Target markets and Segmentation

Marketers know that they cannot appeal to all buyers in their markets, or at least not to all buyers in the same way. Buyers are too numerous, too widely scattered, in their needs and buying practices. Therefore, most companies today are moving away from mass marketing. Instead, they practice target marketing -- identifying market segments, selecting one or more of them, and developing products and marketing mixes tailored to each. In this way, sellers can develop the right products for each target market and adjust their prices, distribution channels, and advertising to reach the target market effectively.

Target marketing involves designing strategies to build the right relationships with the right customers. Market segmentation is that act of dividing a market into distinct groups of buyers with different needs, characteristics, or behaviors who might require separate products and marketing mixes. Once the groups have been identified, target marketing evaluates each market segments attractiveness and selects one or more segments to serve. Market positioning consists of deciding how to best serve target customers -- setting the competitive positioning for the product in creating a detailed marketing plan.

There is no single way to segment a market. Therefore, the marketer tries different variables to see which give the best segmentation opportunities. For consumer marketing, the major segmentation variables are geographic, demographic, psychographic, and behavioral. In geographical segmentation, the market is divided into different geographical units such as nations, regions, states, cities, or neighborhoods. In demographic segmentation, the market is divided into groups based on demographic variables, including age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. In psychographic segmentation, the market is divided into different groups based on social class, lifestyle, or personality characteristics. In behavioral segmentation, the market is divided into groups based on consumers knowledge, attitudes, uses, or responses to a product.

Business marketers use many of the same variables to segment their markets. But business markets also can be segmented by business consumer demographics at (industry, company size), operating characteristics, purchasing approaches, situational factors, and personal characteristics. The effectiveness of segmentation analysis depends on finding segments that are measurable, accessible, substantial, differentiable, and actionable.

Identifying attractive market segments

To target the best market segments, the company must first evaluate each segments size and growth characteristics, structural attractiveness, and compatibility with company objectives and resources. It then chooses one of four target marketing strategies -- ranging from very broad to very narrow targeting. The seller can ignore segment differences and target broadly using undifferentiated (or mass) marketing. This involves mass-producing, mass distributing, and mass promoting about the same product in about the same way to all consumers. Or the seller can adopt differentiated marketing -- developing different markets offers for several segments. Concentrated marketing (or niche marketing) involves focusing on only one or a few market segments. Finally, micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Micromarketing includes local marketing and individual marketing. Which targeting strategy is best depends on company resources, product variability, product lifecycle stage, market variability, and competitive marketing strategies.

Maximum competitive advantage

Once a company has decided which segments to enter, it must decide on its marketing position strategy -- on which positions to occupy in its chosen segments.
The positioning task consists of three steps;

1. identifying a set of possible competitive advantages on which to build position,
2. choosing the right competitive advantages, and
3. selecting an overall positioning strategy

The brands full positioning is called its value proposition -- the full mix of benefits on which the brand is positioned. In general, companies can choose from one of five winning value propositions on which to position their products: more for more, more for the same, the same for less, less for much less, or more for less. Company and brand positioning are summarized in positioning statements that state the target segment in need, positioning concept, and specific points of difference. The company must then effectively communicate and deliver the chosen position to the market.