1 Segmenting and Targeting Markets
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Segmenting and Targeting Markets
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Market Segmentation
MarketMarket
MarketSegmentMarket
Segment
MarketSegmentation
MarketSegmentation
People or organizations with needs or wants and the ability and
willingness to buy
People or organizations with needs or wants and the ability and
willingness to buy
A subgroup of people or organizations sharing one or more characteristics that cause them to
have similar product needs.
A subgroup of people or organizations sharing one or more characteristics that cause them to
have similar product needs.
The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.
The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.
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A Market is...
(1) people or organizations with
(2) needs or wants, and with
(3) the ability and
(4) the willingness to buy.
A group of people that lacks any one of these characteristics is not a market.
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Importance Importance of market segmentation.of market segmentation.
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The Importance of Market Segmentation
Markets have a variety of product needs and preferences
Marketers can better define customer needs
Decision makers can define objectives and allocate resources more accurately
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Learning Objective
Criteria for successful Criteria for successful market segmentation.market segmentation.
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Criteria for Successful Segmentation
Criteria Criteria for for
Market Market SegmentsSegments
Criteria Criteria for for
Market Market SegmentsSegments
SubstantialitySubstantiality
IdentifiabilityIdentifiability
AccessibilityAccessibility
ResponsivenessResponsiveness
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Criteria for Segmentation
SubstantialitySubstantialitySubstantialitySubstantiality
IdentifiabilityIdentifiabilityMeasurabilityMeasurabilityIdentifiabilityIdentifiabilityMeasurabilityMeasurability
AccessibilityAccessibilityAccessibilityAccessibility
ResponsivenessResponsivenessResponsivenessResponsiveness
Segment must be large enough to warrant a special
marketing mix.
Segment must be large enough to warrant a special
marketing mix.
Segments must be identifiable and their size measurable.
Segments must be identifiable and their size measurable.
Members of targeted segments must be reachable with
marketing mix.
Members of targeted segments must be reachable with
marketing mix.Unless segment responds to a marketing mix differently, no separate treatment is needed.
Unless segment responds to a marketing mix differently, no separate treatment is needed.
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Learning Objective
Bases commonly Bases commonly used to segment consumer markets.used to segment consumer markets.
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Segmentation Bases
Characteristics of individuals,
groups,
or organizations used
to divide a total market
into segments.
(variables)
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Bases for Segmentation
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
DemographicsDemographics
GeographyGeography
Bases Bases Used toUsed toSegmentSegment
ConsumerConsumerMarketsMarkets
Bases Bases Used toUsed toSegmentSegment
ConsumerConsumerMarketsMarkets
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Geographic Segmentation
Segmenting markets by
region of the country or
world, market size, market
density, or climate.
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Geographic Segmentation
Region of the country or world
Market size
Market density
Climate
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Demographic Segmentation
Segmenting markets
by age, gender, income,
ethnic background,
and family life cycle
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Bases for Demographic Segmentation Age
Gender
Income
Ethnic background
Family Life Cycle
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Family Life Cycle
AgeAge
MaritalMaritalStatusStatus
ChildrenChildren
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Psychographic Segmentation
Market segmentation on
the basis of personality,
motives, lifestyles, and
geodemographics.
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Bases for Psychographic Segmentation
PsychographicPsychographicSegmentationSegmentation
PsychographicPsychographicSegmentationSegmentation
PersonalityPersonality
MotivesMotives
LifestylesLifestyles
GeodemographicsGeodemographics
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Lifestyle Segmentation
How time is spent
Beliefs
Socioeconomic characteristics
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Geodemographic Segmentation
Segmenting potential
customers into neighborhood
lifestyle categories.
Combines geographic,
demographic, and lifestyle
segmentation.
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Benefit Segmentation
The process of grouping
customers into market
segments according to
the benefits they seek
from the product .
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Quality. Service Economy.
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Usage-Rate Segmentation
Dividing a market by the
amount of product
bought or consumed.
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The 80/20 Principle
A principle holding that
20 percent of all customers
generate 80 percent
of the demand.
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Learning Objective
Describe the bases for Describe the bases for segmenting segmenting
business markets.business markets.
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Macrosegmentation
The process of dividing
business markets into
segments based on general
characteristics such as
geographic location,
customer type, customer size,
and product use.
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Microsegmentation
The process of dividing
business markets into
segments based on the
characteristics of decision-
making units within a
macrosegment.
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Business Marketing Segmentation
Geographic
Customer Type
Customer Size
Product UseBusinessBusinessMarketsMarkets
BusinessBusinessMarketsMarkets
Purchasing Criteria
Purchasing Strategy
Importance
Personal Characteristics
Micro- segmentation
Micro- segmentation
Macro- segmentation
Macro- segmentation
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Learning Objective
List the steps involved List the steps involved in segmenting markets.in segmenting markets.
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Steps in Segmenting a Market
Select a
market for
study
Choosebases
for segmen-
tation
Selectdescrip-
tors
Profileand
analyzesegments
Selecttarget
markets
Design,imple-ment,
maintainmkting
mix
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Learning Objective
Discuss alternative strategies Discuss alternative strategies for selecting target markets.for selecting target markets.
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Target Market
A group of people or
organizations for which an
organization designs,
implements, and maintains a
marketing mix intended to
meet the needs of that group,
resulting in mutually
satisfying exchanges.
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Undifferentiated Targeting Strategy
Marketing approach that
views the market as one big
market with no individual
segments and thus requires a
single marketing mix.
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Undifferentiated Targeting Strategy
AdvantagesAdvantages: Potential savings on
production and marketing costs
DisadvantagesDisadvantages: Unimaginative product
offerings Company more
susceptible to competition
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Concentrated Targeting Strategy
A strategy used to select one
segment of a market for
targeting marketing efforts.
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Niche
One segment of
a market.
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Concentrated Targeting Strategy
AdvantagesAdvantages: Concentration of resources Meets narrowly defined
segment Small firms can compete Strong positioning
DisadvantagesDisadvantages: Segments too small, or
changing Large competitors may market
to niche segment
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Multisegment Targeting Strategy
A strategy that chooses
two or more well-defined
market segments and
develops a distinct marketing
mix for each.
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AdvantagesAdvantages: Greater financial success Economies of scale
DisadvantagesDisadvantages: High costs Cannibalization
Multisegment Targeting Strategy
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Costs of Multisegment Targeting$ Product design costs
$ Production costs
$ Promotion costs
$ Inventory costs
$ Marketing research costs
$ Management costs
$ Cannibalization
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Cannibalization
Situation that occurs when
sales of a new product
cut into sales of a
firm’s existing products.
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Learning Objective
Explain how and why firms implement Explain how and why firms implement positioning strategies and positioning strategies and how product differentiation how product differentiation
plays a role.plays a role.
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Positioning
Developing a specific
marketing mix to influence
potential customers’ overall
perception of a brand,
product line, or organization
in general.
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Position
The place a product, brand, or
group of products occupies in
consumers’ minds relative to
competing offerings.
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Effective Positioning
Assess the positions of competing products
Determine the dimensions of these positions
Choose an effective market position
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Product Differentiation
A positioning strategy that
some firms use to distinguish
their products from those of
competitors.
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Perceptual Mapping
A means of displaying or
graphing, in two or more
dimensions, the location of
products, brands, or groups
of products in customers’
minds.
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Positioning Bases
AttributeAttribute
Price and QualityPrice and Quality
Use or ApplicationUse or Application
Product UserProduct User
Product ClassProduct Class
CompetitorCompetitor
Positioning Positioning BasesBases
Positioning Positioning BasesBases
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Repositioning
Changing consumers’
perceptions of a brand
in relation to
competing brands.
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Learning Objective
Discuss global market segmentation Discuss global market segmentation and targeting issues.and targeting issues.
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Global Issues
Global Market Standardization
TrendsTrends
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