Is the process of dividing a market into smaller groups of buyers with distinct needs characteristics or Behaviour?

In the increasing information and digital age that we live in, companies need to know how to find their target markets. Since “companies cannot connect with all customers in large, broad, or diverse markets […] identifying and uniquely satisfying the right market segments are often the key to marketing success” (Kotler & Keller, 2016, p. 267).

Philip Kotler and Kevin Keller (2016) states that “effective target marketing requires that marketers:”

1. Identify and profile distinct groups of buyers who differ in their needs and wants (market segmentation)

2. Select one or more market segments to enter (market targeting)

3. For each target segment, establish, communicate, and deliver the right benefit(s) for the company’s market offering (market positioning) (p. 267)

Sounds easy, right? Well, let’s dive into each step to make sure you have a better idea.

“Market segmentation divides a market into well-defined slices” (Kotler & Keller, 2016, p. 268). Therefore, “a market segment consists of a group of customers who share a similar set of needs” (Kotler & Keller, 2016, p. 268). The most popular ways to break up a market can be through “geographic, demographic, psychographic, [or] behavioural segmentation” (Kotler & Keller, 2016, p. 268).

Some companies will combine geographies and demographics “to yield even richer descriptions of consumers and neighbourhoods” (Kotler & Keller, 2016, p. 268). “Nielsen Claritas has developed a geo clustering approach called PRIZM,” which has classified “U.S. residential neighbourhoods into 14 distinct groups and 66 distinct lifestyle segments” (Kotler & Keller, 2016, p. 268).

“Once [a] firm has identified its market segment opportunities, it must decide how many and which ones to target.” (Kotler & Keller, 2016, p. 284). “Marketers are increasingly combing several variables in an effort to identify smaller, better-defined target groups” (Kotler & Keller, 2016, p. 284).

Kotler and Keller (2016) suggest:

“Marketers have a range or continuum of possible levels of segmentation that can guide their target market decisions.” (Kotler & Keller, 2016, p. 286).

Full Market Coverage - “Firm attempts to serve all customer groups with all the products they might need” (Kotler & Keller, 2016, p. 286). Typically, only larger organizations use a full market strategy, such as Microsoft, GM, and Coca-Cola (Kotler & Keller, 2016, p. 286).

Multiple Segments - Selective specialization (“subset of all the possible segments”- ex. The launch of Crest Whitestrips by Procter & Gamble, the target was “newly engaged women, brides-to-be as well as gay males”), product specialization (“firm sells certain products to several different market segments”- ex. A microscope company selling to a “university, government, and commercial laboratories”), or market specialization (“concentrates on serving many needs of a particular customer group”- ex. Selling a range of products “only to university laboratories”) (Kotler & Keller, 2016, p. 288).

Single Segments - “Firm markets to only one particular segment” (Kotler & Keller, 2016, p. 288). For example, Porsche focusing on car enthusiasts (Kotler & Keller, 2016, p. 288).

Individuals as Segments - Customized marketing to each individual (Kotler & Keller, 2016, p. 290). Wagner Custom Skis that are uniquely made for the customer (Kotler & Keller, 2016, p. 290).

“Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the minds of the target market” (Kotler & Keller, 2016, p. 297). It is vital for a company and its team to all be on the same page with the brand positioning strategy (Kotler & Keller, 2016, p. 297).

Kotler and Keller (2016) gave examples that resulted from effective positioning.

Kotler and Keller (2016) show that choosing a strong positioning strategy may require going through the following steps:

1. Choosing a competitive frame of reference

Analyzing your brand in comparison to competitors to create your frame of reference.

2. Identifying points of difference and similarity

Points of difference “are attributes or benefits that consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand”. A strong brand will have multiple points of difference from competitors. For example, “Apple – design, ease of use and irreverent attitude”. “Creating strong, favorable, and unique associations is a real challenge, but an essential one for competitive brand positioning”.

Points of Parity “are attribute or benefit associations that are not necessarily unique to the brand but may in fact be shared with other brands.” Points of Parity are important so that consumers “believe the brand is good enough” to be considered.

3. Create a Brand Mantra

“A brand mantra is a three to five word articulation of the heart and soul of the brand.” The brand mantra shows what the brand essentially represents. For example, Nike’s brand mantra is “authentic athletic performance,” which has guided their entire marketing strategy.

Proper market segmentation, targeting, and positioning will help a company build a strong brand. When a company segments the market, targets the most profitable ones, and positions themselves correctly in the minds of their target segments, they will be able to connect with their customers on a deeper level.

References

Kotler, P., & Keller, K. L. (2016). Marketing Management (15th ed.). Pearson. Retrieved 2020