A

REPORT

ON

“SEGMENTATION
STRATEGIES”

By

AMIT RAMPURE (5)

ABHSHEK GOYAL (22)

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 Index

1. Introduction………………………………..
………………03
2. 3-STEP Process……………………………
…….…..…...04
3. Types of strategies ………………………
…………..…05
4. Selecting strategy………………………
……………….09
5. Major benefits……………………………
…………….…18
6. Bibliography……………………..………
………………...33

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 1. INTRODUCTION

To compete successfully in today’s volatile and competitive

business markets, mass marketing is no longer a viable option for
most companies. Marketers must attack niche markets that exhibit
unique needs & wants. Market segmentation is the process of
partitioning markets into groups of potential customers with similar
needs or characteristics who are likely to exhibit similar purchase
behavior.

The overall objective of using a market segmentation strategy

is to improve your company’s competitive position and better serve
the needs of your customers. Some specific objectives may include
increased sales, improved market share and enhanced image.

A Strategy is a special kind of plan formulated in order to meet

the challenges of the policies of competition.

Segmentation outlines the company’s opportunities, but

target marketing is where the marketing manager makes his or her
money. Turning the segmentation opportunities into real markets is
the focus of developing new strategies. Strategies for evaluating
and focusing the market segments are the various levels of
targeting: undifferentiated or mass marketing; differentiated
marketing; concentrated marketing; and micromarketing.

Choosing the target marketing strategy is described as

dependent on many variables, such as company resources, how
variable the product is, and the stage of the product life cycle etc.

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 2. 3-STEP PROCESS

A three-step process is used to develop a market

segmentation strategy:

Segment Identification — determining a given number of

homogeneous market segments based on selected segmentation
variables and criteria. Segments should be customer-focused, a
justifiable size, distinguishable, accessible, accountable & profitable.

Market Selection — selecting one or more groups to target for

marketing activity. It is impossible to pursue every market
opportunity so you must make strategic choices based on customer
needs, competitive opportunities, corporate objectives, and your
firm’s financial, technical & marketing resources.

Positioning— carving out a market niche for your firm. This may be
accomplished by searching out unique marketing advantages,
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seeking new market segments that competitors are not cultivating,
or developing new approaches to old problems. Your positioning
should be based on a real (e.g., lower cost, superior quality) or
intangible (e.g., company reputation) competitive advantage.

3. TYPES OF STRATEGIES

There are Four major types of strategies:

1. Undifferentiated(Mass)
2. Differentiated (Multi-segment)
3. Concentration (Niche)
4. Product differentiated/Customized

1. UNDIFFERENCIATED STRATEGY
Sometimes referred to as mass marketing the firm may decide
to aim its resources at the entire market with one particular
product. a firm might decide to ignore market segment
differences and target the whole market with one offer. This
strategy focuses on what is common in the needs of consumers,
rather than on what is different.

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 Coca Colas original marketing strategy was based on this
form. One product aimed at the mass market in the hope that a
sufficient amount of buyers would be attracted., although there
are now changes in their product line to cater for growing dietary
and caffeine free needs of consumers.

ADVANTAGES

✔ Economies in production and marketing. Due to focus on large

mass segment, the production is in large scale which the
lower cost. And the marketing expenses will be much lower as
compared to the more segments.There will be only one
marketing unit with people having specialize knowledge of
consumers in segment.

✔ Appealing to Everybody. The products are developed which

will appeals to broad spectrum of people. Thisincreases the
consumer base. The concentration on development of only
one product as well as marketing of same is much higher.

DISADVANTAGES

× Threat from Strong Competitor. The entry of strong competitor

or the competitor with different range of products may
hamper the business. Therefore , the vulnerability to
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 competitors offering more differentiated products and services
to market sub segments.

× Consumers with variable needs and wants. This strategy is

effective when most consumers have similar needs and wants.
This is practically difficult. The product which will satisfy or
even attract complete market is difficult.

× One market mix to serve complete market is difficult,

therefore it is difficult to find precise market mix. This is
inefficient method as to serve the complete market.

2. DIFFERENCIATED STRATEGY

Using differentiated or segmented marketing, a firm decides

to target several market segments and designs separate offers for
each. Companies hope for higher sales and a stronger position
within each market segment. This could yield more total sales than
undifferentiated marketing across all segments. Differentiated
marketing can also increase costs, however. So, companies must
weigh increased sales against increased costs when deciding on a
differentiated marketing strategy.

This strategy is appropriate when consumers are choosing

among well-known brands with distinctive images and it is possible
to identify one or more segments with distinct needs for different
types of products

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 An example of this would be airline companies offering first,
business (segment 1) or economy class tickets (segment 2) , with
separate marketing programmes to attract the different groups.

ADVANTAGES

✔ Minimizes risks, as losses in one segment can be made up for

in others.

✔ The Precision and efficiency of this technique is much higher

as it concentrate on small segments. The company can serve
the segments more efficiently.

✔ Unique marketing mix features allow for higher prices. The

Focus on each segment is mush higher , therefore the
customer needs and wants are taken care which will allow to
get higher price.

DISADVANTAGES

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 ✔ Increased costs for differentiated products and marketing. The
cost of manufacturing different range of products is much
higher as compared to one product. The Marketing mix varies
as per segment; which demands much more higher expenses
as compared to single segment.

3. CONCENTRATED STRATEGIES

Where the organization concentrates its marketing effort on

one particular segment. The firm will develop a product that
caters for the needs of that particular group.

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 Concentrated or niche marketing is especially appealing
when a company has limited resources. Instead of going after
a small share of a large market, the firm goes after a large
share of one or a few segments or niches. Niches are smaller
than segments and may attract only one or a few competitors.
A company can market more effectively by fine-tuning its
products, prices, and programs to the needs of carefully
defined segments.

For example Rolls Royce cars aim its vehicles at the

premium segment, same as Harrods within the UK.

ADVANTAGES

✔ When small firm’s have limited resources, they can

concentrate more on one segment. And can serve the
customers more effectively.

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 ✔ As focus is on one single segment; the precise knowledge of
supply and demand increases efficiency of organization.

✔ Knowledge of consumers regarding their need and wants is

much more reliable. The needs are specified and therefore it is
easy to satisfy them and retain them for longer period.

✔ cost of productionis much lower, with high profitably. the

efficiency of production is much higher.

DISADVANTAGES

× Focus on one sub-market, is much more risky-if any

competitor comes with a different and better products then it
will become difficult to retain the customer.

× If there is significant change in size or tastes of the segment,

then it will lead to losing the complete business.

5. PRODCUT DIFFRENCIATED/CUSTOMIZED
STRATEGY

Segments are so precisely defined that products are offered to

exactly meet the needs of each individual. Mass customization is a

related approach in which a company modifies a basic good to meet the
needs of an individual.

Micromarketing is the practice of tailoring products and

marketing programs to suit the tastes of specific individuals and
locations. It includes local marketing and individual marketing.

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Local marketing entails tailoring brands and promotions to the
needs and wants of local customer groups—cities, neighborhoods,
and even specific stores. The drawbacks include that it can drive up
manufacturing and marketing costs, and create logistics problems
as companies try to meet the varied requirements of the different
markets. A brand’s image may also be diluted and the message
could vary too much. But, local marketing does help a company
market more effectively to different segments.

individual marketing in the extreme—tailoring products and

marketing programs to the needs and preferences of individual
customers. Mass customization is the process through which firms
interact one-on-one with masses of customers to design products
and services made specifically to individual needs. The move
towards individual marketing mirrors the trend in consumer self-
marketing, in which consumers take more responsibility for
determining what to buy.

ADVANAGES

✔ Increases Customer base. Focus on all segments increases

customer base which gives company an opportunity to attract
the more customers. And in turn to increase the revenue of
company.

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 ✔ Product diversification. The more number of products with
different features increases chances of attracting customers
as every customer have different need and wants. It also
provides the customer no. of choices.

✔ High Profits. The company focuses more on different products.

The company can achieve the higher profits and also losses
will be compensated by different products.

DISADVANTAGES

× Cost Economies. The cost of production and marketing is

much higher as there is range of products.

× Resources required are much higher as compared to one

product strategy.

× Duplication of activities. Resources and activities are

duplicated as per different products. There are different
marketing forces are required which will concentrates on the
products and have the required knowledge of products.

5. SELECTING STRATEGY

The selection of strategy is much more difficult and can not be

same for the all firms. Depending on situations, segments, the
customer behavior, size of firm etc the strategy should be selected.
Majority of times the strategy will differ form firm to firm and will
combine the different strategy with different degree of
implementation.

Determinantsfor selecting Market Specific strategy

 Company resources

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 Which strategy to employ depends on company resources.
The resources will define which segmentation strategy should
be selected and implemented. Company's resources will
always defines scope of operation of the firm. The number of
customers company could satisfy with the available range of
products is decided by the resources. When the firm’s
resources are limited, concentrated marketing makes sense.

 Product homogeneity/variability

In case of homogeneous products there is no as such

need for concentrating on one segment. The undifferentiated
strategy is good to choose. Undifferentiated marketing makes
sense when product variability is low, such as in steel.

 Stages of Product Life cycle

Market segmentation proves meaningless in the first

and last stages of a products life cycle i.e. introduction and
decline stages, it becomes necessary in other stages i.e. in
growth and maturity stages.

 Competitor's strategy.

It becomes necessary to fall in line with the activity of

the competitor with regard to segmentation, for example it is
difficult for an organizations be successful through
undifferentiated marketing when competitors practicing active
segmentation.

 Nature of Market

Segmentation becomes necessary when customers

preference vary form group to group and not so when the market
is of homogeneous nature.

6. MAJOR BENEFITS

• Designing responsive products to meet the needs of

the marketplace.
• Developing effective and cost-efficient promotional
tactics & campaigns.

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• Gauging your company’s market position — how your
company is perceived by its customers and potential
customers relative to the competition.
• Fine-tuning current marketing strategies

7. BIBILOGRAPHY

1. Basics of marketing by Dr. P.C. Pardesi.

2. www.learnmarketing.net/targeting.htm
3. www.atkinson.yorku.ca/~lripley/imUsegment.htm

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