05/01/23 - 1 -Dr. H. Gayathri

Dr. H. Gayathri

Kotler on Marketing

“Don’t buy market share. Figure out how to earn it.”

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Dr. H. Gayathri

Market Segmentation and Market Targeting

Market segmentation is the process of disaggregating the total market into a number of sub-markets. 

Market consists of buyers who will differ in one or more respects,

 

They may differ in their wants, purchasing power, geographical locations, buying attitudes and buying practices. These variables can be used to segment the market.

05/01/23 - 3 -Dr. H. Gayathri

Dr. H. Gayathri

Requirements for effective segmentation.

 

Measurable, accessible, actionable, substantial

and differentiable.

 

Evaluating the market segments.

 

Segment size and growth.  Segment structural attractiveness.  Company objective and resources.

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Dr. H. Gayathri

Evaluating and Selecting the Market Segments

Single – segment concentration.

Selective specialization.

Product specialization.

Market specialization.

Full market coverage.

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Dr. H. Gayathri

Preference segments:

Homogeneous preferences

Diffused preferences

Clustered preferences 

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Dr. H. Gayathri

Niche Marketing

Local Marketing

Customerization

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Dr. H. Gayathri

Bases for Segmenting Consumer Market :

The marketing firm may have to investigate different segmentation variables in order to gain an insight into the structure of the overall market.

Generally the organizations use a combination of

variables in order to define a precise market

segment.

Geographic Segmentation

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Dr. H. Gayathri

Demographic Segmentation :

It is one of the most straight forward and meaningful bases for segmenting consumer markets. The demographic variables are :

Age & life – cycle stageGenderGeneration Social class / income

05/01/23 - 9 -Dr. H. Gayathri

Dr. H. Gayathri

Psychographic segmentation :

Life style

Personality

Values

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Dr. H. Gayathri

Behavioural Segmentation – Here, the buyers

are divided into groups on the basis of their

knowledge of, attitude toward, use of, or

response to a product.

Many marketers believe that behavioural

variables like occasions, benefits, user status,

usage rate, loyalty status, buyer – readiness stage,

and attitude are useful for segmenting.

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Dr. H. Gayathri

Occasions - Buyers are distinguished

according to the occasions

a) When they develop a need

b) When they purchase a product

c) When they use a product

e.g. : Airline, Fruit juices etc.

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Dr. H. Gayathri

Segmentation by usage – consumption rates

for many consumer products are not evenly

distributed across all household. Hence,

meaningful segments could be defined in terms

of usage of the product itself. 

If a firm can identify heavy users – it may be

able to develop special marketing strategy aimed

at winning more of them to the brand. 

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Dr. H. Gayathri

E.g., heavy users of beer/cigarettes/supari’s etc.

in a particular country could be of working class,

between 25 – 50 years of age, watch television more

than 2 1/2 hours per day and may prefer to watch

regional programme, 

Consumer profiles such as this are obviously

helpful to the marketing firm in developing pricing

and communication strategies,

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Dr. H. Gayathri

Loyalty Status – A market can also be segmented according to the degree of consumers brand loyalty. Kotler has divided them into 4 groups. According to loyalty status : a. Hard-core loyals : undivided loyalty to one brand

eg., AA, A,A,A b. Split loyals : Divided loyalty between 2 or 3

brands eg., A, B, B, A, B

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Dr. H. Gayathri

c. Shifting loyals : Consumers shift loyalty from

one brand to another  

d. Switchers : No brand loyalty at all, instead

switches from one brand to another. eg. B, E, C, A, D

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Dr. H. Gayathri

A company may usually attract switchers, at

least in the short term, by price reductions or

other forms of sales promotions. 

A careful analysis of brand loyalty categories

can tell the firm a lot about its present marketing

strategy and can point the way to improvements.

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Dr. H. Gayathri

For eg., from an analysis of ‘shifting loyals’ the firm may learn about possible inadequacies in its marketing programme that are causing people to switch brands.

Attitude : Five groups are Enthusiastic, Positive, Indifferent, Negative and Hostile. Understanding attitudes helps in formulating communication strategies.

05/01/23 - 18 -Dr. H. Gayathri

Dr. H. Gayathri

Benefit Segmentation : 

Benefit segmentation uses casual rather than

descriptive variables to group consumers,

Different people buy the same or similar products for different reasons, e.g, some people buy a car purely as a means of transport, while others as a status symbol or as an extension of their personality.

05/01/23 - 19 -Dr. H. Gayathri

Dr. H. Gayathri

In using benefit segmentation, the marketing firm

needs to determine the major benefits people are

seeking from a particular product class, to identify

the profiles of the people seeking each benefit and

recognize the existing competitors products that

are close to delivering each of the benefits, e.g.

toothpaste.

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Dr. H. Gayathri

Some of the benefits sought may not be serviced

by existing products – and this will give the firm

the opportunity of capitalizing on an unsatisfied

market segment.

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Dr. H. Gayathri

Variables ExamplesOrganizational variablesPurchasing situation/phase

New task, modified or straight re-buy; stage in the purchasing, decision process

Customer experience stage

Product life-cycle stages (i.e. introduction, growth, and maturity) as it relates to customer adoption process (i.e., early and late adopters)

Customer interaction needs

Dependence on supplier in implementing decision-making process or supplier’s knowledge compared to customer’s knowledge

Industrial Segmentation

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Dr. H. Gayathri

Product innovativeness

Innovative firms versus followers

Organizational capabilities

Extent of operating, technical, or financial capabilities

Purchases situation variablesInventory requirements Purchase importance Purchase policies Purchasing criteria

Material requirement planning or just-in-time systems

Degree of perceived risk (i.e., cost, usage factors, or time)

Market-based prices, bids, or leasing preferencesSupplier reputation, technical services, reliability, flexibility, etc.

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Dr. H. Gayathri

Structure of the buying center

Key influencers and decision makers (e.g., engineering, marketing, plant managers, and R&D)

Individual variables

Personal characteristics

Demographics (e.g., age and experience), personality, non-task motives, perceptions, and risk takers/avoiders

05/01/23 - 24 -Dr. H. Gayathri

Dr. H. Gayathri

Categories of Buyers’ Choice Criteria

Criteria Explanation1. Performance criteria These criteria evaluate the extent to

which the product is likely to maximize performance in the application(s) envisaged for it.

2. Economic criteria These criteria evaluate the anticipated cost outlays associated with buying, storing, using, and maintaining the product.

3. Integrative criteria These criteria evaluate the willingness of suppliers to cooperate and go beyond minimal standards in providing services to integrate their efforts in accordance with the buyers’ requirements.

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Dr. H. Gayathri

4. Adaptive criteria These criteria evaluate the extent to which the buying firm may have to adapt its plans to accommodate uncertainty about the capability of the supplier to meet the buyer’s requirements for production and delivery.

5. Legalistic criteria These criteria evaluate the impact on the buying decision of legalistic or quasi-legalistic constraints (e.g. government regulations, company policies and practices)

Source: Donald R.Lehmann and John O’Shaughnessy, “Decision Criteria Used in Buying Different Categories of Products.” Journal of Marketing, 38 (April 1974)

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Dr. H. Gayathri

Industrial Market SegmentationCharacteristic Segment by QuestionDemographic

Industry Company SizeLocation

Which industry to focus on?Can we produce enough for large needs?What geographical areas? 

Operating Variables

Technology

User / Nonuser Status

Customer Capabilities

What Customer technologies?

Heavy, medium, light nonusers?

Needing many services, few? 

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Dr. H. Gayathri

Purchasing Function

  Power Structure  

Nature of Existingrelationships

Purchasing Policies

Purchasing Criteria

Centralized or decentralized? national account vs. field oriented

Engineer dominated, finance, etc.?

Strong relationships or most desirable companies?

Leasing, service, price, bid?

Quality, service, price? 

Purchasing Approaches

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Dr. H. Gayathri

Situational Factors

Urgency

Specific Application

Size of order

Quick delivery or Service

Certain or all applications?

Large or small orders?

Personal

People

Purchases

Buyer-Seller Similarity

Attitudes toward Risk

Loyalty

Values similar to ours?

Risk-taking, risk-avoiding customers?

High loyalty to suppliers?

 Source : Thomas V. Bonoma and Benson P. Shapiro.