Segmentation

Segmenting and
Targeting Markets
© Gary Yeowell/Getty Images

Chapter 8 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1
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.
LO1
Market Segmentation
People or organizations with needs or wants
Market and the ability and willingness to buy.
Market A subgroup of people or organizations sharing

one or more characteristics that cause them to
Segment have similar product needs.
Market The process of dividing a market into

meaningful, relatively similar, identifiable
Segmentation segments or groups.
LO1
LO1 The Concept of Market
Segmentation
Beyond the Book

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
LO2
Criteria for Segmentation
Segment must be large enough to
Substantiality
warrant a special marketing mix.
Identifiability Segments must be identifiable and

and Measurability their size measurable.
Members of targeted segments
Accessibility must be reachable with marketing
mix.
Unless segment responds to a
Responsiveness marketing mix differently, no
separate treatment is needed.
LO3
Bases for Segmentation
Geography
Demographics
Psychographics
Behavior
1)Benefits Sought
2)Usage Rate
LO4
Major Segmentation Variables
• Geography
• Region :Pacific, Mountain, West North Central, West South

• Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New
England
• City or metro size : Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-
• 100,000; 100,000-250,000; 250,000-500,000; 500,000-1,000,000; 1,000,000-
4,000,000; 4,000,000 or over
• Density : Urban, suburban, rural
• Climate : Northern southern
• Demographic
• Age Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+
• Family size 1-2, 3-4, 5+

Geographic Segmentation
◆ Region of the country or world
◆ Market size
◆ Market density
© iStockphoto.com/Pawel Gaul / ©
◆ Climate
iStockphoto.com/Contour99
LO4
Demographic Segmentation
Age
Gender
Income
Ethnic
Family life cycle

LO4
Ethnic Segmentation
◆ Largest ethnic
markets in U.S. are:
◆African Americans
◆ Asian Americans
Companies must make
© Foodpix/Jupiterimages/Getty Images
products geared toward
specific ethnic groups as
they continue to expand.
LO4
Family Life Cycle
Age
Marital Children
Status
LO4
• Stages in the Family Life Cycle
• 1. Bachelor stage:Young, single, not living at home
• Few financial burdens. Fashion opinion leaders. Recreation oriented. Buy: basic home
• equipment, furniture, cars, game; vacations.
• 2. Newly married couples: Young, no children
• Highest purchase rate and highest average purchase of durables: cars, appliances,
• furniture, vacations.
• 3. Full nest I: Home purchasing at peak. Liquid assets low.
• Youngest child under six Interested in new products, advertised
• products. Buy: washers, dryers, TV, baby food, chest rubs and cough medicines, vitamins,
• dolls, wagons, sleds, skates.
• 4. Full nest II: Youngest child six or over
• Financial position better. Less influenced by advertising. Buy larger-size packages,
• multiple-unit deals. Buy: many foods, cleaning materials, bicycles, music lessons, pianos.

LO4
Exhibit 8.1
Family Life Cycle

Psychographic
Segmentation
Psychographic
Segmentation
Market segmentation on the basis of

personality, motives, lifestyles.
LO4
Bases for Psychographic
Segmentation
Personality
Motives
Lifestyles
LO4
Personality and Motive
Segmentation
Personality
Reflects a person’s traits, attitudes, and habits. Brand

personality” examples:
Sincere, Sophisticated
Rugged , Exciting
Competent
Rugged
Motives
Marketers might appeal to emotional,
rational, or status motives, among others.
LO4
Lifestyle Segmentation
◆ How time is spent

◆ Importance of things around them
◆ Beliefs
LO4
Behavioral Segmentation
Behavioral Variables
• Occasions
• Benefits
• User Status
• Usage Rate
• Buyer-Readiness
• Loyalty Status
Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd.

Benefit Segmentation
Benefit
Segmentation
The process of grouping customers

into market segments according to
the benefits they seek from the
product.
LO4
The Brand Funnel Illustrates Variations in
the
Buyer-Readiness Stage
• Aware
• Ever tried
• Recent trial
• Occasional user
• Regular user
• Most often used

Loyalty Status
Hard-core
Split loyals
Shifting loyals
Switchers

Usage-Rate Segmentation
Usage-Rate Dividing a market by the amount

Segmentation of product bought or consumed.
A principle holding that 20

80/20
percent of all customers generate
Principle
80 percent of the demand.
LO4
Steps in Segmentation Process
Needs-based segmentation
Segment identification Marketing-Mix

Segment attractiveness Strategy
Segment profitability
Segment positioning
Segment acid test

Steps in Segmentation
Process
1. Needs-Based Segmentation
Group customers into segments based on similar
needs and benefits sought by customer in solving
a particular consumption problem.
2. Segment Identification
For each needs-based segment, determine which
demographics, lifestyles, and usage behaviors
make the segment distinct and identifiable
(actionable).
3. Segment Using predetermined segment attractiveness:
Attractiveness criteria (such as market growth, competitive
intensity, and market access), determine the
overall attractiveness of each segment.

• 4. Segment Profitability: Determine segment profitability.
• 5. Segment Positioning For each segment, create a “value proposition”
and product-price positioning strategy based on that segment’s unique customer
needs and characteristics.

Strategies for Selecting
Target Markets
LO7
Target Markets
A group of people or
Target
organizations for which an
Market organization designs,
implements, and maintains a
marketing mix intended to
meet the needs of that group,
resulting in mutually satisfying
exchanges.
LO7
Target Markets
Undifferentiated Concentrated Multisegment

7 Strategy Strategy Strategy
LO
Undifferentiated Targeting Strategy
Undifferentiated A marketing approach that

Targeting views the market as one big
Strategy market with no individual
segments and thus
uses a single
marketing mix.
LO7
Undifferentiated Targeting Strategy
Advantage:
◆ Potential savings on production

and marketing costs
Disadvantages:
◆ Unimaginative product offerings
◆ Company more susceptible to

Undifferentiated
Strategy competition
LO7
Concentrated Targeting
Strategy
A strategy used to select one
Concentrated
segment of a market for targeting
Targeting Strategy
marketing efforts.
Niche
One segment of
a market.
LO7
Concentrated Targeting
Strategy
Advantage:
◆ Concentration of resources
◆ Meets narrowly defined segment
◆ Small firms can compete
◆ Strong positioning
Disadvantages:
◆ Segments too small, or

changing
Concentrated ◆ Large competitors may
Strategy
market to niche segment
LO7
Multisegment Targeting
Strategy
A strategy that
Multisegment
chooses two or
Targeting
more well-defined
Strategy
market segments
and develops a
distinct marketing
mix for each.
LO7
Multisegment Targeting
Strategy
Advantage:
◆ Greater financial success

◆ Economies of scale
Disadvantages:
◆ Higher costs
◆ Cannibalization
Multisegment
Strategy
LO7
Positioning
Positioning is…
developing a specific marketing mix to
influence potential customers’ overall
perception or a brand, product line, or
organization in general.
LO9
Effective Positioning
1. Assess the positions
occupied by competing
products
2. Determine the dimensions

underlying these positions
3. Choose a market position

where marketing efforts will
have the greatest impact
LO9
Product Differentiation
Product Differentiation is…

a positioning strategy that some firms
use to distinguish their products from
those of competitors.
© SuperJam
LO9
Positioning Bases
Attribute
Price and Quality
Use or Application
Product User
Product Class
Competitor
Emotion
LO9

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Segmenting and

© Gary Yeowell/Getty Images

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

Market A subgroup of people or organizations sharing

Market The process of dividing a market into

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4

◆ Marketers can better define customer needs

◆ Decision makers can define objectives and

Identifiability Segments must be identifiable and

• Region :Pacific, Mountain, West North Central, West South

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8

◆ Region of the country or world

Family life cycle

Companies must make

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14

Market segmentation on the basis of

Reflects a person’s traits, attitudes, and habits. Brand

◆ How time is spent

Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd.

The process of grouping customers

Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd.

Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd.

Usage-Rate Dividing a market by the amount

A principle holding that 20

Segment identification Marketing-Mix

Segment acid test

Chapter 8 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25

Chapter 8 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26

Undifferentiated Concentrated Multisegment

Undifferentiated A marketing approach that

◆ Potential savings on production

◆ Unimaginative product offerings

◆ Company more susceptible to

◆ Segments too small, or

◆ Greater financial success

2. Determine the dimensions

3. Choose a market position

Product Differentiation is…

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