3. Segmentation and targeting

The reason for segmenting the market is to make the best use of the firm’s resources. There are no longer any products that please everybody – consumers have become too discerning. Even products such as Coca-Cola have a minority share of the markets in which they operate. In any case, most firms could not afford the kind of resources implied in promoting their products to everyone – the cost would be astronomical. Firms therefore divide up the market, then target the segments which

appear most promising first.

Segmenting is a crucial concept in marketing, because it defines the company’s position in the market. Targeting is the next stage following on from segmentation: targeting is about choosing the most appropriate segments and deciding how to approach them. This may involve choosing which product to offer; it will certainly involve choosing which promotional platform to use, and it is likely to have implications for distribution. In fact, all the marketing mix decisions flow from the

targeting decision.

Targeting allows the firm to use different strategies for each segment it targets. Most firms target several segments at once, because this offers a more secure situation. If one segment fails, another will keep the company afloat. You may well be asked to segment a given market, especially in a case-study based question: you should be able to decide which segments to target, and justify your decision.

To successfully target markets, using a segmentation approach, organizations should engage in the following three-step process.

• 1. Identify segments within the overall market

• 2. Choose the segment(s) that fits best with the organization’s objectives and goals

• 3. Develop a marketing strategy that appeals to the selected target market(s)

4. Step 1 - Identify Market Segments

The first step in targeting markets is to separate customers who make up large, general markets into smaller groupings based on selected characteristics or variables (also referred to as bases of segmentation) shared by those in the group. General markets are most often associated with basic product groups, such as automobile, beverage, footwear, home entertainment, etc. The purpose of segmentation is to look deeper within the general market in order to locate customers with more specific needs within the product group (e.g., seek hybrid automobiles) AND who also share similar characteristics (e.g., college educated, support environmental issues, etc.). When grouped together these customers may form a smaller segment of the general market. By focusing market research on these smaller segments the marketer can learn a great deal about these customers and with this information can begin to craft highly targeted marketing campaigns.

Step 2 - Choosing Market Segments

The second step in selecting target markets requires the marketer to critically evaluate the segments identified in Step 1 in order to select those which are most attractive. For small firms this step may not be very involving since they may lack the resources needed to do it effectively. So they are often left with using their own intuition or judgment to determine which segments are the most promising. For companies with the time and money to commit(здійснити) to this step, the results may identify(вказати на) the segments that are primary candidates for current marketing efforts and also present segments that are future targets for the company’s offerings.

In determining whether a segment is worthy of being a target market, the marketer needs to address the following questions:

• Is the segment large enough to support the marketer’s objectives? This is an especially critical question if the marketer is entering a market served by many competitors.

• Is the segment showing signs of growth? One of the worst situations for a marketer is to enter a market whose growth is flat or declining, especially if competitors already exist.

• Does the company have the necessary skills, knowledge and expertise to service the segment? The company should understand and be able to communicate with the customers in the segment, otherwise they may face a significant learning curve in understanding how to effectively market to a segment.

• Does the segment meet the mission of the company? The segment should not extend too far beyond the direction the company has chosen to take.

Once one or more segments have been identified the marketer must choose the most attractive option(s) for their marketing efforts. At this point the choice becomes the firm’s target market(s).