Chapter

6
Identifying
Market Segments
and Targets

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 Marketing Strategy

S T P
Learning Objectives
1. In what ways can a company divide a
consumer or business market into segments?
2. How should a company choose the most
attractive target markets?
3. What are the different levels of market
segmentation?

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 Bases for Segmenting Consumer
Markets
• Market segment
– A group of customers who share a similar set
of needs and wants

Geographic Demographic
segmentation segmentation

Psychographic Behavioral
segmentation segmentation

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 Geographic Segmentation
• Geographical units
– Nations, states, regions, counties, cities, or
neighborhoods
• Nielsen Claritas’ PRIZM
– Education and affluence
– Family life cycle
– Urbanization
– Race and ethnicity
– Mobility
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Demographic Segmentation

Age & life-

Life stage
cycle stage

Race & Gender

culture

Generation Income

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 Demographic Segmentation
• Age and life-cycle stage
– Our wants and abilities change with age
• Life stage
– A person’s major concern (e.g., divorce)

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 Demographic Segmentation
• Gender
– Men and women have
different attitudes and
behave differently
• Income
– Income segmentation is
a long-standing practice

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 Demographic Segmentation
• Generation Gen Z
1995 and later

Millennials (Gen Y) Gen X

1977-1994 1964-1978

Baby Boomers Silent Generation

1946-1964 1925-1945

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 Demographic Segmentation
• Race and culture
– Multicultural (ethnic) marketing

• Marketers need to factor the norms, language

nuances, buying habits, and business practices
of multicultural markets into the initial
formulation of their marketing strategy

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 Psychographic Segmentation
• Buyers are divided into groups on the basis of
psychological/personality traits, lifestyle, or
values

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Figure 6.1: VALS Segmentation System

http://www.strategicbusinessinsights.co
m/vals/presurvey.shtml

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 Behavioral Segmentation
• Marketers divide buyers into groups on the
basis of their knowledge of, attitude toward,
use of, or response to a product

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User And Usage-Related Variables

Occasions User status

Attitude Usage rate

Buyer-
Loyalty
readiness
status
stage

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 B2B Segmentation
• Businesses can be segmented with SOME of the same variables we
use in consumer markets such as geography, benefits sought, and
usage rate, but business markets also use other variables.
• Demographic variables are the most important followed by
operating variables and down to personal characteristics of the
buyer.
• Business marketers generally identify segments through a
sequential process
 B2B Segmentation
• EXAMPLE: Consider an aluminum company: The company first undertook
macro-segmentation. It looked at which end-use market to serve:
automobile, residential, or beverage containers. It chose the residential
market, and it needed to determine the most attractive product
application: semi-finished material, building components, or aluminum
mobile homes. Deciding to focus on building components, it considered
the best customer size and chose large customers. The second stage
consisted of micro-segmentation. The company distinguished among
customers buying on price, service, or quality. Because it had a high-
service profile, the firm decided to concentrate on the service-motivated
segment of the market.
• Please refer to the next 2 ppt slides on “Bases & Variables for
Segmenting Business markets”
 Bases for Segmenting B2B Markets

Demographic Industry, company size, location

Operating Variables Technology, user status, customer capabilities

Purchasing Approach Power structure, nature of existing relationship

Situational Factors Urgency, specific application, size of order

Personal Characteristics Buyer-seller similarity, loyalty, risk attitude

B2B Segmentation
Variables:
Market Targeting

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FIVE FORCES THAT DETERMINE THE INTRINSIC
LONG-RUN ATTRACTIVENESS OF A MARKET OR
MARKET SEGMENT

Threat of Intense
Segment Rivalry

Threat of Threat of
Potential Entrants Substitutes

Threat of
Threat of Buyers’
Suppliers’
Bargaining Power
Bargaining Power

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 Evaluating & Selecting
Market Segments
• Four levels of segmentation

Multiple Segment
Full Market Coverage
Specialization

Single-Segment
Individual Marketing
Specialization

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Copyright © 2016 Pearson Education, Inc. 6-26