Chapter 5 – Market Segmenting, Targeting, and Positioning
- Describe the factors that make some markets more attractive targets than others.
- Describe the different market-segmenting strategies companies pursue and why.
- Outline the market-segmentation strategies used in global markets.
After you segment buyers and gather consumer insight data about them, you can begin to see those that have more potential. Now you are a dart thrower instead of a popcorn maker. An attractive market has the following characteristics:
It is identifiable
Are you able to determine or identify which customers are within the market segment in order to be able to design products or services to meet their needs? More importantly, are the customers within each market segment distinct from the other segments such that there isn’t sufficient overlap? If multiple segments you have identified are not distinctly different in their needs for the product offering, then maybe a different segmentation scheme should be considered.
It is accessible (or you can find a way to reach it)
Accessibility, or the lack of it, could include geographic accessibility, political and legal barriers, technological barriers, or social barriers. It can also include the ability to reach the customers through persuasive communication. However, less accessible segments are not necessarily lost. Whether they become your target depends on your ability to find a way to reach them. For example, to overcome geographic barriers, Unilever hires women in third-world countries to distribute the company’s products to rural consumers who lack access to stores.
Is it responsive
In order to be successful with your marketing strategy, it is necessary for customers within that segment to respond positively and similarly to your marketing efforts. If the customers within that segment are not likely to respond positively and similarly to a company’s marketing efforts, then it is not an attractive segment to target.
It is sizeable (large) enough to be profitable given your operating cost
A lower percentage of consumers in China own cars than that of consumers in Canada. However, because the country’s population is so large (more than 1.4 billion people in 2021), more cars are sold in China than in Europe or Canada. 4.88 billion people in the world own mobile phones. But that still leaves three billion who don’t (Turner, 2021).
It is growing
The middle class of India is growing rapidly, making it a very attractive market for consumer products companies. People under thirty make up the majority of the Indian population, fueling the demand for “Bollywood” (Indian-made) films. A growing segment means that there will be more potential customers with time, which increases the segments’ attractiveness and long-term profitability
It is not already swamped by competitors, or you have found a way to stand out in a crowd
IBM used to make computers. However, after the marketplace became crowded with competitors, IBM sold the product line to a company called Lenovo. IBM made this move because the market’s profitability for the company reduced, given that too many companies were competing for the same number of consumers.
The company has the resources to compete in it
You might have a great idea to compete in the wind-power market. However, it is a business that is capital intensive. What this means is that you will either need a lot of money or must be able to raise it. You might also have to compete with the likes of T. Boone Pickens, an oil tycoon who is attempting to develop and profit from the wind-power market. Does your organization have the resources to do this?
It “fits in” with your firm’s mission and objectives
Consider TerraCycle, which has made its mark by selling organic products in recycled packages. Fertilizer made from worm excrement and sold in discarded plastic beverage bottles is just one of its products. It wouldn’t be a good idea for TerraCycle to open up a polluting, coal-fired power plant, no matter how profitable the market for the service might be.
Target-Market Strategies: Choosing the Number of Markets to Target
Henry Ford proved that mass marketing can work—at least for a while. Mass marketing is also efficient because you don’t have to tailor any part of the offering for different groups of consumers, which is more work and costs more money. The problem is that buyers are not all alike. If a competitor comes along and offers these groups a product (or products) that better meet their needs, you will lose business.
Most firms tailor their offerings in one way or another to meet the needs of different segments of customers. Because these organizations don’t have all their eggs in one basket, they are less vulnerable to competition. Marriott International is an example of a company that operates in multiple market segments. The company has different types of facilities designed to meet the needs of different market segments. Marriott has invested in unique brands so consumers don’t get confused about their umbrella brand, and that the brand’s image is not diluted. Some of the Marriott sub-brands and their target markets are as follows:
- Marriott Courtyard. Targeted at over-the-road travelers.
- Ritz-Carlton Hotels. Targeted at luxury travelers.
- Marriott Conference Centers. Targeted at businesses hosting small- and midsized meetings.
- Marriott ExecuStay. Targeted at executives needing month-long accommodations.
- Marriott Vacation Clubs. Targeted at travelers seeking to buy timeshares.
A multi-segment marketing strategy can allow firms to respond to demographic changes and other trends in markets. For example, the growing number of people too old to travel have the option of moving into one of Marriott’s “Senior Living Services” facilities, which cater to retirees who need certain types of care. A multi-segment strategy can also help companies weather an economic downturn by allowing customers to trade up or down among brands and products. Suppose you take a pay cut and can’t afford to stay at Marriott’s Ritz-Carlton hotels anymore. A room at a JW Marriott, the most luxurious of the Marriott-brand hotels but cheaper than the Ritz, is available to you. A multi-segment strategy can also help companies deal with the product life cycle issues. If one brand or product is “dying out,” the company has others to compete.
Some firms—especially smaller ones with limited resources—engage in concentrated marketing. Concentrated marketing involves targeting a very select group of customers. Concentrated marketing can be a risky strategy because companies really do have all their eggs in one basket. The auto parts industry is an example. Traditionally, many North American auto parts makers have supplied parts exclusively to auto manufacturers. But when General Motors, Ford, Chrysler, and other auto companies experienced a slump in sales following the recession that began in 2008, the auto parts makers found themselves in trouble. Many of them began trying to make and sell parts for wind turbines, aerospace tools, solar panels, and construction equipment (Simon, 2009).
Niche marketing involves targeting an even more select group of consumers. When engaging in niche marketing, a company’s goal is to be a big fish in a small pond instead of a small fish in a big pond (Business Dictionary, n.d.). Microtargeting, or narrowcasting, is a new effort to isolate markets and target them. It was originally used to segment voters during elections, including the 2008 U.S. presidential election. Microtargeting involves gathering all kinds of data available on people—everything from their tax and phone records to the catalogs they receive. (Schiffman & Kanuk, 2010). Clearly, microtargeting has ethical implications and privacy issues.