Market Segmentation and Product Positioning

Market segmentation is its division into
separate segments, differing in their sales potential for a given
producer's product.
Segmentation can be of several types, depending on the nature of how it is
carried out and on the type of consumer of the goods or services:
macro-segmentation, within which markets are divided by regions,
countries, degree of their industrialization, etc.;
micro-segmentation, which involves forming groups
of consumers (segments) of a single country or region according to more detailed
criteria (characteristics);
segmentation in depth, in which case the segmentation process begins with
a broad group of consumers, and then is progressively narrowed depending
on the classification of the product's or service's end consumers;
segmentation in breadth, which begins with a narrow group (segment)
of consumers, and then expands depending on the scope of purpose and
use of the product;
preliminary segmentation — the initial stage of marketing
research, oriented toward studying the maximum possible number of
market segments;
final segmentation — the concluding stage of market analysis,
carried out in accordance with the firm's own capabilities and
the conditions of the market environment.
A segmentation criterion - an objective indicator establishing
a consumer's membership in a particular group, distinguished by common
stable characteristics; it is a way of identifying a given segment in the
market.
Given the specifics of the market under consideration, in each specific
case the researcher uses the segmentation criteria most suitable
for that case.
The main criteria for segmenting the consumer demand goods
market:
- geographic (region of product purchase);
- organizational (type of industry and company size);
- operational (scope of use: in the production or
technological process);
- situational (payment terms);
- behavioral (purchasing policy, personality traits of the persons
carrying it out, consumption intensity) (Table 8.1)
Many of the above criteria are used when
segmenting a specific market for industrial goods.
However, when identifying separate groups (segments) of consumers of
industrial goods, preference is given to factors such as
industry affiliation, ownership form, field of activity, enterprise
size, and purchasing frequency.
Table 9.1 – Market segmentation criteria.

Having segmented the chosen market and identified
the corresponding set of segments, the researcher should determine
which of them are the most attractive for conducting
business activity. To do this, they determine the capacity of each
segment, analyze the possibilities of its change in the future, and establish
the expected profit volume for each segment. In addition,
consumers' attitude toward the products available in the segments under study is examined,
competitors' interest in specific consumer groups is identified,
and the possibilities for creating and
operating distribution channels are analyzed. Taking into account these
and other possible factors, the researcher identifies the most
attractive (target) segments. The set of such segments forms the
target market.
Segmentation criteria:
1. Quantitative segment parameters, including segment capacity
and the amount of costs associated with bringing the product to market (the market's
cost-intensity).
2. Segment accessibility, i.e., the enterprise's ability to use
distribution channels for products, acceptable storage and sale
conditions for consumers of the given segment.
3. Segment stability. Determining the significance and robustness
of the identified group of consumers.
4. Segment information availability, i.e., assessing
the accessibility of information, identifying closed zones within the segment.
5. Segment profitability, which is determined based on the rate
of profit, return on invested capital, size of dividends per share,
and growth of the enterprise's total profit mass.
6. Segment compatibility with the market of the main competitors. The number of
main competitors, their market positions, and the degree of competitors' readiness
to concede the chosen market segment.
7. Protection of the chosen segment from competition, which
involves identifying prospective competitors in the given segment, their
weak and strong points, and assessing one's own comparative advantages in
the competitive struggle.
8. Effectiveness of working in the chosen market segment, i.e., checking
whether the enterprise has the proper experience working in this segment, the degree
of readiness for competitive struggle, and the availability of resources for
working in this segment.
Market segmentation allows one to:

• - adapt the product with consideration of consumer preferences;
• - increase the product's competitiveness and strengthen the competitive advantages of its producer;
• - reduce the level of competitive struggle by moving into a market segment not yet developed by competitors;
• - align the firm's scientific-technical and production-commercial strategy with the demands of a specific market segment;
• - optimize the expenditure side of the marketing budget.

Positioning – the process of selecting distinctive competitive advantages and communicating information about them to the target consumer.
Types of product positioning are presented in Table 8.2

Table 8.2 - Types of product positioning