system monitors the activities of the
users to suggest them the long tail content according to their own needs.

This makes them stay with Netflix for long and increases their lifetime value.
 Concept of Differentiation

Differentiation is a marketing strategy designed to distinguish a company's

products or services from the competition.

Successful product differentiation involves identifying and communicating the

unique qualities of a product or company while highlighting the distinct
differences between that product or company and its competitors.

Product differentiation goes hand in hand with developing a strong value

proposition so that a product or service is attractive to a target market or
audience.
 Concept of Positioning

Positioning in marketing is a strategic process that involves creating an identity/

image of the brand or product within the target customers’ minds.

The process indicates how you differentiate your product/ service from that of
your competitors and then determine which market niche to fill.

A company’s marketing positioning strategy is affected by plenty of variables

related to customers’ requirements and motivations, as well as by its competitors’
actions.
 Value Proposition

A value proposition refers to the value a company promises to deliver to

customers should they choose to buy their product.

A value proposition is part of a company's overall marketing strategy.

The value proposition provides a declaration of intent or a statement that

introduces a company's brand to consumers by telling them what the company
stands for, how it operates, and why it deserves their business.
 Unique Selling Proposition

Unique Selling Proposition or USP is the one feature or the perceived benefit of
a good which makes it unique from the rest of the competing brands in the
market.

It is that very reason which motivates a buyer to purchase that product even
though it might be costlier than other products.

The key to boost the sales of the product effectively through advertising is to
highlight the USP of the product prominently.