©2002 South-Western Chapter 7 Version 6e1 chapter Segmenting and Targeting Markets 7 7

Chapter 7 Version 6e 1©2002 South-Western

chapter

Segmenting and Targeting Segmenting and Targeting MarketsMarkets

77


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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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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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 Successful Criteria for Successful SegmentationSegmentation

Criteria Criteria for for

Market Market SegmentsSegments

Criteria Criteria for for

Market Market SegmentsSegments

SubstantialitySubstantiality

IdentifiabilityIdentifiability

AccessibilityAccessibility

ResponsivenessResponsiveness

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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

individuals, groups,

or organizations used

to divide a total market

into segments.

(variables)

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Bases for SegmentationBases for Segmentation

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

Bases Bases Used toUsed toSegmentSegment

ConsumerConsumerMarketsMarkets



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Geographic SegmentationGeographic Segmentation

Region of the country or world

Market size

Market density

Climate

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GeographyGeography





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Bases for Bases for Demographic SegmentationDemographic Segmentation

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Age

Gender

Income

Ethnic background

Family Life Cycle







GeographyGeography





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Bases for Bases for Psychographic SegmentationPsychographic Segmentation

PsychographicPsychographicSegmentationSegmentation

PsychographicPsychographicSegmentationSegmentation

PersonalityPersonality

MotivesMotives

LifestylesLifestyles

GeodemographicsGeodemographics

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Geodemographic SegmentationGeodemographic Segmentation44

Segmenting potential

customers into

neighborhood lifestyle

categories.

Combines geographic,

demographic, and lifestyle

segmentation.


VALS 2 DimensionsVALS 2 DimensionsPrinciple-Principle-orientedoriented

Status-Status-orientedoriented

Action-Action-orientedoriented

Fulfillers

Believers

Actualizers

Achievers

Strivers

Strugglers

Experi-encers

Makers

Minimal Resources

Abundant Resources

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GeographyGeography





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Benefit SegmentationBenefit Segmentation

The process of grouping

customers into market

segments according to

the benefits they seek

from the product .

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GeographyGeography





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Usage-Rate SegmentationUsage-Rate Segmentation

Dividing a market by the

amount of product

bought or consumed.

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The 80/20 PrincipleThe 80/20 Principle

A principle holding that

20 percent of all customers

generate 80 percent

of the demand.

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Business Marketing SegmentationBusiness Marketing SegmentationGeographic

Customer Type

Customer Size

Product UseBusinessBusinessMarketsMarkets

BusinessBusinessMarketsMarkets

Purchasing Criteria

Purchasing Strategy

Importance

Personal Characteristics

Micro- segmentation

Micro- segmentation

Macro- segmentation

Macro- segmentation

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Steps in Segmenting a MarketSteps in Segmenting a Market

Select a

market for

study

Choosebases

for segmen-

tation

Selectdescrip-

tors

Profileand

analyzesegments

Selecttarget

markets

Design,imple-ment,

maintainmkting

mix

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Target MarketTarget 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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Strategies for SelectingStrategies for SelectingTarget MarketsTarget Markets

ConcentratedStrategy

ConcentratedStrategy

UndifferentiatedStrategy

UndifferentiatedStrategy

MultisegmentStrategy

MultisegmentStrategy

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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 Concentrated Targeting StrategyTargeting Strategy

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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AdvantagesAdvantages: Greater financial success Economies of scale

DisadvantagesDisadvantages: High costs Cannibalization

Multisegment Multisegment Targeting StrategyTargeting Strategy

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Costs of Multisegment TargetingCosts of Multisegment Targeting

$ Product design costs

$ Production costs

$ Promotion costs

$ Inventory costs

$ Marketing research costs

$ Management costs

$ Cannibalization

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CannibalizationCannibalization

Situation that occurs when

sales of a new product

cut into sales of a

firm’s existing products.

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PositioningPositioning

Developing a specific

marketing mix to influence

potential customers’ overall

perception of a brand,

product line, or organization

in general.

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PositionPosition

The place a product, brand,

or group of products

occupies in consumers’

minds relative to competing

offerings.

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Effective PositioningEffective Positioning

Assess the positions of competing products

Determine the dimensions of these positions

Choose an effective market position

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Product DifferentiationProduct Differentiation

A positioning strategy that

some firms use to

distinguish their products

from those of competitors.

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Perceptual MappingPerceptual 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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Perceptual Mapping--Levi’sPerceptual Mapping--Levi’s88

High PriceHigh PriceHigh PriceHigh Price

Low PriceLow PriceLow PriceLow Price

Cla

ssic

Cla

ssic

Cla

ssic

Cla

ssic

Desig

ner

Desig

ner

Desig

ner

Desig

ner

Old product

New product

Vintage

Red Line

Silver Tab

Slates

DockersPremium

DockersClassics

501

Red TabBasics

Red TabDry Goods

L2

Red TabElesco


Positioning BasesPositioning Bases

AttributeAttribute

Price and QualityPrice and Quality

Use or ApplicationUse or Application

Product UserProduct User

Product ClassProduct Class

CompetitorCompetitor

Positioning Positioning BasesBases

Positioning Positioning BasesBases

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RepositioningRepositioning

Changing consumers’

perceptions of a brand

in relation to

competing brands.

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©2002 South-Western Chapter 7 Version 6e1 chapter Segmenting and Targeting Markets 7 7