A Framework for

Marketing Management

Chapter 7
Identifying Market Segments and Targets

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Chapter Questions

 What are the different levels of market

segmentation?
 How can a company identify the segments
that make up a market?
 How should a company choose the most
attractive target markets?

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Target Marketing Requires That
Marketers…
 Identify and profile distinct groups of buyers
who differ in their needs and preferences
(market segmentation).
 Select one or more segments to enter
(market targeting).
 Establish and communicate the offering’s
distinctive benefit(s) to each target segment
(marketing positioning).

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Levels of Market Segmentation

 Segment marketing
 Niche marketing
 Local marketing
 Individual marketing

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Segment Marketing
 Market segment—a group of customers who share
a similar set of needs and wants.
 Flexible market offering—consists of:
 Solution containing the product and service elements that
all segment members value.
 Homogeneous preferences— exist when all
consumers have roughly the same preferences.
 Diffused preferences—consumers vary greatly in
their preferences.

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Niche Marketing

 Niche—a more narrowly defined customer

group seeking a distinctive mix of benefits.
 Attractive when:
 Customers have a distinct set of needs
 Fairly small but has size, profit, and growth potential
 Customers will pay a premium

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Local Marketing

 Marketing programs tailored to the needs and

wants of local customer groups in particular
trading areas, neighborhoods, even individual
stores.
 Grassroots marketing—concentrating on
getting as close and personally relevant to
individual customers as possible.

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Individual Marketing

 Leads to:
 “Segments of one”
 “Customized marketing”
 “One-to-one marketing”
 Customerization—combines operationally
driven mass customization with customized
marketing in a way that empowers
consumers to design the product and service
offering of their choice.

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Bases for Segmenting Consumer
Markets
 Geographic
 Demographic
 Psychographic
 Behavioral

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Geographic Segmentation
 Dividing the market into different geographical
units such as:
 Nations – air coolers used in some regions of South Asian
countries during hot and dry summer season whereas this
product is ineffective in some regions where climate is hot and
humid during summer
 States and regions – in India southern state like Tamil Nadu
prefer freshly brewed coffee while consumers in many other
states in India prefer tea
 Others include countries, cities and neighborhood
 Segmenting rural markets: segmentation of markets into urban
and rural is especially important in South Asian countries as rural
and urban markets in this region differ on a variety of important
parameters

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Demographic Segmentation
 Divide the market into groups based on age
and other variables:
 Life-cycle stage
 Life stage – life stage defines a person’s major concern, such as
getting married, deciding to buy a home, sending a child to
school, taking care of older parents, planning for retirement, and
so on. These life stages present opportunities for marketers who
can help people cope with major concerns
 Gender
 Social class and income – socio economic classes (refer table
7.2, based on occupation and education

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Psychographic Segmentation
 Psychographics—the science of using psychology and
demographics to better understand consumers.
 In psychographic segmentation buyers are divided into different
groups on the basis of:
 Psychological/personality traits

 Lifestyle

 Values

 People within the same demographic group can exhibit very

different psychographic profiles.

 VALS (values & lifestyle) Framework – classification system based
on psychographic measurements. Signifies value and lifestyle
 The main dimensions of the framework are consumer motivation
including ideals, achievements and self-expression (horizontally) &
consumer resources including low and high resources (vertically)

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Psychographic Segmentation
 Consumers are inspired by one of three motivation: ideals,
achievement and self expression.
 Those motivated by ideals are guided by knowledge and principles
 Those motivated by achievement look for product and services that
demonstrate success to their peers
 Consumers whose motivation is self expression desire social or
physical activity, variety and risk.

 Personality traits like self expression, leadership, self confidence –

in conjunction with key demographics – determine an individual
resources (Innovators and survivors)
 Different level of resources enhance or constrain a person’s
expression of his or her motivation

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Psychographic Segmentation
The 4 groups with high resources:
1.Innovators – successful, sophisticated people with high self esteem.
Example elite class
2.Thinkers – they seek durability, functionality and value in products

3.Achievers – who focus on family and career. They favors products that
demonstrate success to their peers
4.Experiencers – who seek variety and excitement. They spend a lot of income
on fashion, entertainment and socializing
The 4 groups with lower resources:
1.Believers – people with concentrate beliefs (religion)

2.Strivers – trendy and fun loving people. Favor stylish products

3.Makers – who like to work with their hands (practical people, down to earth)

4.Survivors – people concerned about change and loyal to their favorite brands

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 Psychographic Segmentation
 Religion can also have a significant influence on the values, attitude, and
lifestyles of customers in shaping the product and brand choices of
consumers.
 The norms that people follow with respect to food habits or dress codes are
examples of this influence. Example: In India (McDonalds)

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Behavioral Segmentation
 Divide consumers into groups on the basis of their knowledge of,
attitude toward, use of, or response to a product.
 Behavioral variables:
 Occasions (duration)

 Benefits

 User status (nonusers, ex users, potential & first time users)

 User rate (light, medium and heavy purchase consumption)

 Buyer-readiness stage (unaware, aware, informed, interested,

desire for a product)

 Loyalty status - Hard core loyal (consumers who buy only 1

brand), split loyal (2 or 3 brands), shifting loyal (who shift from 1

brand to another), switchers (who show no loyalty)
 Attitude

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Bases for Segmenting Business
Markets (refer Table 7.4)
 Demographic (which industry should we serve, company
size, location)
 Operating variables (technology, user or non user status,
consumer capabilities)
 Purchasing approaches (purchasing criteria etc.)
 Situational factors (size or order etc.)
 Personal characteristics (attitude towards risk, loyalty,
buyer seller similarity etc.)

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Market Targeting: Effective
Segmentation Criteria to be rated
 Measurable (size, purchasing power)
 Substantial (homogeneous)
 Accessible (easily reached and served)
 Actionable (effective programs can be
formulated for attracting and serving the
segments)

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Evaluating and Selecting Market
Segments
 Must look at two factors:
 Segment’s overall attractiveness
 Company’s objectives and resources

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Evaluating and Selecting Market
Michael porter has identified 5 forces that determine the long run
attractiveness of the market or market segment
1.Threat of intense segment rivalry

2.Threat of new entrants

3.Threat of substitute products

4.Threat of buyer’s growing bargaining power (develop superior power

that strong buyers cannot refuse)
5.Threats of suppliers growing bargaining power (build win win
relationship with supplier)

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Patterns of Target Market Selections
 Single-segment concentration (niche marketing)
 Focus on one segment
 Selective specialization
 Select a number of segments
 Multiple segment (Product specialization)
 Specialize in making a certain product for several
segments.
 Multiple segment (Market specialization)
 Serve many needs of a particular customer group.
 Full market coverage (mass marketing)
 Serve all customer groups with all the products they might
need.

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Full Market Coverage
 Undifferentiated marketing—firm goes after the whole market with
one market offering.
 Differentiated marketing—operate in several market segments and
design different programs for each segment.
 Individual marketing – includes one to one
marketing or customized marketing

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