Companies can not connect with all customers in large, broad, or diverse markets. But they can divide such markets into groups of consumers or segments with distinct needs and wants. A company then needs to identify which market segments it can serve effectively. This decision requires keen understanding of consumer behavior and careful strategic thinking. Identifying and satisfying the right market segments is often the key to marketing success.
To compete more effectively, many companies are now embracing target marketing. Instead of scattering their marketing efforts, they’re focusing on those consumers they have the greatest chance of satisfying.
Effective target marketing requires that marketers:
- Identify and profile distinct groups of buyers who differ in their needs and wants(Segmenting market)
- Select one or more market segments to enter( Market targeting)
- For each target segment establish and communicate the distinctive benefits of the company’s market offering(Market positioning).
Horlicks, a leading health food drink brand in India from Glaxosmithkline(GSK) has been providing”pleasurable nourishment” to a wide spectrum of consumers ranging from children and adults to elderly people. The company is able to serve wide segment of customers. I think example is clear to make you understand what is segmentation. There are several factors which are the bases to segmentation.
As the word suggests, Targeting is the post step to market segmentation. There are many statistical for developing market segments. Marketers are increasingly combining several variables in an effort to identify smaller, better, defined target group. For example a bank may not only identify a group of wealthy retired adults but within that group distinguish several segments depending on current income, assets, savings, and risk preferences. This has led some market researchers to advocate a need based market segmentation approach.
Effective segmentation criteria for targeting
Not all segmentation schemes are useful. To be useful market segments must rate favorably on five key criteria:
- Measurable – The size purchasing power and characterstics of the segment can be measured
- Substantial – The segments are large and must be profitable to serve. A segment should be the largest possible homogeneous group worth going after with a tailored marketing programs. For example, for an automobile manufacturer to develop cars for people who are less then 4 feet tall.
- Accessible – The segments can easily be reached and served.
Once you are done with the previous steps and you have formulated a correct target segment then next step is to position your product. While positioning your product there must be essence of two factors. Point of parity and point of difference.
- Point of parity: You must offers your product to your target segment in a way that customers find value in them. Sufficient number of consumer must believe the brand is “good enough” on the dimension to use them or prefer over others.
- Point of difference: As the word suggests, there must be difference in your product in the offering. Customers usually evaluate product with their point of difference.
“Positioning the brand and regaining trust are all smart things for us to do and those are the litmus tests for any decisions we make”.
Hope this post helped you to clear basic concepts of Segmentation, targeting, positioning. This topic is very vast if studied in detail but enough to understand the concepts though with this post.