NEW DIPLOMATS COLLEGE

The Ethiopian TVET-System

Marketing and Sales Management Level III

Learning guide

MODULE TITLE: PROFILE MARKET

MODULE CODE: LSA MSM3 08 1221

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Market segmentation
Market segmentation is the process of identifying distinct groups or sub groups of customers in the
market, who have distinct needs, characteristics, preferences and behaviors, and require separate
product and service offerings and corresponding marketing mixes. Kotler and Armstrong define
market segmentation as “dividing a market into distinct groups of buyers who have distinct needs,
characteristics, or behavior and who might require separate products or marketing mixes”.

Bases of Segmenting Consumer Markets

Demographics:
 Age- the consumer’s needs and wants change with age. Therefore some companies use age and
life-cycle segmentation, where age and the life-cycle determine the marketing
approach.Example, some 70-years-old use a landline telephone, e.g. due to the lack of
technological knowledge, others may only use a mobile telephone.
 Gender-Gender segmentation is used to differentiate the needs and wants between men and
women due to the fact that men and women have different attitudes toward a product.
Example, clothing, hairstyling, cosmetics and magazines.
 Income-Income segmentation divides the market into different income groups. It is used in
automobiles, clothing, cosmetics, financial services and travel.
 Education-literate or illiterate.
 Occupation-white collar or blue collar.
 Generation-Each generation is influenced by the times in which they grow up i.e. the music,
the movies, politics and other significant events characteristic of that period.
 Social class-Social class segmentation divides the customers according to their preferences in
cars, clothing, home furnishings, leisure activities, reading habits and retailers.
 Religion-Muslims don’t consume alcohol and Indians don’t eat beef.
 Nationality-Chinese give priority to their own country products.
 Culture and sub-culture-ethnicity, race, customs and traditions.
Geography:
The geographic segmentation divides customers into segments based on geographical areas such as
location country, region, state, city density of population, climate.
Psychographics;
 Needs and motivation-why customers buy specific product? Motivation is that internal force
that activates some needs and provides direction of behavior towards fulfilment of these needs.
Physiological-Safety needs-Social needs-Esteem needs-Self-actualization needs
 Perception-Our perception of the stimuli and the situation plays an important role on our
behavior. Perception is the critical activity that links the individual consumer to a group,
situation and marketer influences. When a person is exposed to a stimuli, he may show interest
in the exposure. His attention is drawn towards the object and the nerves transmit the sensation
to the brain for process.
 Personality-Consumers try to buy the products that match their personality. People wanting to
look manly will buy products with a macho appeal, which would enhance their image and
personality. People who give emphasis on comfort and care, will purchase comfort products
and so on.
 Attitude-These are learned predispositions towards people, objects and events. Our attitudes
influence our purchase decisions and consumer behavior. A person having a carefree attitude
will buy an object without much involvement.

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  Involvement-Involvement refers to the personal relevance or importance of a product or a
service that a consumer perceives in a given situation. Depending on the value and personal
interest, a consumer can have a high or low involvement.
Psychological profiles are often used as a supplement to geographic and demographics when these
does not provide a sufficient view of the customer behavior.
Behavioral variables:
These comprise:
 User status-By segmenting according to nonusers, ex-users, potential users, first-time users
and regular users of a product a company can customize its marketing for each group.
 Benefits sought-Benefit segmentation divides the customers according to the different benefits
they may seek from a product.
 Buying occasions-Occasions are when the customers are divided into segments based on the
time of day, week, month and year. Example, be during the time around holidays such as
Christmas.
 Buying readiness stage-Buyer-readiness stage refers to people’s awareness and interest of the
product. Some people are unaware of the product, some are aware, some are informed, some
are interested, some desire the product and some intend to buy.
 Loyalty status-A market can also be segmented according to the loyalty of the customers.
Hard-core loyal, split loyal, shifting loyaland switchers
 Usage rate-The usage rate segmentation divides the customers according to how much they
use a product. They are divided into groups of non-users, light, medium and heavy product
users and companies often seek to target one heavy user rather than several light users.
Criteria to use in market segmentation may include:
 Attitude
 average order value in units and Birr
 desired benefits
 business characteristics
 consumer needs
 demographics
 geography
 lifestyle
 lifetime value in units, Birr and number of transactions
 product or service usage
 psychographics
 frequency of response to direct marketing activities
 social and cultural factors
Levels at which segmentation can take place
Mass Marketing
The first area is mass marketing. It covers the area of mass producing, mass distributes and mass
promotes on product to all buyers. However, marketers have realized the great variety in each
individual customer and therefore the market segmentation is a helpful tool for the marketers to
customize their marketing programs for each individual customer.
 Customers have similar needs and wants and can be satisfied with a standardized
product/service offering.
 Standardized product is produced and distributed with a single marketing program or the same
marketing mix.
 Mass production and distribution: Lower costs; Results in lower prices and higher margins.
 Also called mass marketing, aggregate marketing and undifferentiated marketing.
Market Segmentation

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  There exist diverse customer groups homogenous on certain bases within, but heterogeneous
among each other.
 Customers are unique; they have different needs, wants and preferences.
 So, instead of a single standardized product offering, the product and service offerings are
designed according to the needs and wants of the segment so as to satisfy them better.
 Leads to higher customer satisfaction
 It has various forms: Single Segment, Differentiated segment, Concentrated segment or Niche,
Micro-marketing: local, individual.
a) Single Segmentation:
 One segment only.
 The marketer caters to the entire market with a single offering and the same marketing mix.
 Similar to mass marketing
 Example: for products like salt, sugar and staples.
b) Differentiated segment marketing:
 Selection of two or more segments
 Approach these segments with differentiated offerings and corresponding marketing mixes and
programs.
 Example: Shampoos and toiletries.
c) Concentrated marketing:
 The marketer caters to just one segment although the product could appeal to others.
 This is generally a sub-group within the whole segment.
 The process includes targeting a small segment with a specialized mix meant only for that
segment.
 Also called focused or niche marketing
 Example: Sports channels on TV; Religious channels on TV.
d) Micro-marketing:
i. Local marketing
 The marketer caters to local customer groups
 Example: movies dubbed in vernaculars.
ii. Individual marketing
 The marketers caters to the customer individual and personalize the marketing mix.
 The segment comprises one individual; so it is individual to individual marketing.
 Also called customization.
 Example: Holiday packages
Sources of information for segmenting and profiling markets may include:
 advertising sales representatives
 existing research data
 industry sources
 media representatives
 sales representatives
 website operators
The market is segmented in accordance with the selected criteria.
Market segments are reviewed for their usefulness in terms of size, potential, distinctive needs, easy
identification of members, and distinctive media use patterns
 Segments which are large enough to justify the expense of creating distinctive offers and
creative executions.

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  Small segments which are viable if telephone and email are used as communication media
rather than other types of media.
Potential may include:
 high response of market segment members to test campaigns
 high response to previous campaigns by members of market segments
Distinctive needs may include:
 specific price points
 specific products or services
 specific response vehicles such as:
 store visiting only
 website only response
Specific timing of communications such as:
 day of week
 seasonality
 time of day
Easy identification of members may include:
Flags such as:
 postcode
 date of last purchase
Geographical location of segment members, such as:
 city
 metropolitan region
 regional center
 rural region
Distinctive media use patterns may include:
 age
 email use
 ethnic language television, newspapers and radio
 gender
 internet use
 mobile phone use
 special interests
The viability of a segment is based on the following criteria:
A. Measurable:
 The segment should be measurable in term of the total size, purchasing power and,
demographic, geographic and psychographic characteristics.
B. Substantial:

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  The segment should be of sufficient size so as to generate profits; it should also have a
potential for growth.
C. Accessible:
 It should be reachable and easy to enter or penetrate.
 The marketers must be able to deliver the product or service offering and must be able to
operate therein.
D. Differentiable:
 One segment should be easily differentiated from another;
 It should be distinct from others and the people therein should react differently from other
segments towards a marketing mix program;
 Clear differences in consumer want, needs and preferences for the product must exist across
segments.
 Homogeneity within the segment; Heterogeneity with other segments.
E. Actionable:
 It should be possible to design a marketing program directed towards that segment and serve it
effectively and efficiently.
 The marketer should be able to react to the need, wants and preferences of the segment with
the appropriate marketing mix.
Market segments are selected to meet the requirements of the marketing plan, or new segmentation
criteria are chosen and applied
Identify the target market
Targeting -In the segmentation process the second stage is market targeting. Once the marketer has
identified the segments it must be decided how many and which customer groups/segments to target.
Targeting strategies may include: concentrated, differentiated and mass strategies
Approaches to determining and describing the total market for a product or service are evaluated and
chosen
Approaches may include:
 describing total market in dollar or unit terms as gross sales of all other products or services
similar to those offered by the organization
 identifying consumers with relevant needs
 identifying current users of a product or service
 identifying people with related characteristics
Consumers may include:
 Individuals- Individuals and households who buy goods for their own use or benefit are part of
the consumer market. Drug and grocery items are the most common types of consumer
products.
 Businesses-groups or organizations that purchase your product orservice or direct use in
producing other products or for use in their day-to-dayoperations. The reseller market.
Middlemen or intermediaries, such as wholesalers and retailers, who buy finished goods and
resell them for a profit.
Segment descriptions may include:
o demographic descriptions

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Demographic segmentation: dividing consumer groups according to characteristics such as sex, age,
income, occupation, education, household size, and stage in the family life cycle.
o geographic descriptions
Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their
locations.Demand for some goods and services can vary according to the geographic region. Most
major brands get 80 percent of their sales from what are called core regions and Climate is another
important segmentation factor. Northern consumers, for example, eat more soup than Southerners.
o historic descriptions such as:
 volume of purchase
 frequency of purchase
o psychographic descriptions
Psychographic Segmentation: dividing a population into groups that have similar psychological
characteristics, values, and lifestyles. Lifestyle: people’s decisions about how to live their daily lives,
including family, job, social, and consumer activities.
Selection of market segments may be contingent upon:
 expected frequency of purchase
 expected lifetime as customers
 expected volume of purchase
Strategic marketing options may include:
 advertising strategies such as:
 innovative strategies
Target Market Strategies
Targeting strategies usually can be categorized as one of the following:
Concentrated strategy (Single-segment strategy). One market segment (not the entire market) is
served with one marketing mix. A single-segment approach often is the strategy of choice for smaller
companies with limited resources.
Differentiated strategy (Selective specialization or multiple-segment strategy). Different marketing
mixes are offered to different segments. The product itself may or may not be different - in many cases
only the promotional message or distribution channels vary.
Product specialization. The firm specializes in a particular product and tailors it to different market
segments.
Market specialization. The firm specializes in serving a particular market segment and offers that
segment an array of different products.
Full market coverage. The firm attempts to serve the entire market. This coverage can be achieved by
means of either a mass market strategy in which a single undifferentiated marketing mix is offered to
the entire market, or by a differentiated strategy in which a separate marketing mix is offered to each
segment.
Aggregation strategy
 A seller treat its total market as a single segment.
 Example: gasoline
Single –segment strategy
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  Also known as a concentration strategy. Focus on one segment from within the total market.
 Example: Harley Davidson- super heavy weight market.
Multiple Segment Strategy
 Two or more different groups of potential customer are identified as target market.
A market is a set of all actual and potential buyers. A target market is a group of people toward whom
a firm markets its goods, services, or ideas with a strategy designed to satisfy their specific needs and
preferences. Any marketing strategy must include a detailed (specific) description of this.
STRATEGIES FOR REACHING TARGET MARKETS:
Selecting and Executing a Strategy
Positioning: a marketing strategy that emphasizes serving a specific market segment by achieving a
certain position in buyers’ minds
Positioning map: graphic illustration that shows differences in consumers’ perceptions of competing
products.
Reposition: marketing strategy to change the position of its product in consumers’ minds relative to
the positions of competing products.
Criteria for Effective Segmentation
 Segment must match the firm’s marketing capabilities
 Segment must be sufficiently large enough for good profit potential
 Marketers must be able to effectively promote to and serve the segment
 Segment must present measurable purchasing power and size
THE MARKETING PLAN
A Marketing Plan is a written strategy for selling the products/services of a new business.
Why Prepare a Marketing Plan?
A good Marketing Plan will help you to improve your odds against more experienced competitors and
newly emerging ones.
The Plan also shows to others that you have carefully considered how to produce a product that is
innovative, unique and marketable- improving your chances of stable sales and profits - reasons for
investors to financially back you.
CONTENTS OF A MARKETING PLAN
Marketing Goals and Objectives
To introduce this section, include the "mission statement" of the business; an idea of what its goals are
for customers, clients, employees and the consumer, then proceed with:
Market Analysis
Examine whether or not your industry is growing, maturing or declining.
If it is declining, identify the problems that exist and be able to change the ones you can. Show how
you can adapt to changes that you can't control.
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 If your industry is maturing, show how as a new company, you may be able to better adapt to external
forces; better than the more mature competition.
Environmental Analysis - Business Environment
Political and Legal
 Identify the regulations, permits, insurance, liability, and taxation requirements that you must
follow in order to operate your business.
 The business climate of your town, village and surrounding area is an important influence on
your day-to-day operations. Reflect on topics such as taxation, zoning and other factors.

Demographics
Describe the population base that exists to support your product. Identify the market size for your
product, and the people that make up your product/service's consumer group. Provide information
about: Where they live, what products do they buy, how much they spend on similar products each
year, where they shop for these products, etc.
Suppliers
Identify your sources for direct purchasing by describing their locations, the frequency of your orders
and the type and amount of supplies you will be ordering.
Social/Cultural
Explain any particular client support or other specialized consumer groups that can be identified apart
from the general public. Describe the spending and product requirements of these groups and the
characteristics of your company that support the product and services they are demanding.
Competition
Identify your direct competition by naming their business, describing their facilities and operations,
identifying their share of the consumer market, realizing support for their product and by reviewing
the weaknesses of their approach.
Strengths, Weaknesses, Opportunities and Threats Analysis
Strengths
 List the strengths of your business approach such as cost effectiveness, service quality and
customer loyalty.
 List other assets of your operations such as flexibility, innovativeness, response to external
pressures, creativity and company stability.
 Relate your experience (professionalism, duration and diversity) and the contacts you have made
in all areas of your businesses operations - from suppliers to clients, government officials to
business professionals.
Weaknesses
 Describe the areas of weakness in your company's operations, such as government policies and
procedures, and management inexperience.

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 Capital financing, credit, loans and other financial debts should be identified, with strategies to
control their effect on your business.
Opportunities
 Examine how proper timing, as well as other factors such as your company's innovativeness, may
improve your business's chances of success.
 Use tools such as customer surveys to emphasize the need for product quality and after sales
service.
Threats
List the external threats to your business' success, such a existing and newly emerging competitors,
performance of the overall economy, and your dependency on other businesses such as suppliers,
retailers and distributors for market access and support.
Financial Information
 Show the predicted level of sales you expect to realize with and without the strategies you have
outlined in the marketing plan. Show the natural level of sales as described in your business plan,
and then show the expected increase in sales as they relate to specific marketing techniques you
will use.
 Show the market share you will hope to attain, based on "high", "medium", and "low" estimates
for the success of your marketing strategy.
 Forecast the "break-even point" for each of the following 5 years, in the number of sales in
dollars. This will demonstrate your need to realize a certain amount of sales in order to cover
your expected costs for each of the next 5 years.

Group Assignment
Make agroup of 3 students

Submission Date 26/09/2016 E.C

1. List and explain the SWOT analysis in the business environment
2. What are the difference between market segment and target market
3. Briefly explain the market gals and objectives

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