Principles of Marketing: Segmentation Targeting Positioning - Market Segmentation, Geographic Demographic Psychographic Behavioral

What It Is

Market segmentation is the process of dividing a large market into smaller groups of consumers with similar needs, preferences, or behaviors. This helps businesses tailor their products, services, and marketing efforts to meet the unique needs of each group, increasing the chances of success. For example, Coca-Cola targets different segments with its various brands, such as Coca-Cola Classic, Diet Coke, and Coke Zero, each appealing to a distinct demographic.

Key Concepts & Frameworks

• Geographic Segmentation: dividing a market based on geographic location, such as region, country, or city.
  • Example: Nike targets urban runners in its marketing campaigns.
• Demographic Segmentation: dividing a market based on demographic characteristics, such as age, income, education, or occupation.
  • Example: Amazon targets young professionals with its Prime membership program.
• Psychographic Segmentation: dividing a market based on lifestyle, values, or personality traits.
  • Example: Apple targets creative professionals with its Mac computers and iPhones.
• Behavioral Segmentation: dividing a market based on consumer behavior, such as purchase history or loyalty.
  • Example: Starbucks targets frequent customers with its rewards program.
• Firmographic Segmentation: dividing a business market based on company characteristics, such as size, industry, or revenue.
  • Example: Salesforce targets small businesses with its CRM software.
• Value-Based Segmentation: dividing a market based on the value customers place on a product or service.
  • Example: Tesla targets environmentally conscious consumers with its electric vehicles.
• Cluster Analysis: a statistical method used to identify patterns in customer data and group similar customers together.
  • Example: A retailer uses cluster analysis to identify high-value customers and tailor marketing efforts accordingly.
• SWOT Analysis: a framework used to identify strengths, weaknesses, opportunities, and threats in a market.
  • Example: A company uses SWOT analysis to identify opportunities to expand into new markets.
• 4Ps/7Ps: a marketing mix framework used to plan and execute marketing strategies.
  • Example: A company uses the 4Ps (Product, Price, Promotion, Place) to develop a marketing plan for a new product.

How to Apply It

• To segment a market, start with geographic, then add psychographic like lifestyle.
• Use customer data and market research to identify patterns and group similar customers together.
• Develop targeted marketing campaigns for each segment, using the 4Ps/7Ps framework.
• Continuously monitor and adjust segmentation strategies based on customer feedback and market trends.

Common Mistakes

• Mistake: Assuming a single market segment is representative of the entire market.
• Correction: Use multiple segmentation methods to identify diverse customer groups.
• Mistake: Failing to regularly review and update segmentation strategies.
• Correction: Continuously monitor customer feedback and market trends to adjust segmentation strategies.
• Mistake: Ignoring the importance of psychographic segmentation.
• Correction: Consider lifestyle, values, and personality traits when developing marketing campaigns.

Exam / Interview Tips

• Be prepared to explain the differences between geographic, demographic, psychographic, and behavioral segmentation.
• Highlight the importance of using multiple segmentation methods to identify diverse customer groups.
• Be able to apply the 4Ps/7Ps framework to develop a marketing plan for a new product.
• Show examples of how companies have successfully used market segmentation in their marketing strategies.

Quick Practice

Scenario 1: A company wants to develop a marketing campaign for a new product. Which segmentation method should it use first?

A) Geographic B) Demographic C) Psychographic D) Behavioral

Answer: A) Geographic. Explanation: Geographic segmentation is a good starting point as it helps identify the target market's location and size.

Scenario 2: A company wants to identify high-value customers. Which statistical method should it use?

A) Cluster Analysis B) Regression Analysis C) Time Series Analysis D) Correlation Analysis

Answer: A) Cluster Analysis. Explanation: Cluster analysis is a statistical method used to identify patterns in customer data and group similar customers together.

Scenario 3: A company wants to develop a marketing plan for a new product. Which framework should it use?

A) 4Ps/7Ps B) SWOT Analysis C) PESTEL Analysis D) AIDA Model

Answer: A) 4Ps/7Ps. Explanation: The 4Ps/7Ps framework is a marketing mix framework used to plan and execute marketing strategies.

Last-Minute Cram Sheet

• Market segmentation is the process of dividing a large market into smaller groups of consumers with similar needs, preferences, or behaviors.
• Geographic segmentation divides a market based on geographic location.
• Demographic segmentation divides a market based on demographic characteristics.
• Psychographic segmentation divides a market based on lifestyle, values, or personality traits.
• Behavioral segmentation divides a market based on consumer behavior.
• Firmographic segmentation divides a business market based on company characteristics.
• Value-Based Segmentation divides a market based on the value customers place on a product or service.
• Cluster Analysis is a statistical method used to identify patterns in customer data and group similar customers together.
• SWOT Analysis is a framework used to identify strengths, weaknesses, opportunities, and threats in a market.
• The 4Ps/7Ps framework is a marketing mix framework used to plan and execute marketing strategies.
• "Marketing Myopia" = focusing on the product instead of the customer need.
• "Market Research" = gathering data about a target market, while "Marketing Research" = gathering data to inform marketing strategies.
• ROI = (Gain – Cost)/Cost.