Chapter 5 Market Segmentation - Taft University · 5-2 . Key Terms . Market Segmentation, Post Hoc Segmentation, Priori Segmentation, Benefit Segmentation, Psychographic Segmentation,

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Chapter 5 Market

Segmentation

5-2

Key Terms

Market Segmentation, Post Hoc Segmentation, Priori Segmentation, Benefit Segmentation, Psychographic Segmentation, Vertical Dimension, Horizontal Dimension, Geodemographic Segmentation, Positioning Map, Marketing Mix, VALSTM Framework, PRIZM NE

5-3

Understanding Market Segmentation

Market segmentation - The process of dividing a market into groups of similar consumers and selecting the most appropriate group(s) to serve Target market - Group or market segment that a

company selects to focus on Viable market - One that can be profitably

served by a firm

5-4

A Model of the Market Segmentation Process (Figure 5.1)

5-5

Delineate the Firm's Current Situation

A firm must do a complete situational analysis when embarking on a new or modified marketing program The analysis aids in determining objectives,

opportunities, and constraints to be considered when selecting target markets and developing marketing mixes

5-6

Determine Consumer Needs and Wants

Successful marketing strategies depend on meeting consumer needs and wants In most situations, the industry within which

the firm operates specifies boundaries of firm’s need satisfaction activities At a strategic level, need and wants usually

are translated into more operational concepts

5-7

Divide Markets on Relevant Dimensions

Three important questions to be considered are: Should the segmentation be a priori or a post

hoc? How does one determine the relevant

dimensions or bases to use for segmentation? What are some bases for segmenting consumer

and organizational buyer markets?

5-8

Divide Markets on Relevant Dimensions

Three important questions to be considered are: Should the segmentation be a priori or a post

hoc? How does one determine the relevant

dimensions or bases to use for segmentation? What are some bases for segmenting consumer

and organizational buyer markets?

5-9

Relevance of Segmentation Dimensions

At least some initial dimensions can be determined from: Previous research Purchase trends Managerial judgment

Consideration and research of sought benefits are a strongly recommended approach

5-10

Useful Segmentation Bases for Consumer Markets (Figure 5.2)

5-11

Useful Segmentation Bases for Consumer Markets (Figure 5.2)

5-12

Useful Segmentation Bases for Consumer Markets (Figure 5.2)

5-13

Bases for Segmentation

Benefit segmentation - A market-oriented approach that focuses on benefits sought by consumers Psychographic segmentation - Focuses on

consumer lifestyles Lifestyles are measured on the bases of

activities, interests, and opinions (AIO) of consumers Best-known type of segmentation is VALSTM

(“values and lifestyles”)

5-14

VALS™ Framework and Segments (Figure 5.4)

5-15

Bases for Segmentation

Geodemographic segmentation - Identifies specific households in a market by focusing on local neighborhood geography PRIZM NE - Assumes that consumers in

particular neighborhoods are similar in many respects and that the best prospects are those who actually use a product

5-16

Develop Product Positioning

Positioning can be achieved through any one of these strategies Superiority to competitive products on one or

more product attributes Positioned by use or application Positioned in terms of particular types of users Positioned relative to a product class Positioned directly against particular

competitors

5-17

Develop Product Positioning

Positioning map - Visual depiction of customer perceptions of competitive products, brands, or models

5-18

Positioning Map for Automobiles (Figure 5.6)

5-19

Decide Segmentation Strategy

A firm may decide: Not to enter the market To segment but to be a mass marketer Market is so small that it is not profitable to market

to one portion of it Heavy users comprise such a large proportion of sales

that they are the only relevant target Product is a dominant brand, and targeting to a few

segments is not beneficial

5-20

Decide Segmentation Strategy

A firm may decide: To market to one segment To market to more than one segment and design

a separate marketing mix for each

5-21

Decide Segmentation Strategy

Criteria to base a firm’s segmentation strategy decisions are: Measurable - Firm must be capable of measuring

its size and characteristics Meaningful - Large enough to deliver sufficient

sales and growth potential Marketable - Can be reached and served in an

efficient manner

5-22

Selecting Target Markets: Some Questions Marketing Managers Should Answer (Figure 5.7)

5-23

Selecting Target Markets: Some Questions Marketing Managers Should Answer (Figure 5.7)

5-24

Design Marketing Mix Strategy

Selection of target market and designing the market should go hand in hand Marketing mix decisions should have already

been carefully considered Product positioning has many implications

for promotion and channel distribution