Market Segmentation and Market Targeting

Introduction

Instructional Goals:Instructional Goals: To understand what it means to "segment" a market The basic steps in segmenting a market How you know if you have done a good job of segmentation How to evaluate and select segments for targeting of marketing programs

Marketers can Marketers can target their target their products to customers in four products to customers in four distinct waysdistinct ways •Mass marketing Mass marketing •Segment or product-variety Segment or product-variety

marketing marketing •Target (both niche and local) Target (both niche and local)

marketing marketing • Individual marketingIndividual marketing

Mass MarketingMass MarketingMass marketing aims to

attract all kinds of buyers by producing and distributing the one best

product at the lowest possible price

Segment MarketingSegment MarketingSegment or product-variety

marketing aims to serve large identifiable groups

by offering a limited array of good products at a

variety of prices

Target MarketingTarget MarketingTarget (both niche and local) marketing aims to

please identifiable clusters of customers by providing products that are carefully

tailored to match group means and tastes

Individual MarketingIndividual Marketing

Individual or marketing aims to satisfy individual customers by providing

products that are precisely tailored to

match individual means and tastes

Target marketing is where we are today

The key steps in target marketing are •Market segmentation•Market evaluation•Product differentiation and positioning.

Market segmentation

Market segmentation means dividing mass markets into

distinct groups of buyers with relatively homogeneous tastes, preferences, or

behaviors that distinguish them from the rest of the

market.

Market EvaluationMarket evaluation = assessing the sales

potential of each segment and selecting segments most suitable for

exploitation. Sales potential is a function of the

number of people in the segment, their disposable incomes, and their willingness to pay for product

attributes -- given the organization’s ability to serve them.

Indicators: size, growth rate, price sensitivity, current usage in the

product category, etc.

Market PositioningA product's position is defined by how

consumers view it on important attributes -- the "rank" a product holds in the consumer’s mind

Marketers can position products by users, by usages, by price and/or quality, according to product attributes or benefits received, against a single competitor, against many competitors, or against an entire product category.

Video Case 1: Patagonia

• How does Patagonia exemplify the marketing concept? The societal marketing concept?

• What type of marketing strategy has Patagonia pursued?

• How has Patagonia responded to the forces in the macro-environment?

• Are the critics right? Or will Patagonia’s actions help reduce consumption?

Buying Power Index: DishwasherManufacturer

(a) (b) (c) (d) (e) (f) (g)Metropolitanarea covered .

NumberofHousholds

No.earning$25,000+

ApplianceSales

No. aged25-49

Sum ofFactors

Percent

Boston 1,366.4 449.5 $548.0 1,287.5 3,651.4 70.4Springfield 204.0 51.8 66.7 182.4 504.9 9.7Worcester 222.2 63.8 105.5 200.5 592.0 11.4New Bedford 170.2 33.9 83.1 148.3 435.5 8.4

Totals 5,183.8 99.9°

Index Numbers :• The number of households and appliance sales

were given in the Survey of Buying Power data. • The number earning $25,000+ a year was

given in percentage form and multiplied by the number of households in each market.

• The number aged 25-34 and 35-49 were given in percentage form. These were added for each market and multiplied by population.

• Columns b, c, d, and e were added across to get a sum of factors for each market.

• The sums of factors were added downward.• Each sum of factor was divided by the total to

get an index number (or percent).