STPD

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STP Model

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Definition

 Market segmentation is the process of dividing a market of potential

customers into groups, or segments, based on different characteristics.

The segments created are composed of consumers who will respond similarly to
marketing strategies and who share traits such as similar interests, needs, or
locations

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 Definition

 A market is composed of individuals with dissimilar needs & wants & for this reason it is
called a heterogeneous market.

“Market segmentation is the process of dividing the total heterogeneous

market into relatively distinct homogenous sub groups of consumers with
common needs or characteristics & selecting one or more segments to
target with distinct marketing programme…”

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Need for market segmentation

Most efficient Most effective

Many Groups
of One

One Mass
Market

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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.

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Segmentation Process

• Marketers follow two methods to determine the bases on which to identify

markets:
– Segments are predefined by managers based on their observation of the
behavioral and demographic characteristics of likely users

– Segments are defined by asking customers which attributes are

important and then clustering the responses

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Criteria for effective segmentation

Responsiveness

Accessibility

Measurability /
Identifiability

Substantiality

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Geographic Segmentation

 Geographic segmentation divides the market on the basis of geography.

This type of market segmentation is important for the marketers as people
belonging to different regions may have different requirements. For
example, water might be scarce in some regions which inflates the demand
for bottled water but, at the same time, it might be in abundance in other
regions where the demand for the same is very less.

 People belonging to different regions may have different reasons to use the
same product as well. Geographic segmentation helps marketer draft
personalized marketing campaigns for everyone.

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Geographic Segmentation

TYPES OF MARKET SEGMENTATION.

Geographic Segmentation
Geographic segmentation refers to the classification of market into various geographical
areas.
A marketer can’t have similar strategies for individuals living at different places.

Nestle promotes Nescafe all through

the year in cold states of the country
as compared to places which have well
defined summer and winter season…

McDonald’s in India does not sell beef

products as it is strictly against the religious
beliefs of the countrymen, whereas
McDonald’s in US freely sells and promotes
beef 11
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Geographic Segmentation variables

World City or Metro

Region or Size
Country Neighborhood
State Density
City Climate

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Demographic Segmentation

 Demographic segmentation divides the market on the basis of demographic

variables like age, gender, marital status, family size, income, religion,
race, occupation, nationality, etc. This is one of the most common
segmentation practice among the marketers. Demographic segmentation is
seen almost in every industry like automobiles, beauty products, mobile
phones, apparels, etc and is set on a premise that the customers’ buying
behaviour is hugely influenced by their demographics.

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Gender

 Gender is one of the most simple yet important bases of market

segmentation. The interests, needs and wants of males and females differ at
many levels.

 Thus, marketers focus on different marketing and communication strategies

for both.

 This type of segmentation is usually seen in the case of cosmetics, clothing,

and jewellery industry, etc.

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No Market Segmentation

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Segmented by Gender

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Dove Targets Women
Age Group

 Segmenting market according to the age group of the audience is a great

strategy for personalized marketing. Most of the products in the market are
not universal to be used by all the age groups. Hence, by segmenting the
market according to the target age group, marketers create better marketing
and communication strategies and get better conversion rates.

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Segmented by age

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Segmented by age

 Division on the basis of age group of the target audience is also one of the
ways of market
segmentation.
 The products and marketing strategies for teenagers would obviously be
different than kids.
 Age group (0 - 10 years) - Toys, Nappies, Baby Food, pram
Age Group(10 - 20 years) - Toys, Apparels, Books, School Bags
Age group (20 years and above) - Cosmetics, Anti-Ageing Products,
Magazines, apparels and so on

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 Toyota Scion
Targets Gen Y Consumers
Income

Income decides the purchasing power of the target audience. It is also one of the
key factors to decide whether to market the product as a need, want or a
luxury. Marketers usually segment the market into three different groups
considering their income. These are
 High Income Group
 Mid Income Group
 Low Income Group
 This division also varies according to the product, its use, and the area the
business is operating in.

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Segmented by income

 Marketers divide the consumers into small segments as per their income.
Individuals are
classified into segments according to their monthly earnings.
The three categories are:
 High income Group
 Mid Income Group
 Low Income Group

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 Other segments

Marital Status
Market segmentation can also be as per the marital status of the individuals.
Travel agencies would not have similar holiday packages for bachelors and married
couples.

Occupation
Office goers would have different needs as compared to school / college students.
A beach house shirt or a funky T Shirt would have no takers in a Zodiac Store as it caters
specifically to the professionals.

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Psychographic Segmentation

 Psychographic Segmentation divides the audience on the basis of their

personality, lifestyle and attitude. This segmentation process works on a
premise that consumer buying behaviour can be influenced by his personality
and lifestyle.

 Personality is the combination of characteristics that form an individual’s

distinctive character and includes habits, traits, attitude, temperament, etc.
Lifestyle is how a person lives his life.

 Personality and lifestyle influence the buying decision and habits of a person
to a great extent. A person having a lavish lifestyle may consider having an air
conditioner in every room as a need, whereas a person living in the same city
but having a conservative lifestyle may consider it as a luxury.

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 Psychographic Segmentation

 When the segmentation is based on personality or life style

characteristics.
 Every consumer has a self image & this describes their personality.
 are
 There ambitious
different types of people such as :
 confident
Some motorcycle manufacturers segment the
 aggressive
 impulsive market on the basis of personality such as macho
 modern image, independent & impulsive.
Some producers of liquor, cigarettes & apparel
 conservative
 gregarious segment the market on the basis personality &
 loners self image.
 extroverts or
introverts

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Behavioural Segmentation

 The market is also segmented based on audience’s behaviour, usage,

preference, choices and decision making. The segments are usually divided
based on their knowledge of the product and usage of the product. It is
believed that the knowledge of the product and its use affects the buying
decision of an individual. The audience can be segmented into –

Behavioral Variables
Occasions
Benefits
User Status
Usage Rate
Buyer-Readiness
Loyalty Status
Attitude

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 The Brand Funnel Illustrates Variations in the
Buyer-Readiness Stage

 Aware

 Ever tried

 Recent trial

 Occasional user

 Regular user

 Most often used

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Loyalty Status

Hard-core

Split loyals

Shifting loyals

Switchers

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 Behavioral
Segmentation Breakdown

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Agenda

Definition

Segmenting Consumer Markets

Segmenting Business and

International Markets

Requirements for effective

Segregation

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Segmenting Business Markets

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Why do firms need to segment business markets?

 Particularly as business markets have a much smaller number of potential

customers, as opposed to some very large consumer numbers. However, firms
that market to other businesses will typically have smaller number of
customers.

 These customers are, as a result, more important to them on individual basis,

so careful customer selection becomes more critical.

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 MARKET
TARGETING
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Definition

Market targeting is a process of selecting the target market

from the entire market. Target market consists of
group/groups of buyers to whom the company wants to
satisfy or for whom product is manufactured, price is set,
promotion efforts are made, and distribution network is
prepared.

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Definition

1.We can define the term as: Market targeting is a process of selecting the target
market from the entire market. Target market consists of group/groups of
buyers to whom the company wants to satisfy or for whom product is
manufactured, price is set, promotion efforts are made, and distribution
network is prepared.

2.It involves basically two actions – evaluation of segments and selection of the
appropriate market segments. In this relation, market targeting can be defined
as: Market targeting is an act of evaluating and selecting market
segments.

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 Targeting consists of 2
steps
1. Evaluating Market Segments:
Evaluation of market segments calls for measuring suitability of segments. The
segments are evaluated with certain relevant criteria to determine their
feasibility.

2. Selecting Market Segments

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Evaluating Market Segments

i. Attractiveness of Segment:
In order to determine attractiveness of the segment, the company must think on
characteristics/conditions which reflect its attractiveness, such as size,
profitability, measurability, accessibility, actionable, potential for growth,
scale of economy, differentiability, etc. These characteristics help decide
whether the segment is attractive.

ii.Objectives and Resources of Company:

The firm must consider whether the segment suits the marketing objectives.
Similarly, the firm must consider its resource capacity. The material,
technological, and human resources are taken into account. The segment must
be within resource capacity of the firm.

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Selecting Market Segments

 When the evaluation of segments is over, the company has to decide in which
market segments to enter. That is, the company decides on which and how
many segments to enter. This task is related with selecting the target market.
Target market consists of various groups of buyers to whom company wants
to sell the product; each tends to be similar in needs or characteristics

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 Patterns of
Target Market Selection
 Patterns of
Target Market Selection
 Patterns of
Target Market Selection
Single Segment Concentration

 It is the simplest case. The company selects only a single segment as target
market and offers a single product. Here, product is one; segment is one.

 For example, a company may select only higher income segment to serve
from various segments based on income, such as poor, middleclass, elite
class, etc. All the product items produced by the company are meant for only
a single segment.

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Selective Specialization

 In this option, the company selects a number of segments. A company

selects several segments and sells different products to each of the
segments. Here, company selects many segments to serve them with many
products. All such segments are attractive and appropriate with firm’s
objectives and resources.

 There may be little or no synergy among the segments. Every segment is

capable to promise the profits. This multi-segment coverage strategy has
the advantage of diversifying the firm’s risk. Firm can earn money from
other segments if one or two segments seem unattractive. For example, a
company may concentrate on all the income groups to serve.

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Product Specialization

 In this alternative, a company makes a specific product, which can be sold to

several segments. Here, product is one, but segments are many.
Company offers different models and varieties to meet needs of different
segments.

 The major benefit is that the company can build a strong reputation in the
specific product area. But, the risk is that product may be replaced by an
entirely new technology. Many ready-made garment companies prefer this
strategy

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Market Specialization

 This strategy consists of serving many needs of a particular segment. Here,

products are many but the segment is one.

 The firm can gain a strong reputation by specializing in serving the specific
segment. Company provides all new products that the group can feasibly use.
But, reduced size of market, reduced purchase capacity of the segment, or the
entry of competitors with superior products range may affect the company’s
position

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Full Market Coverage

 In this strategy, a company attempts to serve all the customer groups with all
the products they need. Here, all the needs of all the segments are served.
Only very large firm with overall capacity can undertake a full market coverage
strategy

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Selecting Target Market
Segments

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Agenda

Definition

Undifferentiated Marketing

Differentiated Marketing

Concentrated Marketing

Micromarketing
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4
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Undifferentiated Marketing

 Company sells the same products to all the customer groups. It does not
consider difference among buyers. Product and marketing programme remain
common for all the segments. The firm relies on mass production, mass
distribution, and mass advertising. So, it can considerably reduce production,
distribution, and promotional costs. Similarly, reduced costs result into low price
and the price-sensitive consumers can be attracted. This method is followed
by pharmaceutical companies.

 However, many experts and practicing managers have expressed strong

doubts about the strategy. It is erroneous to believe that all the segments have
similar needs. It is a rare case. Such strategy may invite competition to serve
larger groups of buyers, and smaller groups are neglected. People, in different
segments, differ significantly in terms of needs, preference, and advertising
appeal.

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5
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 Undifferentiated Marketing

 The company decides to ignore market segment differences.

 Targets the whole market with one offer.
 It focuses on what is common in the needs of consumers.
 It designs a product & marketing program that will appeal to largest number
of
customers.
 The firm relies on mass distribution & mass advertising.
 It creates a superior image of the product in everyone’s mind.

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4
Agenda

Definition

Undifferentiated Marketing

Differentiated Marketing

Concentrated Marketing

Micromarketing
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Differentiated Marketing

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Differentiated Marketing

 Here, company operates in several segments and designs different marketing

programmes for each of the segments. Various groups of customers are
targeted by several types of products and marketing strategies. It is based on
the notion that each group needs different products. This strategy is used by
the most of automobile companies. This strategy creates more total sales, but
costs of doing business also on increase.

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Following costs are likely to be higher in
differentiated marketing strategy

 i. Marketing research cost

 ii. Administrative costs
 iii. Manufacturing costs
 iv. Inventory costs
 v. Promotional costs
 vi. Product modification costs
 Here, costs and sales both increase. So, profitability is doubtful. However, it is
less risky. Loss in one segment can be offset against profitable segments.
Most of companies prefer this option. Thus, market targeting is an essential
aspect of marketing programme. A manager needs a lot of experience,
knowledge, and expertise to take decision on target market. The alternative to
be used depends upon a large number of internal and external variables.
Careful and objective analysis of these variables can assist in selecting target
market.

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 Differentiated Marketing

 Here the company operates in several market segments.

 It designs separate offers for each.
 By offering product & marketing variations to segments, companies hope for higher
sales
& stronger position within each market segment.
 It creates more total sales than mass marketing but at increased cost.

EXAMPLES
Maruti Suzuki – A car for every purse, purpose & personality NIKE Shoes – for running,
golf, cycling & basketball
P&G – 8 brands of laundry detergents worldwide.

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Agenda

Definition

Undifferentiated Marketing

Differentiated Marketing

Concentrated Marketing

Micromarketing
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Concentrated (Niche)Marketing
 Following the concentrated market targeting strategy, the company focuses on
one or a few segments or niches in a market. The aim is then to reach a large
share in this segment or niche, instead of going after a small share of a large
market.
 Why should a company do so? Clearly it will be able to achieve a stronger
market position in the chosen segment because its knowledge of the consumer
needs in the niche is larger. Also, it may acquire a special reputation for
delivering exactly what the consumer wants in that niche. The company can
fine-tune its products, marketing programmes and prices to the specific needs
of consumers in the niche. Therefore, its marketing becomes more effective. But
marketing may also become more efficient, because the company can tailor its
offerings, channels and programmes to the needs of those consumers it can
serve best and most profitably.
 The difference between a niche and a segment is the size. While a segment is
rather large and will in most cases attract several competitors, a niche is quite
small and may be focused on by few competitors only. Niching thus allows
especially small companies to focus their limited resources on serving niches.
The key is to find those niches that are overlooked by larger competitors.
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 Concentrated (Niche)Marketing

 It involves marketing in a small but profitable market segment.

 It is a narrowly defined customer group desiring a distinctive mix of
benefits.

EXAMPLES
Shahnaz Hussains herbal products made of Herbals.

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Agenda

Definition

Undifferentiated Marketing

Differentiated Marketing

Concentrated Marketing

Micromarketing
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Micromarketing

 Micromarketing means nothing else than tailoring the marketing programmes

and products to the needs and wants of individual consumers or local
customer segments. This is the narrowest market targeting strategy possible.
Instead of seeing a customer in every individual, we see the individual in
every customer. We can tailor our products and programmes to suit the tastes
of specific locations of specific individuals. Therefore, micromarketing can
take the form of local marketing and individual marketing.
 Under the local marketing strategy, we tailor brands and promotions to the
specific needs and wants of groups of local customers. These may be cities,
neighbourhoods etc.

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 Micromarketing

 Micromarketing includes individual marketing and local marketing.

 Individual marketing, also known as one-to-one marketing,
is an example of
micromarketing. Today, it is possible for firms to customize products to order.
 Using computers and the Web, it is possible for firms to manufacture custom-made
products.
 With micromarketing, the approach calls for getting to know the client’s needs, likes, and
dislikes very well.
 This makes it easier to match that consumer with the goods or services that are being
offered.
 The approach is often successful because the client receives a sense of being important
to the marketer and sees the efforts to connect as being on a more personal level rather
than a general one.

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Local marketing

 Tailoring brands and marketing to the needs and wants of local customer
segments-cities, neighborhoods, and even specific stores
 For example, Marriot’s Renaissance Hotels has rolled out its Navigator
program, which hyper-localizes guest experiences at each of its 155
lifestyle hotels around the world
 Local marketing has some drawbacks. It can drive up manufacturing and
marketing costs by reducing economies of scale.
 It also creates logistics problems as companies try to meet the varied
requirements of different local markets.

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Individual Marketing

 Tailoring products and marketing programs to the needs and preferences of

individual customers
 In the extreme, micromarketing becomes individual marketing
 Also called one to one marketing
 Companies these days are hyper-customizing everything from food, artwork,
earphones, and sneakers to high end luxury products.
 Visit Nike ID or Puma factory online to design and order personalized
sneakers.

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Thank you
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