Mastering Market Segmentation & Marketing Strategies

Market Segment Requirements

For market segments to be truly useful, they must possess the following characteristics:

• Measurable: The size, purchasing power, and profiles of the segments can be quantified and assessed.
• Accessible: The segments must be able to be effectively reached and served through marketing efforts.
• Substantial: The segments should be large or profitable enough to warrant serving them.
• Differentiable: Segments must respond distinctly to different marketing mix elements and programs, allowing for tailored approaches.
• Actionable: Effective programs can be designed and implemented for attracting and serving the identified segments.

Evaluating Market Segments

When evaluating different market segments, a firm must carefully consider three critical factors:

1. Segment Size and Growth

   This is a relative matter. The largest, fastest-growing segments are not always the most attractive. Companies may lack the necessary resources and skills to serve them effectively, or these segments might be overly competitive.

2. Segment Structural Attractiveness

   A segment becomes less attractive if it already contains numerous and aggressive competitors, is saturated with substitute products, or presents low barriers to entry for new competitors. The bargaining power of buyers is also crucial; powerful suppliers who control prices or quality can render a segment unattractive.

3. Company Objectives and Resources

   Even highly attractive segments may be dismissed if they do not align with the firm's overall objectives or if the company lacks the required resources or skills to compete successfully within them.

Marketing Strategy Approaches

Undifferentiated Marketing Strategy

In this approach, the company chooses to ignore market segment differences and targets the entire market with a single offer. The focus is on what is common among customers rather than what differentiates them. While seemingly cheaper, this approach typically proves ineffective because not all consumers desire the same thing.

Differentiated Marketing Strategy

Here, the company decides to target several distinct market segments and designs separate, tailored offers for each. The goal is to achieve higher overall sales and a stronger position within each targeted segment. This strategy implies higher costs due to multiple campaigns and product variations but is generally more effective than mass marketing.

Concentrated Marketing Strategy

With this strategy, the company pursues a large share of a small market, or focuses on a few smaller segments or niches. By gaining greater knowledge of specific consumer needs within these niches, the company can achieve a strong market position. This allows for more effective marketing by fine-tuning its 4 Ps (Product, Price, Place, Promotion) to the selected segment(s), often leading to higher profitability. However, this segmentation strategy also carries higher risks due to its narrow focus.

Micromarketing Strategies

Micromarketing involves tailoring products and marketing programs to the specific needs and wants of individual customers and local customer segments. It encompasses two main forms:

• Local Marketing: Adapting brands and promotions to the unique needs and preferences of local customer segments, such as specific cities, neighborhoods, or even individual stores.
• Individual Marketing: Customizing products and marketing programs to the needs and preferences of individual customers. This is often referred to as one-to-one marketing, mass customization, or markets-of-one marketing.

Differentiation and Positioning Steps

The critical task of differentiation and positioning involves three sequential steps:

1. Identifying a set of differentiated competitive advantages upon which to build a strong market position.
2. Choosing the right competitive advantages that are unique, important, superior, communicable, preemptive, affordable, and profitable.
3. Selecting an overall positioning strategy that clearly communicates the brand's unique value proposition to the target market.

The company must then effectively communicate and deliver the chosen position to the market to ensure its success.