Chapter 7
Segmenting and Targeting Markets
What are Markets?
• Market: people or institutions with
sufficient purchasing power, authority,
and willingness to buy
• Types of Markets
Requirements of a Markets
Need
+
Ability
Willingness
Authority
Role of Market Segmentation
Market Segmentation: division of the
total market into smaller, relatively
homogeneous groups
Why?
Levels – Mass, Segment, and Niche
Why segment?
Most Most
efficient effective
Many Groups
of One
One Mass
Market
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.
No Market Segmentation
Segmented by Gender
Segmented by Age
Segmentation Process
• Marketers follow two methods to determine
the bases on which to identify markets:
– Segments are predefined by managers
based on their observation of the
behavioral and demographic
characteristics of likely users
– Segments are defined by asking
customers which attributes are important
and then clustering the responses
Criteria for Effective
Segmentation
Responsiveness
Accessibility
Measurability /
Identifiability
Substantiality
Most important point
In relation to responsiveness to different
marketing mixes, segments must be:
Homogeneous within
Heterogeneous between
LO4 Bases for Segmenting Consumer
Markets
Characteristics of individuals,
groups, or organizations used to
divide a total market into segments.
(variables)
LO4
Bases for Segmentation
Geography
Geography
Demographics
Demographics
Psychographics
Psychographics
Benefits
Benefits Sought
Sought
Usage
Usage Rate
Rate
Segmenting Consumer
Markets
• Geographic Segmentation: Dividing
an overall market into homogeneous
groups on the basis of their locations
Metropolitan
MetropolitanStatistical
Statistical
Area
Area(MSA)
(MSA)
Segmenting Consumer
Markets
• Demographic segmentation: dividing
consumer groups according to
characteristics such as gender, age,
income, occupation, education, ethnicity,
household size, and stage in the family
life cycle.
Family Life Cycle
Age
Marital
Children
Status
Psychographic Segmentation
• Psychographic Segmentation: dividing a
population into groups that have similar
psychological characteristics, and lifestyles.
• Lifestyle: people’s decisions about how to live
their daily lives, including family, job, social, and
consumer activities
LO4
Geodemographic
Segmentation
Segmenting potential customers into
neighborhood lifestyle categories.
Combines geographic, demographic,
and psychographic segmentation.
LO4
Benefit Segmentation
The process of grouping customers
into market segments according to
the benefits they seek from the
product.
Usage Rate Segmentation
Dividing
Dividing aa market
market by
by the
the
amount
amount ofof product
product bought
bought
or
or consumed.
consumed.
Bases for Segmenting Business
Markets
Producers
Producers
Resellers
Resellers
Government
Government
Institutions
Institutions
Company
Company Buying
Buying
Characteristics
Characteristics Processes
Processes
LO6
Steps in Segmenting Markets
1 2 3 4 5 6
Select Choose Select Profile Select Design,
a market bases descriptors and target implement,
for for analyze markets maintain
study segmen- segments marketing
tation mix
Note that steps 5 and 6 are actually marketing activities that follow market segmentation (steps 1 through
4).
Targeting
Choosing one or more segments for which
to design your marketing operations
Identify the Appropriate Targeting Strategy
Undifferentiated Strategy
Differentiated
Concentrated
Undifferentiated Strategy
Single
Marketing
Mix
Organization
Target Market
Differentiated Strategy
Marketing Mix 1
Marketing Mix 2
Organization
Target Market
Concentrated Strategy
Single
Marketing
Mix
Organization
Target Market
Cannibalization
Cannibalization
Cannibalization
Situation that occurs when
sales of a new product cut into
sales of a firm’s existing
products.
STRATEGIES FOR REACHING
TARGET MARKETS
• No single, best choice strategy suits all
firms
• Determinants of a market-specific
strategy:
– Company resources
– Product homogeneity
– Competitors’ strategy
One-to-One Marketing
An individualized marketing method
that utilizes customer information to
build long-term, personalized, and
profitable relationships with each
customer.
- ‘share of customer’
Product Positioning
Positioning starts with a product. A Piece of
merchandise, a service, a company, an
institution, or even a person... But positioning
is not what you do to a product. Positioning is
what you do to the mind of the prospect.
That is, you position the product in the mind
of the prospect.
Al Ries and Jack Trout (1981)
Positioning of
Procter & Gamble
Detergents
Market
Brand Positioning
Share
Tide Tough, powerful cleaning 31.1%
Cheer Tough cleaning, color protection 8.2%
Bold Detergent plus fabric softener 2.9%
Gain Sunshine scent and odor-removing formula 2.6%
Era Stain treatment and stain removal 2.2%
Dash Value brand 1.8%
Oxydol Bleach-boosted formula, whitening 1.4%
Solo Detergent and fabric softener in liquid form 1.2%
Dreft Outstanding cleaning for baby clothes, safe 1.0%
LO 9
Ivory Snow Fabric & skin safety on baby clothes 0.7%
Ariel Tough cleaner, aimed at Hispanic market 0.1%
Product Positioning
Dimensions
Product Attributes / Differences / Benefits
Product User / Usage
By Association
Problem Solution
Against a Competitor / Away from Competitors
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.
Perceptual Maps
Corolla
Corolla Celica
Celica Avalon
Avalon Camry
Camry
Expensive
Sporty Conservative
Inexpensive
Product Positioning using
perceptual maps
High moisturizing
Zest
Tone 7
4
Lever 2000
Dove
5 2
Safeguard
Coast
Lux 8
Nondeodorant 3 Deodorant
1
Dial
Lifebuoy
Lava
6
Low moisturizing
Repositioning
Changing consumers’
perceptions of a brand in relation
to competing brands.
Positioning and Product Differentiation