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PUNE INSTITUTE OF BUSINESS MANAGEMENT
MARKETING RESEARCH
DR. Prantosh Banerjee
GROUP NO: 09
2023-2208-0001-0004 Rajshekhar Singh
2023-0809-0001-0010 Rishiraj Swami
2023-0909-0001-0001 Laveena Rupani
2023-1208-0001-0008 Phijam Bebeto Singh
2023-1208-0001-0010 Yumkhaibam Swami Singh
2023-2208-0001-0011 Sneha Mohis
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Chapter 9: Identifying Market Segments and Targets
Effective target marketing requires that marketers:
1. Identify and profile distinct groups of buyers who differ in their needs and wants (market segmentation).
2. Select one or more market segments to enter (market targeting).
3. For each target segment, establish, communicate, and deliver the right benefit(s) for the company’s
market offering (market positioning).
Market segmentation, targeting, and positioning are known as the “STP” of marketing. This chapter will focus on
the first two steps.
In what ways can a company divide the consumer market into segments?
Market segmentation divides a market into well-defined slices. A market segment consists of a group of customers
who share a similar set of needs and wants. The major segmentation variables—geographic, demographic,
psychographic, and behavioral segmentation.
Geographic Segmentation
Geographic divides the market into geographical units such as nations, states, regions, counties, cities, or
neighborhoods. The company can operate in one or a few areas, or it can operate in all but pay attention to local
variations.
In a growing trend called grassroots marketing, marketers concentrate on making such activities as personally
relevant to individual customers as possible, such as Nike’s sponsorship of local school teams.
Nielsen Claritas has developed a geoclustering approach called PRIZM (Potential Rating Index by Zip Markets) NE
that classifies more than half a million U.S. residential neighborhoods into 14 distinct groups and 66 distinct
lifestyle segments called PRIZM Clusters. The groupings take into consideration 39 factors in five broad
categories. The clusters have descriptive titles such as Blue Blood Estates, Winner’s Circle, Hometown Retired,
Shotguns and Pickups, and Back Country Folks. The inhabitants in a cluster tend to lead similar lives, drive similar
cars, have similar jobs, and read similar magazines. Table 9.2 has examples of three PRIZM clusters.
A brand’s overall image might be diluted if the product and message are too different in different localities.
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Demographic Segmentation
One reason demographic variables such as age, family size, gender, income, occupation, education, religion, race,
generation, nationality, and social class are so popular with marketers is that they’re often associated with
consumer needs and wants. Another is that they’re easy to measure.
Age and Life-Cycle Stage
Consumer wants and abilities change with age. The target market for some products may be the psychologically
young.
Life Stage
People in the same part of the life cycle may still differ in their life stage. Life stage defines a person’s major
concern, such as going through a divorce, going into a second marriage and so on.
Gender
Men and women have different attitudes and behave differently. Gender differences are shrinking in some other
areas as men and women expand their roles.
Income
Income segmentation is a long-standing practice in such categories as automobiles, clothing. Income does not
always predict the best customers for a given product. Increasingly, companies are finding their markets are
hourglass-shaped, as middle-market U.S. consumers migrate toward both discount and premium products.
Generation
Each generation or cohort is profoundly influenced by the times in which it grows up—the music, movies, politics,
and defining events of that period. Here are some general observations about the four main generation cohorts of
U.S. consumers, from youngest to oldest:
Millennials (or Gen Y): the term usually means people born between 1977 and 1994. They are much more
likely than other age groups to:
o Own multiple devices and multitask while online.
o Broadcast their thoughts and experiences and to contribute user-generated content.
o Trust friends more than corporate sources of information.
o Highly socially conscious, concerned about environmental issues.
o Less likely to have bought their first homes and more likely to still live with their parents.
Gen X: were born between 1964 and 1978. Gen Xers prize self-sufficiency and the ability to handle any
circumstance. Technology is an enabler for them, not a barrier. Unlike the more optimistic, team- oriented Gen
Yers, Gen Xers are more pragmatic and individualistic. As consumers, they are wary of hype and pitches that
seem inauthentic.
Baby Boomers: born between 1946 and 1964. They represent a wealthy target, thry have spending power and
controlling three-quarters of the country’s wealth, marketers often overlook them. With many baby boomers
approaching their 70s and even the last and youngest wave cresting 50, demand has exploded for products to
turn back the hands of time.
Silent Generation: born between 1925 and 1945. Advertisers have learned that older consumers don’t mind
seeing other older consumers in ads targeting them, as long as they appear to be leading vibrant lives. But
marketers have learned to avoid clichés like happy older couples strolling on beach at sunset.
Race and Culture
Multicultural marketing is an approach recognizing that different ethnic and cultural segments have sufficiently
different needs and wants to require targeted marketing activities and that a mass market approach is not refined
enough for the diversity of the marketplace. Such as:
1. Hispanic Americans 2. Asian Americans
3. African Americans 4. LGBT
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Psychographic Segmentation
Psychographics is the science of using psychology and demographics to better understand consumers. In
psychographic segmentation, buyers are divided into groups on the basis of psychological/personality traits,
lifestyle, or values. People within the same demographic group can exhibit very different psychographic profiles.
Behavioral Segmentation
In behavioral segmentation, marketers divide buyers into groups on the basis of their knowledge of, attitude toward,
use of, or response to a product.
Needs and Benefits
Needs or benefit based segmentation identifies distinct market segments with clear marketing implications.
Decision Roles
People play five roles in a buying decision: Initiator, Influencer, Decider, Buyer, and User. For example, a wife
initiates a purchase by requesting a gift for her birthday. The husband may then seek his friend who is a key
influencer in what gifts to consider. After presenting the alternative choices to his wife, he purchases her
preferred gift, which ends up being used by the family. Different people are playing different roles, but all are
crucial in the decision process and ultimate consumer satisfaction.
User and Usage-Related Variables
Many marketers believe variables related to users or their usage—occasions, user status, usage rate, buyer-readiness
stage, and loyalty status—are good starting points for constructing market segments.
Occasions: mark a time of day, week, month, year, or other well-defined temporal aspects of a
consumer’s life. For example, air travel is triggered by occasions related to family or vacation.
User Status: Every product has its nonusers, ex-users, potential users, first-time users, and regular users. The
key to attracting potential users, is understanding the reasons they are not using.
Usage Rate: We can segment markets into light, medium, and heavy product users. Heavy users are often a
small slice but account for a high percentage of total consumption. Marketers would rather attract one heavy
user than several light users.
Buyer-Readiness Stage: Some people are unaware of the product, some are aware, some are informed, some
are interested, some desire the product, and some intend to buy. Recall from Chapter 5 that marketers can
employ a marketing funnel to break the market into buyer-readiness stages.
o Figure below displays a funnel for two proposed brands. Compared with Brand B, Brand A
performs poorly at converting one-time users to more recent users (only 46 percent convert for
Brand A compared with 61 percent for Brand B). Depending on the reasons consumers didn’t use
again, a marketing campaign could introduce more relevant products, find more accessible retail
outlets, or dispel rumors or incorrect beliefs consumers hold.
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Loyalty Status: Marketers usually envision four groups based on brand loyalty status:
o Hard-core loyals—Consumers who buy only one brand all the time.
o Split loyals—Consumers who are loyal to two or three brands.
o Shifting loyals—Consumers who shift loyalty from one brand to another.
o Switchers—Consumers who show no loyalty to any brand.
Attitude: Five consumer attitudes about products are enthusiastic, positive, indifferent, negative, and hostile.
Multiple Bases: Combining different behavioral bases can provide a more comprehensive and cohesive view
of a market and its segments. Figure below depicts one possible way to break down a target market by various
behavioral segmentation bases.
How should business markets be segmented?
We can segment business markets with some of the same variables we use in consumer markets, such as geography,
benefits sought, and usage rate, but business marketers also use other variables:
The demographic variables are the most important, followed by the operating variables, Purchasing
Approaches, Situational Factors to lastly, the personal characteristics of the buyer. Business marketers
generally identify segments through a sequential process.
A flexible market offering consists of two parts: a naked solution containing the product and service elements that
all segment members value and discretionary options that some segment members value. Each option might carry
an additional charge.
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How should a company choose the most attractive target markets?
Once the firm has identified its market segment opportunities, it must decide how many and which ones to target.
Marketers are increasingly combining several variables in an effort to identify smaller, better-defined target groups.
This has led some market researchers to advocate a needs-based market segmentation approach. Roger Best
proposed the seven-step approach shown in Table 9.6.
What are the requirements for effective segmentation?
To be useful, market segments must rate favorably on five key criteria:
Measurable: The size, purchasing power, and characteristics of the segments can be measured.
Substantial: The segments are large and profitable enough to serve. A segment should be the largest possible
homogeneous group worth going after with a tailored marketing program. It would not pay, for example, for an
automobile manufacturer to develop cars for people who are under four feet tall.
Accessible: The segments can be effectively reached and served.
Differentiable: The segments are conceptually distinguishable and respond differently to different marketing
mix elements and programs. If married and single women respond similarly to a sale on perfume, they do not
constitute separate segments.
Actionable: Effective programs can be formulated for attracting and serving the segments.
Michael Porter has identified five forces that determine the intrinsic long-run attractiveness of a market or market
segment:
Threat of rivalry: A segment is unattractive if it already contains numerous, strong competitors.
Threat of new entrants: an attractive segment is one in which entry barriers are high and exit barriers are low.
The worst case occurs when entry barriers are low and exit barriers are high.
Threat of substitutes: Substitutes place a limit on prices and on profits.
Threat of buyers’ growing bargaining power: A segment is unattractive if buyers possess strong or growing
bargaining power. A solution is developing superior offers that strong buyers cannot refuse.
Threat of suppliers’ growing bargaining power: A segment is unattractive if the company’s suppliers are able
to raise prices or reduce quantity supplied. The best defenses are to build win-win relationships with suppliers
or use multiple supply sources.
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What are the different levels of market segmentation?
Marketers have a range of possible levels of segmentation that can guide their target market decisions. Figure
shows, at one end is a mass market of essentially one segment; at the other are individuals as segments. Between lie
multiple segments and single segments.
Full market coverage
A firm attempts to serve all customer groups with all the products they might need. Only very large firms such as
Microsoft (software market) and General Motors (vehicle market) can undertake a full market coverage strategy.
Large firms can cover a whole market in two broad ways:
Differentiated Marketing: the firm sells different products to all the different segments of the market.
Undifferentiated / Mass Marketing: ignores segment differences and goes for whole market.
Multiple Segment Specialization
A firm selects a subset of all the possible segments, each objectively attractive and appropriate. A supersegment is
a set of segments sharing some exploitable similarity. A firm can also attempt to achieve some synergy with
product or market specialization. With product specialization, the firm sells a certain product to several different
market segments while market specialization, the firm concentrates on serving many needs of a particular customer
group.
Single-Segment
Through concentrated marketing, the firm gains deep knowledge of a one segment’s needs and achieves a strong
market presence. A niche is a more narrowly defined customer group seeking a distinctive mix of benefits within a
segment. Marketers usually identify niches by dividing a segment into subsegments.
Individual Marketing
The ultimate level of segmentation leads to “segments of one,” “customized marketing,” or “one-to-one marketing.
Mass customization is the ability of a company to meet each customer’s requirements—to prepare on a mass basis
individually designed products, services, programs, and communications.
Early pioneers in individual marketing Don Peppers and Martha Rogers outlined a four-step framework for what
they called one-to-one marketing as follows:
1. Identify your prospects and customers. Don’t go after everyone.
2. Differentiate customers in terms of their needs and their value to your company.
3. Interact to improve your knowledge about their individual needs and to build stronger relationships.
4. Customize products, services, and messages to each customer.
Legal and Ethical Issues With Market Targets
Some consumers resist being labeled. Elderly consumers who don’t feel their age may not appreciate products that
label them “old.” Market targeting also can generate public controversy when marketers take unfair advantage of
vulnerable groups (such as children) or disadvantaged groups (such as inner-city residents) or promote potentially
harmful products. The cereal industry has been criticized through the years for marketing efforts directed toward
children.