11

Segmenting and Segmenting and Targeting MarketsTargeting Markets

22

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.

33

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.

44

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

55

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.

66

Segmentation BasesSegmentation Bases

Characteristics of Characteristics of

individuals, groups, individuals, groups,

or organizations used or organizations used

to divide a total market to divide a total market

into segments.into segments.

(variables)(variables)

77

Bases for SegmentationBases for Segmentation

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

88

Geographic SegmentationGeographic Segmentation

Segmenting markets bySegmenting markets by

region of the country/worldregion of the country/world

market sizemarket size

market density market density

climateclimate

99

Benefits of Regional Benefits of Regional SegmentationSegmentation

New ways to generate sales in New ways to generate sales in sluggish and competitive marketssluggish and competitive markets

Scanner/POS data allow assessment Scanner/POS data allow assessment of best selling brands in regionof best selling brands in region

Regional brands appeal to local Regional brands appeal to local preferencespreferences

React more quickly to competitionReact more quickly to competition

1010

Bases for SegmentationBases for Segmentation

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

1111

Demographic SegmentationDemographic Segmentation

Segmenting markets Segmenting markets

by age, gender, income, by age, gender, income,

ethnic background, ethnic background,

and family life cycleand family life cycle

1212

Bases for Bases for Demographic Demographic SegmentationSegmentation

AgeAge

GenderGender

IncomeIncome

Ethnic backgroundEthnic background

Family Life CycleFamily Life Cycle

1313

Family Life CycleFamily Life Cycle

AgeAge

MaritalMaritalStatusStatus

ChildrenChildren

1414

Family Life CycleFamily Life Cycle

1515

Bases for SegmentationBases for Segmentation

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

1616

Psychographic Psychographic SegmentationSegmentation

Market segmentation on Market segmentation on

the basis of personality, the basis of personality,

motives, lifestyles, and motives, lifestyles, and

geodemographics.geodemographics.

1717

Bases forBases forPsychographic Psychographic SegmentationSegmentation

PsychographicPsychographicSegmentationSegmentation

PsychographicPsychographicSegmentationSegmentation

PersonalityPersonality

MotivesMotives

LifestylesLifestyles

GeodemographicsGeodemographics

1818

Lifestyle SegmentationLifestyle Segmentation

How time is spentHow time is spent

Importance of things Importance of things around themaround them

BeliefsBeliefs

Socioeconomic Socioeconomic characteristicscharacteristics

1919

Geodemographic Geodemographic SegmentationSegmentation

Segmenting potential Segmenting potential

customers into customers into

neighborhood lifestyle neighborhood lifestyle

categories. categories.

Combines geographic, Combines geographic,

demographic, and lifestyle demographic, and lifestyle

segmentation.segmentation.

2020

Bases for SegmentationBases for Segmentation

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

2121

Benefit SegmentationBenefit Segmentation

The process of grouping The process of grouping

customers into market customers into market

segments according to segments according to

the the benefits they seekbenefits they seek

from the product.from the product.

2222

Bases for SegmentationBases for Segmentation

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

2323

Usage-Rate SegmentationUsage-Rate Segmentation

Dividing a market by the Dividing a market by the

amountamount of product of product

bought or consumed.bought or consumed.

2424

The 80/20 PrincipleThe 80/20 Principle

A principle holding that A principle holding that

20 percent of all 20 percent of all

customers generate 80 customers generate 80

percent percent

of the demand.of the demand.Target Target customerscustomers

20%20%Share ofShare ofcustomerscustomers

Target Target customerscustomers

80%80%

Share ofShare ofsalessales

2525

Business Marketing Business Marketing SegmentationSegmentation

Four segments of business markets:Four segments of business markets:

Producers / manufacturersProducers / manufacturers ResellersResellers GovernmentsGovernments InstitutionsInstitutions

2626

Steps in Segmenting a Steps in Segmenting a MarketMarket

Select a

market for

study

Choose bases

for segme

n-tation

Select descrip-tors

Profile and

analyze segment

s

Select target market

s

Design, imple-ment,

maintain mktging

mix

2727

Target MarketTarget Market

A group of people or A group of people or

organizations for which an organizations for which an

organization designs, organization designs,

implements, and implements, and

maintains a marketing maintains a marketing

mix intended to meet the mix intended to meet the

needs of that group, needs of that group,

resulting in mutually resulting in mutually

satisfying exchanges.satisfying exchanges.

2828

Undifferentiated Undifferentiated Targeting StrategyTargeting Strategy

Marketing approach that Marketing approach that

views the market as one views the market as one

big market with no big market with no

individual segments and individual segments and

thus requires a single thus requires a single

marketing mix.marketing mix.

2929

Undifferentiated Undifferentiated Targeting StrategyTargeting Strategy

AdvantagesAdvantages: Potential savings on

production and marketing costs

DisadvantagesDisadvantages: Unimaginative product

offerings Company more

susceptible to competition

3030

Concentrated Targeting Concentrated Targeting StrategyStrategy

A strategy used to select A strategy used to select

one segment of a market one segment of a market

(a (a nicheniche) for targeting ) for targeting

marketing efforts.marketing efforts.

3131

Concentrated Targeting Concentrated Targeting StrategyStrategy

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

3232

CannibalizationCannibalization

Situation that occurs when Situation that occurs when

sales of a new product sales of a new product

cut into sales of a cut into sales of a

firm’s existing products.firm’s existing products.

3333

PositionPosition

The place a product, The place a product,

brand, or group of brand, or group of

products occupies in products occupies in

consumers’ minds relative consumers’ minds relative

to competing offerings.to competing offerings.

3434

PositioningPositioning

Developing a specific Developing a specific

marketing mix to marketing mix to

influence potential influence potential

customers’ overall customers’ overall

perception of a brand, perception of a brand,

product line, or product line, or

organization in general.organization in general.

3535

Product DifferentiationProduct Differentiation

A positioning strategy that A positioning strategy that

some firms use to some firms use to

distinguish their products distinguish their products

from those of competitors.from those of competitors.

3636

Perceptual MappingPerceptual Mapping

A means of displaying or A means of displaying or

graphing, in two or more graphing, in two or more

dimensions, the location dimensions, the location

of products, brands, or of products, brands, or

groups of products in groups of products in

customers’ minds.customers’ minds.

3737

Perceptual Map and Positioning Perceptual Map and Positioning Strategy for Levi Strauss Strategy for Levi Strauss

ProductsProducts

3838

RepositioningRepositioning

Changing consumers’ Changing consumers’

perceptions of a brand perceptions of a brand

in relation to in relation to

competing brands.competing brands.