● Market segmentation is the process of dividing the market (consumers) into identifiable

groups based on similarities and diffs as they relate to our product/product class
● Value drivers may be diff across segments
● One product that provides value to all customers (that is better than segment-specific
competitors) is difficult.
● Segments should be:
○ Distinct
■ Homogeneous within groups
■ Diff across groups
■ Want to minimize overlap
○ Actionable
■ Useful for identifying customers and deciding marketing mix variables
○ Substantial
■ Big enough to be profitable
● Geographic segmentation: starbucks
○ More desserts and larger, more comfortable coffee shops in the South where
customers tend to come in later and stay longer.
● Demographic
○ Age, gender, income, occupation, education, race

Psychographics: VALS
● The most widely-used approach: measure consumer’s values, attitudes and lifestyle ...
and personality

Behaviour segmentation
● occasions, benefits sought, user status, usage rate, loyalty status

Behaviour: usage rate

● Occasions, benefits sought, user status, usage rate, loyalty status
○ Light, medium, heavy users (most attractive segment)
● In the fast food industry, heavy users (20% of the patrons) consume approximately 60%
of all food served.
● Typically, while fast food chains rely on heavy users, a significant percentage of
marketing dollars are spend on light users.
● Occasions, benefits sought, user status, usage rate, loyalty status
○ E.g., Loyalty programs

Primary Segmentation Variables

● Descriptors “who”
○ Age
○ Income
○ Education
○ Profession
○ Location
 ● Psychographics “Why”
○ Needs
○ Self concept
○ Values
○ Attitude
○ Lifestyles
● Behaviors “What”
○ Usage
○ Loyalty
○ Deal proneness
○ Responsiveness to marketing mix

● Using multiple segmentation bases

○ Marketers often use multiple segmentation variables – not just one!
○ For example, a bank might not only identify a group of retired adults, but also
profile them using their income, assets, lifestyle and risk tolerance.
● Profiling the Segments
○ Use cluster analysis
○ Identify clusters (or segments) first. Then describe (or profile) them using the
descriptor (who) variables
○ How do we decide how many segments to have?
○ If the average profile of each group is “sufficiently” different, then we have “good”
descriptors

Customer analysis: S-T-P process

● Market segmentation
○ Identifying segmentation variables and segment the market
○ Develop profiles of resulting segments
● Market targeting
● Product poising

How to decide which segments to target?

● Company fit:
○ With obejctives
○ With competencies
○ With customer base
○ With resources
● Market opportunities for profit
○ Segment size
○ Growth rate/potential
● Competitive intensity
○ May be too many competitors going for the same segment
○ Underserved needs?
○ Competitors strengths
 ● These feed into: target market selection

Targeting: market coverage strat

● 3 broad strats:
○ Undifferentiated marketing

■
○ Differentiated marketing

■
○ Concentrated marketing

Cannibalization in targeting
● Reduction in sales volume, revenue, or market share of one product as a result of the
introduction of a new product by the same producer
● When do we not care about cannibalization?
○ When the competitors will take share away from your brand, better off taking the
share from your older brand yourself
○ When the new brand has a much higher profit margin
○ When phasing out the older brand
● How can we convince consumers in the target segment to choose our offering?
○ Our offer should be seen to:
■ meet (or exceed) customer needs and
■ do it better than competitive offerings
● This is brand Positioning

Positioning
● The act of framing the brand’s image in the target consumers’ minds, so it occupies a
distinct and valued place in relation to competitors
● Positioning analysis:
○ The key to positioning is determining
■ the needs of consumers along important benefit dimensions
■ consumers’ perceptions of all existing products / firms in the market along
each of these dimensions
 ○ An important tool that summarizes all this information is called the Perceptual
Map
■ focuses on (generally) two most important attributes or benefits that
consumers seek.
■ contains Brand Locations, i.e., consumers’ perceptions of all brands in the
market along the two dimensions

○
● Developing a positioning statement:
○ Elements:
■ Target (segment)
■ Frame of Reference (Competition)
■ Point of Difference (Uniqueness)
■ Reason to Believe (Support)
○ Purpose:
■ Internal
● Summarize strategy
● Guide tactical decisions (4Ps)
■ External
● Establish identity in the mind of the consumer
● Differentiate your product

○
 ● Important distinction: desired positioning vs actual positioning

STP process