6.Segmenting and Targeting

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Segmenting and Targeting Markets

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Market 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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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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Importance Importance of market segmentation.of market segmentation.

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The Importance of Market 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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Learning Objective

Criteria for successful Criteria for successful market segmentation.market segmentation.

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Criteria for Successful Segmentation

Criteria Criteria for for

Market Market SegmentsSegments

Criteria Criteria for for

Market Market SegmentsSegments

SubstantialitySubstantiality

IdentifiabilityIdentifiability

AccessibilityAccessibility

ResponsivenessResponsiveness

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Criteria 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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Learning Objective

Bases commonly Bases commonly used to segment consumer markets.used to segment consumer markets.

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Segmentation Bases

Characteristics of individuals,

groups,

or organizations used

to divide a total market

into segments.

(variables)

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Bases for Segmentation

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

Bases Bases Used toUsed toSegmentSegment

ConsumerConsumerMarketsMarkets

Bases Bases Used toUsed toSegmentSegment

ConsumerConsumerMarketsMarkets

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Geographic Segmentation

Segmenting markets by

region of the country or

world, market size, market

density, or climate.

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Geographic Segmentation

Region of the country or world

Market size

Market density

Climate

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Demographic Segmentation

Segmenting markets

by age, gender, income,

ethnic background,

and family life cycle

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Bases for Demographic Segmentation Age

Gender

Income

Ethnic background

Family Life Cycle

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Family Life Cycle

AgeAge

MaritalMaritalStatusStatus

ChildrenChildren

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Psychographic Segmentation

Market segmentation on

the basis of personality,

motives, lifestyles, and

geodemographics.

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Bases for Psychographic Segmentation

PsychographicPsychographicSegmentationSegmentation

PsychographicPsychographicSegmentationSegmentation

PersonalityPersonality

MotivesMotives

LifestylesLifestyles

GeodemographicsGeodemographics

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Lifestyle Segmentation

How time is spent

Beliefs

Socioeconomic characteristics

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Geodemographic Segmentation

Segmenting potential

customers into neighborhood

lifestyle categories.

Combines geographic,

demographic, and lifestyle

segmentation.

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Benefit Segmentation

The process of grouping

customers into market

segments according to

the benefits they seek

from the product .

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Quality. Service Economy.

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Usage-Rate Segmentation

Dividing a market by the

amount of product

bought or consumed.

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The 80/20 Principle

A principle holding that

20 percent of all customers

generate 80 percent

of the demand.

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Learning Objective

Describe the bases for Describe the bases for segmenting segmenting

business markets.business markets.

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Macrosegmentation

The process of dividing

business markets into

segments based on general

characteristics such as

geographic location,

customer type, customer size,

and product use.

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Microsegmentation

The process of dividing

business markets into

segments based on the

characteristics of decision-

making units within a

macrosegment.

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Business Marketing Segmentation

Geographic

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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Learning Objective

List the steps involved List the steps involved in segmenting markets.in segmenting markets.

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Steps 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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Learning Objective

Discuss alternative strategies Discuss alternative strategies for selecting target markets.for selecting target markets.

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Target 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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Undifferentiated Targeting Strategy

Marketing approach that

views the market as one big

market with no individual

segments and thus requires a

single marketing mix.

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Undifferentiated Targeting Strategy

AdvantagesAdvantages: Potential savings on

production and marketing costs

DisadvantagesDisadvantages: Unimaginative product

offerings Company more

susceptible to competition

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Concentrated Targeting Strategy

A strategy used to select one

segment of a market for

targeting marketing efforts.

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Niche

One segment of

a market.

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Concentrated Targeting 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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Multisegment Targeting Strategy

A strategy that chooses

two or more well-defined

market segments and

develops a distinct marketing

mix for each.

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AdvantagesAdvantages: Greater financial success Economies of scale

DisadvantagesDisadvantages: High costs Cannibalization

Multisegment Targeting Strategy

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Costs of Multisegment Targeting$ Product design costs

$ Production costs

$ Promotion costs

$ Inventory costs

$ Marketing research costs

$ Management costs

$ Cannibalization

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Cannibalization

Situation that occurs when

sales of a new product

cut into sales of a

firm’s existing products.

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Learning Objective

Explain how and why firms implement Explain how and why firms implement positioning strategies and positioning strategies and how product differentiation how product differentiation

plays a role.plays a role.

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Positioning

Developing a specific

marketing mix to influence

potential customers’ overall

perception of a brand,

product line, or organization

in general.

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Position

The place a product, brand, or

group of products occupies in

consumers’ minds relative to

competing offerings.

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Effective Positioning

Assess the positions of competing products

Determine the dimensions of these positions

Choose an effective market position

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Product Differentiation

A positioning strategy that

some firms use to distinguish

their products from those of

competitors.

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Perceptual 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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Positioning 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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Repositioning

Changing consumers’

perceptions of a brand

in relation to

competing brands.

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Learning Objective

Discuss global market segmentation Discuss global market segmentation and targeting issues.and targeting issues.

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Global Issues

Global Market Standardization

TrendsTrends