Week 8
MARKET SEGMENTATION, TARGETING, POSITIONING AND DIFFERENTIATION
Market Segmentation
This is the process of dividing a potential market into distinct subsets of consumers who have common needs,
characteristics or behavior and who might require separate products or marketing mixes.
Need for Market Segmentation
1. Buyers have unique needs and wants
2. Limited resources
Benefits of Market Segmentation
According to Harrison (2000) the following are the benefits of market segmentation:
• Market segmentation reduces marketing costs by closer matching of company resources with market
requirements;
• Market segmentation enhances customer satisfaction by meeting customer requirements more
accurately;
• Market segmentation enables the firm to focus its efforts on a narrower target, thus gaining specialist
knowledge of the needs and requirements of that group of customers.
• Market segmentation helps the firm to anticipate new customer requirements. This is done by
projecting known segment characteristics onto new/potential customers.
• Market segmentation also enables the marketer to compare marketing opportunities of different market
segments by studying the customer needs and potential, competition and satisfaction levels of
customers in each market segment. Thus, the marketer can do a more effective job.
(Read about Limitations of Market Segmentation on your own)
Requirements for Effective Market Segmentation
1. The market should be identifiable(the children’s designer clothing had long been ignored in Kenya and
measurable(measure its size and profitability)
2. The market should be sufficient (size) or substantial
3. The market must be accessible( infrastructural- wise)
4. The market must be responsive to the marketing offer
5. The market must be stable- in terms of demographic, psychological factors and needs
Levels of Market Segmentation
1
, Levels of Market Segmentation
Mass Segment Niche Micro
Marketing Marketing Marketing Marketing
1. Mass Marketing
This is a situation where there is no division or target marketing. The marketer produces the same product for
everyone, prices it the same, promotes and distributes it the same. For example, Coca-Cola at one time
produced only one drink for the whole market, hoping it would appeal to everyone. For a very long time in
Kenya, Unga Company Limited sold its Jogoo brand of maize meal to almost every household.
The argument for using this strategy is that it helps an organization to serve a large market, which
leads to lower costs; the lower costs lead to higher margins. In today’s marketing, it is difficult to develop a
single product or program that appeal to diverse groups of consumers. Many companies are moving away
from mass marketing to segment marketing.
2. Segment marketing
This technique is used by organizations that recognize that consumers differ in terms of their needs
perceptions and buying behaviors. It is concerned with isolating broad segments that make up a market and
adopting marketing offers to match the needs of one or more segments. For example, Kenya Airways has
segmented its services into economy and first class. Unilever produces products for different income groups.
For instance, Blue-Band margarine, one of its main brands, sells in various sizes that target different income
groups in Kenya. Hospitals too have facilities for different ages and income groups.
3. Niche marketing
A niche is a more narrowly defined group usually identified by dividing a segment into sub-segments or by
defining a group with a distinctive set of traits who may seek a special combination of benefits. For example,
in the luxury car segment, niches might include luxury sports cars, luxury standard cars and luxury buses and
trucks.
Note:
1. While segments are usually large identifiable groups within the market (for instance luxury car
buyers, performance car buyers, and economy car buyers), niche marketing focuses on sub-groups within
these segments.
2. A niche can also be regarded as that market segment that major competitors have largely ignored.
For example, for a very long time the major media houses in Kenya had ignored the ethnic radio stations.
Some investors have now invested heavily in the sector and are reaping profits. Mainstream media outlets also
ignored religious radio and TV stations and 24-hour broadcasting. Now we have players in these sectors -
HOPE FM, Family TV and radio, Radio Waumini and K24.
3. Niche marketing is also applied in clothing (e.g. Little Red, Sir Henry’s), hotels (e.g. Hotel 680,
Hilton, Hotel Inter-Continental, etc), vehicles (e.g. Ferrari specializes in manufacturing luxury sport cars),
universities (e.g. Kiriri Women University of Science and Technology admits only women students interested
in sciences), and hospitals (e.g. Gertrude serves children patients).
2
MARKET SEGMENTATION, TARGETING, POSITIONING AND DIFFERENTIATION
Market Segmentation
This is the process of dividing a potential market into distinct subsets of consumers who have common needs,
characteristics or behavior and who might require separate products or marketing mixes.
Need for Market Segmentation
1. Buyers have unique needs and wants
2. Limited resources
Benefits of Market Segmentation
According to Harrison (2000) the following are the benefits of market segmentation:
• Market segmentation reduces marketing costs by closer matching of company resources with market
requirements;
• Market segmentation enhances customer satisfaction by meeting customer requirements more
accurately;
• Market segmentation enables the firm to focus its efforts on a narrower target, thus gaining specialist
knowledge of the needs and requirements of that group of customers.
• Market segmentation helps the firm to anticipate new customer requirements. This is done by
projecting known segment characteristics onto new/potential customers.
• Market segmentation also enables the marketer to compare marketing opportunities of different market
segments by studying the customer needs and potential, competition and satisfaction levels of
customers in each market segment. Thus, the marketer can do a more effective job.
(Read about Limitations of Market Segmentation on your own)
Requirements for Effective Market Segmentation
1. The market should be identifiable(the children’s designer clothing had long been ignored in Kenya and
measurable(measure its size and profitability)
2. The market should be sufficient (size) or substantial
3. The market must be accessible( infrastructural- wise)
4. The market must be responsive to the marketing offer
5. The market must be stable- in terms of demographic, psychological factors and needs
Levels of Market Segmentation
1
, Levels of Market Segmentation
Mass Segment Niche Micro
Marketing Marketing Marketing Marketing
1. Mass Marketing
This is a situation where there is no division or target marketing. The marketer produces the same product for
everyone, prices it the same, promotes and distributes it the same. For example, Coca-Cola at one time
produced only one drink for the whole market, hoping it would appeal to everyone. For a very long time in
Kenya, Unga Company Limited sold its Jogoo brand of maize meal to almost every household.
The argument for using this strategy is that it helps an organization to serve a large market, which
leads to lower costs; the lower costs lead to higher margins. In today’s marketing, it is difficult to develop a
single product or program that appeal to diverse groups of consumers. Many companies are moving away
from mass marketing to segment marketing.
2. Segment marketing
This technique is used by organizations that recognize that consumers differ in terms of their needs
perceptions and buying behaviors. It is concerned with isolating broad segments that make up a market and
adopting marketing offers to match the needs of one or more segments. For example, Kenya Airways has
segmented its services into economy and first class. Unilever produces products for different income groups.
For instance, Blue-Band margarine, one of its main brands, sells in various sizes that target different income
groups in Kenya. Hospitals too have facilities for different ages and income groups.
3. Niche marketing
A niche is a more narrowly defined group usually identified by dividing a segment into sub-segments or by
defining a group with a distinctive set of traits who may seek a special combination of benefits. For example,
in the luxury car segment, niches might include luxury sports cars, luxury standard cars and luxury buses and
trucks.
Note:
1. While segments are usually large identifiable groups within the market (for instance luxury car
buyers, performance car buyers, and economy car buyers), niche marketing focuses on sub-groups within
these segments.
2. A niche can also be regarded as that market segment that major competitors have largely ignored.
For example, for a very long time the major media houses in Kenya had ignored the ethnic radio stations.
Some investors have now invested heavily in the sector and are reaping profits. Mainstream media outlets also
ignored religious radio and TV stations and 24-hour broadcasting. Now we have players in these sectors -
HOPE FM, Family TV and radio, Radio Waumini and K24.
3. Niche marketing is also applied in clothing (e.g. Little Red, Sir Henry’s), hotels (e.g. Hotel 680,
Hilton, Hotel Inter-Continental, etc), vehicles (e.g. Ferrari specializes in manufacturing luxury sport cars),
universities (e.g. Kiriri Women University of Science and Technology admits only women students interested
in sciences), and hospitals (e.g. Gertrude serves children patients).
2
