Market Segmentation and Targeting

Updated: Sep 1





It is impossible for businesses to completely satisfy all of the customers since each individual’s preferences are different. Not all the firms can have enough resources to serve the entire market. Therefore, companies use segmentation to divide market into segments and developing products or services to these segments.


What is market segmentation?

Basically, segmenting is the separation of a group of customers with different needs into subgroups of customers with similar needs and preferences. It is because different segments require different marketing variables such as promotions, price or distributions. By doing this, a company can get a better understanding of the want of customers and thus, better target its products and services to meet each segment’s unique needs. There are four types of segmentation:

1. Geographic segmentation:

Geographic segmentation is segmenting based on the location of target market. Markets can be divided into different geographical units such as nations, regions, states or cities. This segmentation approach may consider variables such as climate, culture, natural resources and population density, among other geographic variables. For example, McArabian is a pita bread sandwich available at all McDonald's outlets in Arab countries and Pakistan while McDonald’s India uses dosa which is a thin fermented rice and lentil pancake.

2. Demographic segmentation:

Demographic segmentation involves dividing the market into groups that may include; age, gender, income, occupation, marital status, family size, race, religion and nationality. These segmentation methods are a popular way of segmenting the customer markets, as the demographic variables are relatively easy to measure. In terms of age, for instance, a business targeting Gen X when building a nostalgic ad can get a lot of positive feedback, but this same ad and targeting Gen Z will likely fail.

3. Psychographic Segmentation

Psychographic segmentation could be used to segment markets according to personality traits, social class and lifestyles. A psychographic dimension can be used by itself to segment a market, or it can be combined with other segmentation variables. Different consumers may respond differently to the businesses’ marketing efforts. For example, high-end brands like Gucci or Chanel aim their products at the upper-class consumer with high quality, high prices, and high fashion.

4. Behavioral segmentation

Behavioral segmentation divides the customers according to individual purchase behaviors. Behavioral status segmentation divides buyers into groups based on the benefits sought from the product, with the identification of specific buying behaviors, in terms of shopping frequency and usage rate, types of loyalty, etc.


What is market targeting?

Once the market segmentation has been completed, the company should identify the most profitable segments and to decide which segments that they will serve. Market targeting is a process of evaluating and selecting market segments and selecting the appropriate segments as the target market . Target market consists of groups of buyers to whom the company wants to satisfy .There are three market coverage alternatives:

1. Undifferentiated Marketing (Mass Marketing)

An undifferentiated marketing strategy ignores market differences within a market since it tends to reach as many people as possible. Therefore, this strategy involves approaching the customers as a homogenous group with one market offer. Traditionally, it focuses on radio, television, and newspapers as the means to reach a large audience, which will help the products or services to be broadly exposed. Products like sugar, flour, toothpaste, dish soap, and fruits and vegetables are just a few of the many undifferentiated product examples that just about everyone buys, regardless of demographics.

2. Differentiated Marketing

A differentiated marketing strategy will usually involve targeting a number of segments. This marketing involves designing an individual product or service offering for only one very defined and specific market segment. Differentiated marketing strategies can target many more than two segments, for example, a clothing store can implement different strategies for a product that appeals to women in different two age groups.

3. Concentrated marketing

Concentrated marketing is a strategy which targets very defined and specific segments of the consumer population. The companies with limited resources will usually target just one or a few sub-markets, which means going after a large share of one or a few segments or niches. For example, Rolls- Royce has chosen to concentrate on the luxury segment of the car market, targeting customers with liquid assets of at least $30 million. Concentrated targeting is particularly effective for small companies with limited resources as it does not require the use of mass production, mass distribution, and mass advertising.


Source:

Camilleri, M. A. (2018). Market Segmentation, Targeting and Positioning.

Indeed, 2021

Lumen Learning

Indeed

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