Market Segmentation

The market consists of many types of customers, products, and needs, and the marketer has to determine which segments offer the best chance in which to achieve company objectives. Consumers can be grouped in various ways based on geographic factors (regions, cities), demographic factors (sex, age, income, education), psychographic factors (social classes, life styles), and behavioral factors (purchase occasions, benefits sought, usage rates). The process of classifying customers into groups with different needs, characteristics, or behaviors is called market segmentation.

A market segment consists of consumers who respond in a similar way to a given set of marketing stimuli. In the car market, for example, consumers who choose the biggest, most comfort­able car regardless of price make up one market segment. Another market segment would be customers who care mainly about price and operating economy. It would be difficult to make one model of car that was the first choice of every consumer. Companies are wise to focus their efforts on meeting the distinct needs of one or more market segments. They should study the geographic, demographic, behavioral, and other cha­racteristics of each market segment to evaluate its attractiveness as a marketing opportunity.

Market Targeting

After a company has defined market segments, it can enter one or many segments of a given market. Market targeting involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. A company with limited resources might decide to serve only one or a few special segments. This strategy limits sales but can be very profitable. Or a company might choose to serve several related segments—perhaps those that have different kinds of customers but with the same basic wants. Or a large company might decide to offer a complete range of products to serve all market segments.

Market Positioning

Once a company has decided which market segments to enter, it must decide what «positions» it wants to occupy in those segments. A product’s position is the place the product occupies in consumers’ minds relative to competitors. If a product is perceived to be exactly like another product on the market, consumers will have no reason to buy it.

Market positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Thus, marketers plan positions that distinguish their products from competing products and give them the greatest strategic advantage in their target markets. For example, the Hyundai automobile is positioned on low price as «the car that makes sense». Chrysler offers «the best-built, best-backed Ame­rican cars»; Pontiac says, «we build excitement»; and at Ford, «quality is job one». Jaguar is positioned as «a blending of art and machine», while Saab is «the most intelligent car ever built». Mercedes is «engineered like no other car in the world»; the luxurious Bentley is «the closest a car can come to having wings». Such deceptively simple statements form the backbone of a product’s marketing strategy.

To plan a product’s position, the company first identifies the existing positions of all the products and brands currently serving its market segments. It next figures out what consumers want with respect to major product attributes. The company then selects a position based on its product’s ability to satisfy consumer wants better than competitors’ products. Finally, it develops a marketing program that communicates and delivers the product’s position to target consumers.