Steps in Segmenting Steps in Segmenting MarketsMarkets

Segmenting CriteriaSegmenting Criteria

Potential for increasing profitPotential for increasing profit Similarity of needs of buyers within a Similarity of needs of buyers within a

segmentsegment Difference of needs of buyers among Difference of needs of buyers among

segmentssegments Potential of a marketing action to Potential of a marketing action to

reach a segmentreach a segment Simplicity & cost of assigning potential Simplicity & cost of assigning potential

buyers to segmentsbuyers to segments

Step 1: Group Potential Buyers Step 1: Group Potential Buyers into Segmentsinto Segments

Divide market into 2 categoriesDivide market into 2 categories Buying situationsBuying situations Customer characteristicsCustomer characteristics

Buying SituationsBuying Situations

Benefits soughtBenefits sought Usage Rate – quantity consumed Usage Rate – quantity consumed

during a period of timeduring a period of time 80/20 Rule – 80/20 Rule – conceptconcept that suggests that suggests

80% of sales are obtained by 20% of its 80% of sales are obtained by 20% of its customerscustomers

Customer CharacteristicsCustomer Characteristics

DemographicsDemographics PsychographicsPsychographics GeographicsGeographics

Step 2: Group Products into Step 2: Group Products into CategoriesCategories

Grouped so buyers can relateGrouped so buyers can relate

Example: Fast FoodExample: Fast Food BreakfastBreakfast SnackSnack DinnerDinner DesertDesert

Step 3: Develop a Market Step 3: Develop a Market Product GridProduct Grid

Step 4: Select Target Step 4: Select Target MarketsMarkets

Criteria:Criteria: Market sizeMarket size Expected GrowthExpected Growth Competitive positionCompetitive position Cost of reaching segmentCost of reaching segment Compatibility with organization's Compatibility with organization's

objectives and action planobjectives and action plan

Step 5: Take Marketing Actions Step 5: Take Marketing Actions to Reach Target Marketto Reach Target Market

Develop and execute an action planDevelop and execute an action plan

Product PositioningProduct Positioning

How customers perceive the productHow customers perceive the product Use a Perceptual MapUse a Perceptual Map