Chapter 8:
Segmenting and Targeting Markets
Dr. Abdullah Alhidari
The Importance of Market
Segmentation
• 1960:
Why!
• Markets have a variety of product needs and preferences.
• Better define customer needs.
• Define objectives and allocate resources more accurately (competitive
advantage)
A new product:
Think of target markets:
– Demographics
– Geographic
– Psychographics
Market Segmentation
Market
Wants and needs
People or that can be satisfied
organizations. by particular
product categories.
Willing to exchange
Able to buy the
their resources for
products they seek.
desired products.
Market Segmentation
People or organizations with needs or wants and
Market
the ability and willingness to buy.
A subgroup of people or organizations sharing one
Market
or more characteristics that cause them to have
Segment similar product needs.
Market The process of dividing a market into meaningful,
Segmentation relatively similar, identifiable segments or groups.
Criteria for Segmentation
Segment must be large enough to warrant a special
Substantiality marketing mix.
Identifiability Segments must be identifiable and their size
and Measurability measurable.
Members of targeted segments must be reachable
Accessibility with marketing mix.
Unless segment responds to a marketing mix
Responsiveness differently, no separate treatment is needed.
Bases for Segmentation
Geographic
Demographics
Psychographics
Benefits Sought
Usage Rate
Bases for Segmentation
Bases of Geographic Segmentation
Region of
the Market
country or size
world
Market
Climate
density
Demographic Segmentation
Age
85 % of consumers
Gender goods by women
Low-income
Income High-income
Ethnic background
Family life cycle
Age
Marital
Children
Status
Bases for Segmentation
Psychographic Segmentation
• Bases:
Personality
Motives
Lifestyles
Geo-demographics
Bases for Segmentation
• Combines geographic,
demographic, and lifestyle
Geo- segmentation
demographic
Segmentation • Segmenting potential
customers into neighborhood
lifestyle categories.
Bases for Segmentation
Benefit Segmentation:
– grouping customers into market segments according to the
benefits they seek from the product.
• Basis of their needs and wants instead of some other
characteristic
Bases for Segmentation
Usage-Rate Segmentation:
• The amount of product bought or consumed
• Focus efforts on heavy users
A principle holding that 20 % of all
80/20
customers generate 80 % of the
Principle
demand.
Steps in Segmenting a Market
Select a market for Choose bases for
segmentation
Select descriptors
study
Profile and analyze
Select markets Design implement
segments
Markets are dynamic, so it is important that companies
proactively monitor their segmentation strategies over time.
Strategies for Selecting Target
Markets
A marketing approach that views the
Undifferentiated market as one big market with no individual
Strategy segments and thus uses a single marketing
mix.
A strategy used to select one segment of a
Concentrated market for targeting marketing efforts.
Strategy
“Niche”
A strategy that chooses two or more well-
Multi-segment Cannibalization
defined market segments and develops a
Strategy distinct marketing mix for each.
Positioning
• Developing a specific marketing mix to
influence potential customers’ overall
Positioning: perception or a brand, product line, or
organization in general.
• is the place a product, brand, or group
Position: of products occupies in consumers’
minds relative to competing offerings.
Positioning
Assess the positions
occupied by competing
products
Determine the
Effective Positioning
dimensions underlying
require
these positions
Choose a market position
where marketing efforts
will have the greatest
impact
Positioning
Product Differentiation:
A positioning strategy that some firms use to
distinguish their products from those of competitors.
• What we can offer that others can’t.
• Real vs. perceived
Positioning
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.
Strategy Canvas
24
25
Positioning
Repositioning
Changing consumers’ perceptions of a brand in
relation to competing brands.