What is the current company? What kind of company is it?
- Current line of products, pricing promotions etc
- Branding, Current target market?
What is the product that you’re intending to add into the mix?
(LBC’s essay questions usually involve adding a product into an existing line of products)
Does the new product affect the current branding? Does it fit into the current line of products?
Good fit - replicate without changing brand. If not, rebrand to target other segments
Typical Exam Question 1:
Segment the market for XX; recommend the segmentation variables, then decide on the targeting strategy and
target segment. (*Segmentation ≠ targeting, requires different steps)
Steps:
o Identify segmentation variables
o Evaluate segmentation variables using MASDA
o Evaluate and Recommend targeting strategy
o Evaluate target segments based on targeting strategy chosen
Conclusion: target segment chosen
STEP 1: Identify segmentation variables
E.g “Market can be segmented via ___ using (eg. household income, race, newly-wed couples) as the segmentation variables.
The market could be further segmented by ___ segmentation, through (measuring usage rate/segregating income levels).”
Market Segmentation (Dividing market into smaller groups of buyers with distinct needs, characteristics or
behaviours who might require separate products or marketing mixes)
Segmenting Consumer Markets
Variable Example
Psychographic Social class, lifestyle, personality
Behavioural Occasions, benefits sought, user status, usage rate, loyalty
Demographic Life-cycle stage, gender, income, occupation, education, religion, ethnicity, generation
Geographic Nations, regions, states, counties, cities, neighbourhoods, population density (urban,
suburban, rural), climate
Use Multiple Segmentation Bases to identify smaller, better-defined target groups
- Psychographic Segmentation About the mind, less quantitative, e.g. Why do you shop?
Dividing market into different groups based on social class, lifestyle or personality characteristics.
o E.g. personality: adventurous types (North Face) OR mature, practical
o Brand focused: “Apple tribe” stylish, tech savvy nonconformists
- Behavioural Segmentation About behaviour, more quantitative, e.g. How often do you shop?
Dividing market into groups based on consumer knowledge, attitude, use or response to a product.
o Occasions
When buyers get the idea to buy/actually make the purchase/use purchased item
o Benefits Sought
Finding major benefits people look for in the product class
Finding types of people who look for each benefit
Finding major brands that deliver each benefit
o User Status (Nonusers, ex-users, potential users, first-time users and regular users)
E.g. existing users of your current product line or brand then target them when you launch a new
product
o Usage Rate (Light, medium and heavy product users, preference to attract one heavy user rather than
several light users)
Often target light users with ads and promotions
o Loyalty Status (degree of loyalty)
Studying the loyal customers to see what appeals to them
Studying the less loyal buyers can help company analyse which brands its strongest competitors
Marketing weakness can be identified by customers leaving
, - Demographic Segmentation
Based on demographic variables: age, sex, family size, life cycle stage, income, occupation, education, religion,
race and nationality. (easier to measure)
Avoid stereotyping!!
o Consumer needs, wants and usage rates often vary closely with demographic variables
o Need to know a segment’s demographics characteristics to reach it efficiently
o Life-Cycle Stage
Dividing market into different age and life-cycle groups
Gen X – cares about environment, less materialistic, more sceptical
Gen Y – very tech savvy)
(Age is a poor predictor of a person’s life cycle, health, work or family status, needs and buying power
support with other variables)
- Geographic Segmentation
Into different geographical units: nations, states, regions, countries, cities or neighbourhoods
o Localise the products, advertising, promotion and sales efforts to fit the needs of individual
geographical units
o Seek to cultivate untapped geographic region
o Develop new store concepts to gain access to higher-density urban areas
Segmenting Business Markets
- Use variables like customer operating characteristics, purchasing approaches, situational factors and
personal characteristics.
Segmenting International Markets
Few companies have resources/will to operate in all, or even most, countries
- Geographic Location: grouping countries by regions by assuming that nations close to one another will have
many common traits and behaviours, but there are many exceptions.
- Economic Factors: population income levels (GDP) or overall level of economic development
- Political & Legal Factors: stability of government, receptivity to foreign firms, monetary regulations and
amount of bureaucracy
- Cultural Factors: languages, religions, values, attitudes, customs and behavioural patterns
Intermarket Segmentation: Forming segments of consumers having similar needs and buying behaviour even
though they are located in different countries.
STEP 2: Evaluate each chosen target segmentation variables using MASDA
State why chosen variables are suitable, no need to say why you DIDN’T choose some
Requirements for Effective Segmentation (MASDA)
o Measurable – Segmentation variables can be measured
o Accessible – Market segments can be effectively reached and served
o Substantial – Market segments are large or profitable enough to serve (should be the largest possible
homogeneous group worth pursuing)
o Differentiable – conceptually distinguishable and responds differently to different marketing mix
elements and programs
o Actionable – (feasibility, resources) to design effective program to attract & serve the segments
Segmentation via _____ is effective as……
e.g. Different behavioural segments are actionable as effective programs can be designed for attracting and serving the
different (benefits sought).
Different income groups are conceptually distinguishable as they have different salary ranges and respond differently to
marketing mix elements due to their varying purchasing power.
Step 3: Evaluate and Recommend targeting strategy
Target Market (A set of buyers sharing common needs or characteristics that company decides to serve)
Undifferentiated (Mass) Marketing: firm ignores market segment differences and go after whole market with one
,offer good for homogeneous market
- Focuses on common needs of consumers rather than differences (appeals to largest no. of buyers)
- Difficult to compete with more focused firms
- Hard to develop a product/brand that satisfies all consumers
Differentiated (Segmented) Marketing: firm targets several market segments and designs separate offers for each
- Advantage: creates more sales and a stronger position within each market segment
- Disadvantage: Increases costs of doing business
^ Company must weigh increased sales against increased costs
Concentrated (Niche) Marketing: firm goes after a large share of one/a few segments of niches
Smaller companies can compete by focusing limited resources (unless qn states that company is rich) on niches which may be
overlooked by larger competitors.
- Achieves strong market position (more effective and efficient) due to greater proximity and knowledge of
consumer needs + acquires special reputation
- Higher-than-normal risks due to lack of diversification (segment can turn sour/larger competitors enter same
segment with greater resources).
Micromarketing
Local Marketing: tailor to needs and wants of local customer groups – cities/neighbourhoods/specific stores
o Helps company to market more effectively in face of pronounced regional and local differences
o Drives up manufacturing and marketing costs by reducing economics of scale
o Creates logistical problems due to varied needs
o Brand’s overall image might be diluted
^ new supporting technologies can help to negate the disadvantages
Individual Marketing: tailoring to needs and preferences of individual customers.
o Involve customers more in all phases of product development and buying process, increasing opportunities for
buyers to practice self-marketing (individual customers taking more responsibility to determine which products
and brands to buy)
o Emphasises customer relations (helps to stand out from competitors)
o High cost and might be hard to cater to each person’s need
^ improvements in technology has allowed for mass customisation (Nike’s self-design sneakers)
Evaluate chosen Target Marketing Strategy (*address every point)
Company Resources (vast – differentiated; finite – undifferentiated/concentrated)
Eg. small company with limited resources should devote its resources to capture maximum market share within niches (concentrated)
Product Variability
- Uniform products (low variability) should cater across many segments (undifferentiated)
- Products varying in quality/design are more suited to (differentiated/concentrated)
Product Life-Cycle Stage
- If product is in the introduction stage, (new) more practical to first launch one version in a small target market
(conc/undifferentiated), so that company can uniquely meet the needs of the segment more effectively.
- In mature stage of product life cycle, differentiated marketing makes more sense (launch different products, capture
larger market share)
Market Variability (variability in consumer tastes is low/same tastes or reaction – undifferentiated; high – differentiated)
Competitor’s Marketing Strategies
- If competitors undifferentiated, use concentrated/differentiated to gain advantage
- If competitors use differentiated/concentrated, trying to capture multiple segments with undifferentiated is suicidal.
Socially Responsible Target Marketing: Concern for vulnerable/disadvantaged segments: do not target such consumers with
controversial or potentially harmful products (profit at the expense of them)
Step 4: Evaluate target segments based on chosen targeting strategy (preferred one/a few target segments)
Evaluating Market Segments
, - Segment Size & Growth
o E.g. Phenomenal growth rate of _____market will be a profitable source of income for XX
o Large population size in tier 1 cities makes it an extremely profitable segment for XX
o Largest, fastest-growing segments are not always most attractive to every company not every company can
have the resources needed to target largest segment
- Segment Structural Attractiveness
o Actual/potential substitute products
o Competitors - analyse numbers and strength
Types - strong, aggressive (less attractive)
o Buyer and supplier power (high bargaining power can decrease segment attractiveness)
Buyers with strong bargaining power will try to force prices down, demand more services, set
competitors against one another
Powerful suppliers can control prices/reduce the quality and quantity of goods
- Company Objectives & Resources
o Target segment must tie in with company’s long-run objectives: (be market
challenger/follower/nicher)
o Should only enter segments that can create superior customer value to gain advantage over
competitors
Conclusion: which target segment is chosen
- Current line of products, pricing promotions etc
- Branding, Current target market?
What is the product that you’re intending to add into the mix?
(LBC’s essay questions usually involve adding a product into an existing line of products)
Does the new product affect the current branding? Does it fit into the current line of products?
Good fit - replicate without changing brand. If not, rebrand to target other segments
Typical Exam Question 1:
Segment the market for XX; recommend the segmentation variables, then decide on the targeting strategy and
target segment. (*Segmentation ≠ targeting, requires different steps)
Steps:
o Identify segmentation variables
o Evaluate segmentation variables using MASDA
o Evaluate and Recommend targeting strategy
o Evaluate target segments based on targeting strategy chosen
Conclusion: target segment chosen
STEP 1: Identify segmentation variables
E.g “Market can be segmented via ___ using (eg. household income, race, newly-wed couples) as the segmentation variables.
The market could be further segmented by ___ segmentation, through (measuring usage rate/segregating income levels).”
Market Segmentation (Dividing market into smaller groups of buyers with distinct needs, characteristics or
behaviours who might require separate products or marketing mixes)
Segmenting Consumer Markets
Variable Example
Psychographic Social class, lifestyle, personality
Behavioural Occasions, benefits sought, user status, usage rate, loyalty
Demographic Life-cycle stage, gender, income, occupation, education, religion, ethnicity, generation
Geographic Nations, regions, states, counties, cities, neighbourhoods, population density (urban,
suburban, rural), climate
Use Multiple Segmentation Bases to identify smaller, better-defined target groups
- Psychographic Segmentation About the mind, less quantitative, e.g. Why do you shop?
Dividing market into different groups based on social class, lifestyle or personality characteristics.
o E.g. personality: adventurous types (North Face) OR mature, practical
o Brand focused: “Apple tribe” stylish, tech savvy nonconformists
- Behavioural Segmentation About behaviour, more quantitative, e.g. How often do you shop?
Dividing market into groups based on consumer knowledge, attitude, use or response to a product.
o Occasions
When buyers get the idea to buy/actually make the purchase/use purchased item
o Benefits Sought
Finding major benefits people look for in the product class
Finding types of people who look for each benefit
Finding major brands that deliver each benefit
o User Status (Nonusers, ex-users, potential users, first-time users and regular users)
E.g. existing users of your current product line or brand then target them when you launch a new
product
o Usage Rate (Light, medium and heavy product users, preference to attract one heavy user rather than
several light users)
Often target light users with ads and promotions
o Loyalty Status (degree of loyalty)
Studying the loyal customers to see what appeals to them
Studying the less loyal buyers can help company analyse which brands its strongest competitors
Marketing weakness can be identified by customers leaving
, - Demographic Segmentation
Based on demographic variables: age, sex, family size, life cycle stage, income, occupation, education, religion,
race and nationality. (easier to measure)
Avoid stereotyping!!
o Consumer needs, wants and usage rates often vary closely with demographic variables
o Need to know a segment’s demographics characteristics to reach it efficiently
o Life-Cycle Stage
Dividing market into different age and life-cycle groups
Gen X – cares about environment, less materialistic, more sceptical
Gen Y – very tech savvy)
(Age is a poor predictor of a person’s life cycle, health, work or family status, needs and buying power
support with other variables)
- Geographic Segmentation
Into different geographical units: nations, states, regions, countries, cities or neighbourhoods
o Localise the products, advertising, promotion and sales efforts to fit the needs of individual
geographical units
o Seek to cultivate untapped geographic region
o Develop new store concepts to gain access to higher-density urban areas
Segmenting Business Markets
- Use variables like customer operating characteristics, purchasing approaches, situational factors and
personal characteristics.
Segmenting International Markets
Few companies have resources/will to operate in all, or even most, countries
- Geographic Location: grouping countries by regions by assuming that nations close to one another will have
many common traits and behaviours, but there are many exceptions.
- Economic Factors: population income levels (GDP) or overall level of economic development
- Political & Legal Factors: stability of government, receptivity to foreign firms, monetary regulations and
amount of bureaucracy
- Cultural Factors: languages, religions, values, attitudes, customs and behavioural patterns
Intermarket Segmentation: Forming segments of consumers having similar needs and buying behaviour even
though they are located in different countries.
STEP 2: Evaluate each chosen target segmentation variables using MASDA
State why chosen variables are suitable, no need to say why you DIDN’T choose some
Requirements for Effective Segmentation (MASDA)
o Measurable – Segmentation variables can be measured
o Accessible – Market segments can be effectively reached and served
o Substantial – Market segments are large or profitable enough to serve (should be the largest possible
homogeneous group worth pursuing)
o Differentiable – conceptually distinguishable and responds differently to different marketing mix
elements and programs
o Actionable – (feasibility, resources) to design effective program to attract & serve the segments
Segmentation via _____ is effective as……
e.g. Different behavioural segments are actionable as effective programs can be designed for attracting and serving the
different (benefits sought).
Different income groups are conceptually distinguishable as they have different salary ranges and respond differently to
marketing mix elements due to their varying purchasing power.
Step 3: Evaluate and Recommend targeting strategy
Target Market (A set of buyers sharing common needs or characteristics that company decides to serve)
Undifferentiated (Mass) Marketing: firm ignores market segment differences and go after whole market with one
,offer good for homogeneous market
- Focuses on common needs of consumers rather than differences (appeals to largest no. of buyers)
- Difficult to compete with more focused firms
- Hard to develop a product/brand that satisfies all consumers
Differentiated (Segmented) Marketing: firm targets several market segments and designs separate offers for each
- Advantage: creates more sales and a stronger position within each market segment
- Disadvantage: Increases costs of doing business
^ Company must weigh increased sales against increased costs
Concentrated (Niche) Marketing: firm goes after a large share of one/a few segments of niches
Smaller companies can compete by focusing limited resources (unless qn states that company is rich) on niches which may be
overlooked by larger competitors.
- Achieves strong market position (more effective and efficient) due to greater proximity and knowledge of
consumer needs + acquires special reputation
- Higher-than-normal risks due to lack of diversification (segment can turn sour/larger competitors enter same
segment with greater resources).
Micromarketing
Local Marketing: tailor to needs and wants of local customer groups – cities/neighbourhoods/specific stores
o Helps company to market more effectively in face of pronounced regional and local differences
o Drives up manufacturing and marketing costs by reducing economics of scale
o Creates logistical problems due to varied needs
o Brand’s overall image might be diluted
^ new supporting technologies can help to negate the disadvantages
Individual Marketing: tailoring to needs and preferences of individual customers.
o Involve customers more in all phases of product development and buying process, increasing opportunities for
buyers to practice self-marketing (individual customers taking more responsibility to determine which products
and brands to buy)
o Emphasises customer relations (helps to stand out from competitors)
o High cost and might be hard to cater to each person’s need
^ improvements in technology has allowed for mass customisation (Nike’s self-design sneakers)
Evaluate chosen Target Marketing Strategy (*address every point)
Company Resources (vast – differentiated; finite – undifferentiated/concentrated)
Eg. small company with limited resources should devote its resources to capture maximum market share within niches (concentrated)
Product Variability
- Uniform products (low variability) should cater across many segments (undifferentiated)
- Products varying in quality/design are more suited to (differentiated/concentrated)
Product Life-Cycle Stage
- If product is in the introduction stage, (new) more practical to first launch one version in a small target market
(conc/undifferentiated), so that company can uniquely meet the needs of the segment more effectively.
- In mature stage of product life cycle, differentiated marketing makes more sense (launch different products, capture
larger market share)
Market Variability (variability in consumer tastes is low/same tastes or reaction – undifferentiated; high – differentiated)
Competitor’s Marketing Strategies
- If competitors undifferentiated, use concentrated/differentiated to gain advantage
- If competitors use differentiated/concentrated, trying to capture multiple segments with undifferentiated is suicidal.
Socially Responsible Target Marketing: Concern for vulnerable/disadvantaged segments: do not target such consumers with
controversial or potentially harmful products (profit at the expense of them)
Step 4: Evaluate target segments based on chosen targeting strategy (preferred one/a few target segments)
Evaluating Market Segments
, - Segment Size & Growth
o E.g. Phenomenal growth rate of _____market will be a profitable source of income for XX
o Large population size in tier 1 cities makes it an extremely profitable segment for XX
o Largest, fastest-growing segments are not always most attractive to every company not every company can
have the resources needed to target largest segment
- Segment Structural Attractiveness
o Actual/potential substitute products
o Competitors - analyse numbers and strength
Types - strong, aggressive (less attractive)
o Buyer and supplier power (high bargaining power can decrease segment attractiveness)
Buyers with strong bargaining power will try to force prices down, demand more services, set
competitors against one another
Powerful suppliers can control prices/reduce the quality and quantity of goods
- Company Objectives & Resources
o Target segment must tie in with company’s long-run objectives: (be market
challenger/follower/nicher)
o Should only enter segments that can create superior customer value to gain advantage over
competitors
Conclusion: which target segment is chosen
