Segmenting and

Targeting Markets

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Market Segmentation

People
People or
or organizations
organizations with
with
Market
Market needs
needs or
or wants
wants and
and the
the ability
ability and
and
willingness
willingness to
to buy
buy

AA subgroup
subgroup of of people
people or
or
Market
Market organizations
organizations sharing
sharing one
one or
or more
more
Segment
Segment characteristics
characteristics that
that cause
cause them
them to
to
have
have similar
similar product
product needs.
needs.

The
The process
process ofof dividing
dividing aa market
market
Market
Market into
into meaningful,
meaningful, relatively
relatively similar,
similar,
Segmentation
Segmentation identifiable
identifiable segments
segments or or groups.
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
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

market segmentation.

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Criteria for Successful
Segmentation
Substantiality
Substantiality

Identifiability
Identifiability

Criteria
Criteria Accessibility
Accessibility
for
for
Market
Market
Segments
Segments
Responsiveness
Responsiveness

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Criteria for Segmentation

Segment
Segment must
must be
be large
large
Substantiality
Substantiality enough
enough to
to warrant
warrant aa special
special
marketing
marketing mix.
mix.
Identifiability
Identifiability Segments
Segments must
must be
be identifiable
identifiable
Measurability
Measurability and
and their
their size
size measurable.
measurable.
Members
Members ofof targeted
targeted segments
segments
Accessibility
Accessibility must
must be
be reachable
reachable with
with
marketing
marketing mix.
mix.
Unless
Unless segment
segment responds
responds to to aa
Responsiveness
Responsiveness marketing
marketing mix
mix differently,
differently, no
no
separate
separate treatment
treatment isis needed.
needed.
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Learning Objective

Bases commonly
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

Geography
Geography

Bases Demographics
Demographics
Bases
Used
Used to
to
Segment
Segment Psychographics
Psychographics
Consumer
Consumer
Markets
Markets Benefits
Benefits Sought
Sought

Usage
Usage Rate
Rate

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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

Age

Marital Children
Status

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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
Personality
Personality

Motives
Motives

Lifestyles
Lifestyles
Psychographic
Psychographic
Segmentation
Segmentation
Geodemographics
Geodemographics

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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

segmenting
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
Macro-
Macro-
segmentation
segmentation Customer Size

Product Use
Business
Business
Markets
Markets
Purchasing Criteria

Purchasing Strategy
Micro-
Micro-
segmentation
segmentation Importance
Personal
Characteristics 28
Learning Objective

List the steps involved

in segmenting markets.

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 Steps in Segmenting a
Market

Select Choose Select Profile Select Design,

a bases descrip- and target imple-
market for tors analyze markets ment,
for segmen- segments maintain
study tation mkting
mix

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Learning Objective

Discuss alternative strategies

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
Advantages:
 Potential savings on
production and marketing
costs

Disadvantages:
Disadvantages
 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
Advantages:
Advantages
 Concentration of resources
 Meets narrowly defined
segment
 Small firms can compete
 Strong positioning

Disadvantages:
Disadvantages
 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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Multisegment
Targeting Strategy
Advantages:
Advantages
 Greater financial success
 Economies of scale

Disadvantages:
Disadvantages
 High costs
 Cannibalization

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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

positioning strategies and
how product differentiation
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

Attribute
Attribute

Price
Price and
and Quality
Quality

Use
Use or
or Application
Application

Product
Product User
User
Positioning
Positioning
Bases Product
Product Class
Class
Bases
Competitor
Competitor
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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

and targeting issues.

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Global Issues

Trends
Trends

Global Market
Standardization

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