Market Segmentation, Targeting, and Positioning in Marketing

The Market

Producer and Consumer Markets

The market is the space where sellers and buyers meet to achieve their objectives. In consumer markets, the consumer buys the product for consumption. However, when products are sold for use in the production process, this is known as a producer market.

Market Segmentation, Targeting, and Positioning

Definition of Segmentation

Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively.

Segmentation Methods

A market segment is a group with similar needs and wants. There are various ways in which a market may be segmented, including:

• Geographic Segmentation: This focuses on the impact of factors such as the location of customers or the climate in different regions.
• Demographic Segmentation: Focuses on the impact of factors such as age, gender, income, occupation, and life stage.
• Psychographic Segmentation: Focuses on the impact of factors such as people's personality, lifestyle, values, social class, and attitudes.
• Behavioral Segmentation: Focuses on the impact of factors such as if someone is a regular consumer, if someone is a heavy consumer, and what motivates someone to buy a product.

Requirements for Effective Segmentation

• Measurable: The size and profiles of the segments can be measured.
• Accessible: The market segments can be effectively reached and served.
• Substantial: The market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group.
• Differentiable: The segments should be conceptually distinguishable and respond differently to different marketing mix elements.
• Actionable: Effective programs can be designed for attracting and serving the segments.

Market Targeting

Out of the various segments, the firm must evaluate which segments it can serve best. In evaluating different market segments, a firm must look at three factors: segment size and growth, segment structural attractiveness, and the company's objectives and resources. However, the fastest-growing and largest segments are not always the most attractive ones for every company. Finally, the target market consists of a set of buyers who share common needs that the company can satisfy.

Differentiation and Positioning

A product's position is the way the product is defined by consumers based on important attributes. Consumers organize products and companies into different categories and position them in their minds. Because of that, marketers must plan positions that will give their product the strongest position (advertising is one strategy).