– So the next topic we wanna discuss is basically how can companies choose which target market to serve. Or in other words which
type of consumers to serve. So we learned about consumer behavior and we understand that some consumers behave differently than others. So today we're gonna
talk about segmentation. So what is segmentation? Segmentation is when we take the market that has all the consumers and divide it into sub-areas. For example we have Segment 1 and Segment 1 shared their needs, let's say, for a shampoo. So all of them want to have a shampoo that is anti-dandruff. Segment 2 on the other hand, buys shampoo for different reasons. They want their hair to be nice and shiny. So although both of them are in the need to buy a hair product, a shampoo in this case, the needs that come from
using a shampoo are different.
One segment wants to be anti-dandruff, the other segment wants
to have shiny hair. Now one of the main things
we need to understand is that two different segments, can never have the same needs. If they have the same needs, then the way we segmented
the market is wrong. So we always need to make sure that all the people in the segment have the same needs for
the specific product, and all the people that
are not in the segment have different needs or might not need the
product all together. So market segmentation then means that we divide the
market into distinct groups which will require
separate marketing mixes.
And that is another issue
we want to remember. For each segment we have to create their own marketing plan. Their own four P's, their own strategy. Target marketing is
when I decide to choose which group should I appeal to because obviously I cannot appeal to all the segments in the market. And then market positioning
is when I create a very clear and distinct position in the consumer's mind
relative to competition. For example, Volvo is positioned as
being very high on safety, Geico, very high on low price.
Now we will discuss these terms later on, but it's important that we understand what they mean. Positioning strategy is when we select then
a specific key theme in order to communicate
to the target market. And marketing strategy basically is the consequence that
comes from all of these STP's; segmentation,
targeting, and positioning. So basically the two
questions we want to answer is the who and the how. So we want to understand
how will we decide how the needs change based
on the product that we have, which is called segmentation. Then we want to understand out of these segments, which target market, which set of consumers would our product serve.
And that will depend on our SWOT analysis, situation analysis and consumer behavior. Then once we decide on the target market, we need to understand how are we different than competition and what can we position our product to enhance our strength
and reduce our weakness. And by doing so we can actually create value to our target customers. So then how do we decide how to pick the target market. So there are a few criteria that we want to make sure our target market has.
And by doing so it probably will guarantee
that this is a good choice. So the first criteria is profitable. Obviously we wanna make sure that we can offer that target market a product with a price that will bring us profit. So if we are going with high price because we have high cost, our target market should
have the financial means to pay for the cost that we have. The other thing is we wanna make sure that this profitability is also sustainable over time.
Meaning that the chance
of another competitor targeting this audience
with a cheaper price is not as high as if we
didn't target this market. The other criteria is if this
target market is measurable. Can I actually do marketing research and see that this target
market is profitable. Can I access those people. So this will be the
third one, accessibility. For example, let's say that I find that
they have a nice niche, this nice segment in Alaska, but unfortunately my distribution doesn't go so far, or my product are not durable and it's difficult for me
to ship them long distances.
So the fact that I have a target market, or a segment that want my product, but I cannot access makes that target market not
beneficial for my company. Then we also want to make sure that the segment is homogenous. And this is what I
discussed about the fact that the people within the segment must have similar needs. So they all need to buy the product for the same reason. Because, again, if I have a segment that is not homogenous and there are more than a
few needs within that segment for one type of product, then I have to resegment it again. And finally, they're mutually exclusive.
Meaning that two segments cannot share the same needs. So they're homogenous and
they're mutually exclusive are probably the two
most important criteria when we choose a target market, and then accessibility, measurability, and obviously profitability. So how do we decide how
to segment the market? Basically you can segment the market any way you want. However, these are the
typical basis of segmentation that marketers use, and we will go one by one
to explain what they are. So the first one is
geographic segmentation.
Geographic segmentation, as you can understand from the name, is when the market needs emerge from their geographical location. So for example, if you live in cold weather or live in an urban terrain as compared to rural terrain. And the idea is that you divide the market based on the idea that people who live let's say, in rural areas
will have the same needs when it comes to your product as compared to people
who live in urban areas. For example, take a car. People who live in an urban area might want a car that's smaller and easier to park, where maybe people who live in rural areas might want a truck or a bigger car that can go over terrains that might not be as easy or as developed as they are in the urban environment.
Usually, the way we decide if we want to do geographical segmentation will depend on that the needs have to come from a geographical location. So for example if I'm
having air conditions, then obviously the need will be effective on what weather I have within that area. And the same as we said with the car, what terrain do I have. I really don't need the
big SUV or the big truck if I'm only going on plateau and very smooth roads.
And the other thing is that the general pattern of consumption might be affected by what we call social or cultural environment like maybe political views or ethnic flavors. Now here it's not directly related to the geographical location, but occasionally it
happens that sub-cultures are concentrated within
a geographical location. So for example, let's say, in Florida there's more
concentration of hispanic population that might maybe like potato chips that are more spicy as compared to maybe the East coast. So we might divide the United States based on what types of flavors
of potato chips will sell based on the geographical location even though obviously
it's not because Florida causes people to like spicy food, but because of the
demographic concentration of the people who live in
that geographical area. Demographic segmentation is
usually one of the top ways that marketers like to segment.
One of the main reasons is
because it's the easiest after geographical segmentation that marketers can do. We don't really need the
cooperation of the consumer in order to do demographic segmentation. We can look at the consumer and we can see in general
what the gender is, what the age is, if they're married or not. We don't really have to
ask a lot of questions. So it's a very easy segmentation to do and before the internet, before we had social media and Google with all the data that comes with Google, that was the basic most
popular segmentation that marketers did. And as you can see it
comes from demographics. Meaning that the reason, let's say, you would like one type
of vocation verus another, is because of your age. Or you would like one type
of product versus another. For example razor blades would
be because of your gender, and so forth.
So those are needs that emerge because of your demographic characteristics and not because other
types of characteristics. Now psychographic and
lifestyle segmentation is probably, today, the most used. And the reason I say, again, today is because it's probably
the most accurate way of segmenting the market because as you remember for motivation, personality, and psychological factors affects our buyer behavior, and hence our motivation. So usually a lot of the needs
that we have for products will emerge from our lifestyle. However, in the old days
before we had the internet, it was almost impossible to pick up on psychographic
characteristics because you actually had
to do marketing research where you actually had
to distribute surveys and collect consumer insights. Today, because we have Google, companies can actually buy data that shows how people
buy and behave online without those people even knowing that that information is being taken.
Now it doesn't mean that someone knows, let's say, that Tamar Avnet has bought two pants on Gap and then she went and bought a pair of boots, but they do know that someone
who has my demographics and my kind of lifestyle, my kind of hobbies, bought that and bought that. So this is what we mean by
Google giving data to companies. So segmenting by psychographics means that we divide the
market or the population into groups that the reason
they have similar needs comes from their
psychological characteristics, their values, and their lifestyle. So personality, maybe
they like the same things or they like the same values. For example, today
there are many companies who have what we call a social component to the purchase. Tom's shoes for example offers that for every pair
of shoes that you buy, they donate another pair of shoes to people in South America. So if I'm a person who wants
to also donate to society, I might`want to buy Tom's shoes, not necessarily because of the look, but because of what it symbolizes.
If there's another consumer
who buys the product exactly for the same reason, that has to do with our personality. Lifestyle will be in the sense of how people live their daily life. It can be a job, it can be consumer activities, it can be like surfing like
the picture that we see. People who like to golf, people who like to watch sports. So those people will all share, let's say, maybe the need for a smart TV that also has ESPN or maybe also shows satellite programs from other countries not necessarily the United States. And then we have segmentation by behavior.
Segmentation by behavior is the idea that you segment the market basically based on the buyer behavior. So one of them can be
if they're loyal or not. So for example, there's a lot of ways that
companies like to reward consumers that are loyal and give them different prices or even different products as compared to first-time consumers. Airlines are actually
very popular or known in using loyalty and
segmenting by behavior. You get a lot of different products and a lot of different service treatments if you're loyal versus if you're not. In addition, it will depend on the type of benefits that you get from the product. So those people who are most sensitive to texture than others, for example. Some people will buy clothing because they're very comfortable or they're very soft, or they want only organic
or natural material. So that will also be
segmentation by behavior. Some will be based on fashion, stylish look, but again it depends on what
they consider is fashion, so again this will be by behavior.
The trend of the cool. Some people are worried about allergies or about the environment, so that again would be
segmentation by behavior, and so forth. And then we have usage situation. That means when the person will use the product. So for example, NyQuil, actually has, and a lot
of other cold medication, they have daytime and they have nighttime. So for the nighttime
you might want something that will help you to sleep and for the daytime you want something that will not make you groggy because you need to function. So that will be segmentation by usage. Johnson and Johnson will be segmentation by the
situation and by the usage. If you need to use it for the baby, you will buy Johnson and Johnson shampoo. Johnson and Johnson a few years ago tried to actually expand
to the segment of mothers, meaning adults.
They were trying to sell
them shampoo and conditioner and body lotion to mothers because mothers trust the brand. However, the brand is so strongly associated with being used only on babies, mothers did not want to use
the same product as the babies. So sometimes the fact that you position yourself very strongly on a specific benefit can actually backfire. So yeah, Johnson and Johnson are number one in baby products, and Head and Shoulders are
number one in anti-dandruff, but it's very difficult for both of them to expand outside of those
specific usage patterns.
And then we have benefit segmentation. And we mentioned it a little bit before when we were talking about the cars. So benefit segmentation would be all the people that buy cars because of style. All the people who buy
cars because it's safe. All the people who buy cars
because of the fuel economy. So that means that you buy a product for a very specific benefit. And hence you and the
rest of the consumers who like that benefit, will be part of that segment. And this is just another good example of how a company does
segmentation by benefits. The toothpaste market is very much known as well as the detergent market. So here this is an example of Crest. So you have different
toothpaste all made by Crest. One talks about the benefit
of cavity prevention, so if you care about that, you will buy that toothpaste. Other talks about whitening. Another talks about tartar
control and so forth. And the idea here is to segment the market based on benefits, and in case they actually
cover all the markets. So they actually pick all of
those as their target market, offering each and every consumer market the benefit that they like the most.