1 Segmenting and Segmenting and Targeting Targeting Markets Markets
Jan 19, 2015
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Segmenting and Segmenting and Targeting MarketsTargeting Markets
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Market SegmentationMarket 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...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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The Importance of The Importance of Market SegmentationMarket 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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Criteria for SegmentationCriteria 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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Segmentation BasesSegmentation Bases
Characteristics of Characteristics of
individuals, groups, individuals, groups,
or organizations used or organizations used
to divide a total market to divide a total market
into segments.into segments.
(variables)(variables)
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Bases for SegmentationBases for Segmentation
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
DemographicsDemographics
GeographyGeography
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Geographic SegmentationGeographic Segmentation
Segmenting markets bySegmenting markets by
region of the country/worldregion of the country/world
market sizemarket size
market density market density
climateclimate
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Benefits of Regional Benefits of Regional SegmentationSegmentation
New ways to generate sales in New ways to generate sales in sluggish and competitive marketssluggish and competitive markets
Scanner/POS data allow assessment Scanner/POS data allow assessment of best selling brands in regionof best selling brands in region
Regional brands appeal to local Regional brands appeal to local preferencespreferences
React more quickly to competitionReact more quickly to competition
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Bases for SegmentationBases for Segmentation
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
DemographicsDemographics
GeographyGeography
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Demographic SegmentationDemographic Segmentation
Segmenting markets Segmenting markets
by age, gender, income, by age, gender, income,
ethnic background, ethnic background,
and family life cycleand family life cycle
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Bases for Bases for Demographic Demographic SegmentationSegmentation
AgeAge
GenderGender
IncomeIncome
Ethnic backgroundEthnic background
Family Life CycleFamily Life Cycle
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Family Life CycleFamily Life Cycle
AgeAge
MaritalMaritalStatusStatus
ChildrenChildren
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Family Life CycleFamily Life Cycle
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Bases for SegmentationBases for Segmentation
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
DemographicsDemographics
GeographyGeography
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Psychographic Psychographic SegmentationSegmentation
Market segmentation on Market segmentation on
the basis of personality, the basis of personality,
motives, lifestyles, and motives, lifestyles, and
geodemographics.geodemographics.
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Bases forBases forPsychographic Psychographic SegmentationSegmentation
PsychographicPsychographicSegmentationSegmentation
PsychographicPsychographicSegmentationSegmentation
PersonalityPersonality
MotivesMotives
LifestylesLifestyles
GeodemographicsGeodemographics
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Lifestyle SegmentationLifestyle Segmentation
How time is spentHow time is spent
Importance of things Importance of things around themaround them
BeliefsBeliefs
Socioeconomic Socioeconomic characteristicscharacteristics
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Geodemographic Geodemographic SegmentationSegmentation
Segmenting potential Segmenting potential
customers into customers into
neighborhood lifestyle neighborhood lifestyle
categories. categories.
Combines geographic, Combines geographic,
demographic, and lifestyle demographic, and lifestyle
segmentation.segmentation.
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Bases for SegmentationBases for Segmentation
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
DemographicsDemographics
GeographyGeography
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Benefit SegmentationBenefit Segmentation
The process of grouping The process of grouping
customers into market customers into market
segments according to segments according to
the the benefits they seekbenefits they seek
from the product.from the product.
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Bases for SegmentationBases for Segmentation
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
DemographicsDemographics
GeographyGeography
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Usage-Rate SegmentationUsage-Rate Segmentation
Dividing a market by the Dividing a market by the
amountamount of product of product
bought or consumed.bought or consumed.
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The 80/20 PrincipleThe 80/20 Principle
A principle holding that A principle holding that
20 percent of all 20 percent of all
customers generate 80 customers generate 80
percent percent
of the demand.of the demand.Target Target customerscustomers
20%20%Share ofShare ofcustomerscustomers
Target Target customerscustomers
80%80%
Share ofShare ofsalessales
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Business Marketing Business Marketing SegmentationSegmentation
Four segments of business markets:Four segments of business markets:
Producers / manufacturersProducers / manufacturers ResellersResellers GovernmentsGovernments InstitutionsInstitutions
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Steps in Segmenting a Steps in Segmenting a MarketMarket
Select a
market for
study
Choose bases
for segme
n-tation
Select descrip-tors
Profile and
analyze segment
s
Select target market
s
Design, imple-ment,
maintain mktging
mix
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Target MarketTarget Market
A group of people or A group of people or
organizations for which an organizations for which an
organization designs, organization designs,
implements, and implements, and
maintains a marketing maintains a marketing
mix intended to meet the mix intended to meet the
needs of that group, needs of that group,
resulting in mutually resulting in mutually
satisfying exchanges.satisfying exchanges.
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Undifferentiated Undifferentiated Targeting StrategyTargeting Strategy
Marketing approach that Marketing approach that
views the market as one views the market as one
big market with no big market with no
individual segments and individual segments and
thus requires a single thus requires a single
marketing mix.marketing mix.
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Undifferentiated Undifferentiated Targeting StrategyTargeting Strategy
AdvantagesAdvantages: Potential savings on
production and marketing costs
DisadvantagesDisadvantages: Unimaginative product
offerings Company more
susceptible to competition
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Concentrated Targeting Concentrated Targeting StrategyStrategy
A strategy used to select A strategy used to select
one segment of a market one segment of a market
(a (a nicheniche) for targeting ) for targeting
marketing efforts.marketing efforts.
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Concentrated Targeting Concentrated Targeting StrategyStrategy
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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CannibalizationCannibalization
Situation that occurs when Situation that occurs when
sales of a new product sales of a new product
cut into sales of a cut into sales of a
firm’s existing products.firm’s existing products.
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PositionPosition
The place a product, The place a product,
brand, or group of brand, or group of
products occupies in products occupies in
consumers’ minds relative consumers’ minds relative
to competing offerings.to competing offerings.
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PositioningPositioning
Developing a specific Developing a specific
marketing mix to marketing mix to
influence potential influence potential
customers’ overall customers’ overall
perception of a brand, perception of a brand,
product line, or product line, or
organization in general.organization in general.
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Product DifferentiationProduct Differentiation
A positioning strategy that A positioning strategy that
some firms use to some firms use to
distinguish their products distinguish their products
from those of competitors.from those of competitors.
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Perceptual MappingPerceptual Mapping
A means of displaying or A means of displaying or
graphing, in two or more graphing, in two or more
dimensions, the location dimensions, the location
of products, brands, or of products, brands, or
groups of products in groups of products in
customers’ minds.customers’ minds.
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Perceptual Map and Positioning Perceptual Map and Positioning Strategy for Levi Strauss Strategy for Levi Strauss
ProductsProducts
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RepositioningRepositioning
Changing consumers’ Changing consumers’
perceptions of a brand perceptions of a brand
in relation to in relation to
competing brands.competing brands.