Market segmentation, Dividing a market into distinct groups of buyers who have different needs, , annot appeal 10 all buyers in the marke, companies today recognize that they cannot appeal to all buyers in et place—or at least not to all buyers in the same way. BUYErS are 100 numer, us, hi a _ Widely catered, and varied in ther needs and buying PRT <= Chae oe se themselves vay widely thei aie mace SEMEN. se. crocs makeing Tike Henkel, companies mun iden the paso the market ey € EE Be and gy Profitably. They must design customer-driven marketing oe are Fight re. Tationships with the right customers. Thus, most companies have MON Say From may marketing and toward target markerng: identifying market SeRNONS, SSe Figure 6:1 shows the four major steps in designing a custor Marketing Market targeting (targeting) Evaluating each market segment's attractiveness and selecting one or more segments to serve. asomers that wil seve. strat In the first two steps, the company selects the customer Market Diternaton Segmentation ivelvs diving make ito sinc rou of Byes WhO Have diy \ctually differentiating the marke Eee caer ua ‘require separate marketing stratepi offering to create superior evsoneer needs, characteristics, or behaviors and who might require seP: EBs op ‘mixes, The company identifies different ways to segment a Pee Profiles of the resulting make segments. Market targeting or targeting) consis 9 evaluating cay market segments attractiveness and selecting one more marke! SEBTCIS 19 sew In the final two steps, the company decides on 8 ae Paseo ee ue for target custo ferentiation involves actu im’s deine pceeanet competing et feng to cee open cote vale, Pstlning com of sani Products in the minds of target ‘a market offering to occupy a clear, distinctive, and desirable place relative to competing on products in the minds of target consumers. We discuss each of these steps in turn, Positioning Arranging for a market offering to occupy a clear, distinctive, and Author Comment Maree segmentation addreses the Gest ‘imple-tounding marketing queston hat asomers wih we serve? Market Segmentation Yaa Buyers in any market differ in their wants, resources, locations, buying attitudes, and buy. ing practices. Through market segmentation, companies divide large, diverse markets inig smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs. In this section, we discuss four important segmen. tation topics: segmenting consumer markets, segmenting business markets, segmenting international markets, and the requirements for effective segmentation. > Figure 6.1 Designing a Customer Value-Driven Market Strategy Select customers to serve lncacet rane (cost wi ‘Segmentation rman at Divide the total market into sent oie ‘Srraet segments Sr Sip cone : rene warren Crs Decide on a value proposition Differentiation Ditlerentiate the market offering to create superior customer valve eee Targeting cose regotocete Select the segment or Postion the markt tering in fro wets te ane we segments to enter the minds of target customers Senet compton Go PositioningChapter 6: '2pter 6: Customer Value-Driven Marketing Strategy: Creating Value for Target Customers 199 Segmenting Consumer Markets ‘Thetis no single way to segment a market. A marketer has to try different segmentation ‘ariables, alone and in combination, to find the best way to view market structure, >> Table 6.4 Qutlines variables that might be used in segmenting consumer markets. Here we look at the ‘major geographic, demographic, psychographie, and behavioral variables. a GeecrenieSegnentaton artim derek Geographie segmentation cals for dividing the market int diferent geographical units Dp unis, schasatons, SU. 88 ations regions, tates, counties, cies, or even neighborhoods. A company may ses mez, counties, cites, or even __“£C1U to operate in one or a few geographical areas oF operat in all areas but pay atten- neighborhoods. tion to geographical differences in needs and wants. Moreover, many companies today are localizing their products, services, advertising, promotion, and sales efforts to fit the needs Of individual regions, cities, and neighborhoods. For example, many large retailers—from Target and Walmart to Kohl's and Staples—are now opening smaller- format stores designed to fit the needs of densely packed ur- ban neighborhoods not suited to their typical large suburban superstores. > Target's CityTarget stores average about half the size of a typical Super Target: its TargetExpress stores ate even smaller at about one-fifth the size of a big-box ovt- let. These smaller, conveniently located stores carry 2 more limited assortment of goods that meet the needs of urban residents and commuters, such as groceries, home essentials, beauty products, and consumer electronics. They also offer pick-up-in-store services and a pharmacy? Beyond adjusting store size, many retailers also local- ize product assortments and services. For example, depart- rment store chain Macy's has a localization program called >> Geographic segmentation: Targets now opening smaterfrmat, ___MYMacy’s in which merchandise is customized under 69 __conveniemly located CityTarget and TargetExpress stores designed tot ‘ifferent geographical districts. At stores around the coun. + into densely packed urban neighborhoods, tty, Macy's sales clerks record local shopper requests and APs ey pass them along to district managers. In turn, blending the customer requests with store transaction data, the district ‘managers customize the mix of merchandise in their stores, So, for instance, Macy's stores, in Michigan stock more locally made Sanders chocolate candies. In Orlando, Macy's carties more swimsuits in stores near waterparks and more twin bedding in stores near condominium rentals. The chain stocks extra coffee percolators in its Long Island stores, ‘where it sells more of the 1960s must-haves than anywhere else in the country. In all, the “"MyMacy’s" strategy is to meet the needs of local markets, making the giant retailer seem smaller and more in touch.? Major Segmentation Variables LACT AES Segmentation Variable Examples Geographic Nations, regions, states, counties, cities, neighborhoods, population density (urban, suburban, rural}, climate Demographic ‘Age, if-cyele stage, gender, ncome, occupation, education, teligion, ethnicity, generation Psychographic Social class, itestye, personality Behavioral Occasions, benefits, user status, usage ratDD 200 Part 3: Designing a Customer Vale-Driven Strategy and Mi Demographic Segmentation et into segments based On Vatiabley Demographic segmentation Demographic segmentation divides toe pation education, religion, ethnicity a % viding the market into segments ager ifecyte stage, genet INCOME. Ty tases for SEENENINE stoner pe factors are the rates often VA Closely wig based on variables such as age, 7: iesyek sage. gender nce, Gretna et cesipaton,edston reiion ‘ethnicity, and generation, graphic variables. A other types of varial such as benefits sought or be tics to assess the size of the target mar ‘Age and Life-Cycle Stage. Age and life-cycle segmentation i u Diving 2 markt into diferent age and life-cycle groups «cle group Mayer brand markets the substantial sucet example, whereas most tablet ms ‘ups, Amazon has spotted a t centert they were handing the aa market, Am G-rated movies, gam Sesame Strect, and DC Comics. Not only does ‘Amazon, it helps sell more Kit Marketers must be careful segmentation. For example, although some 80-year shut-ins with fixed incomes, others ski and play tennis. Similarly, Gender segmentation Dividing a market into different ‘segments based on gender. Goldie Toys for future innovators ; >> Gender segmentation: GoldleBox markets engineering toys for girs “Move over Barbie, there's a new gil in town. And she's wearing overalls and construction boots. Ge, One reason is that consumer nother is tha 7 les. Even when markele les Uploaded, « version desigt recently, the brand launched an (Portable Protein Pack). Now, ‘one of America’s favorite noor Other companies offer brands that t4 children for entertainment, education, zon introduced FreeTime targeted toward three- to eight-year-olds. features “Endless kid stuff. No grownup stuff” and books, including premium wrariables are easier {0 Measure thay arst define SeEMENIS USiNg othe, MM ow asegiment’s demographic chara 7 it efficiently Jnavior, and wants change with age. Some oo sumer needs . Consumer NESTS ing different products oF using dite, nies use age and life-cycle segmentation. marketing approaches for diffe Lunchables, conve! unchables, how 3s of Lunchables, HOW TE Actes and sensibilities of teenagers, py yee groups. For example, Krafs gy packaged lunches for children, Tey sear Mayer later introduced Ly vent age and life sient Pre ever, nd neh. J to meet Ul los a ryt withthe more adul-fiendly name py ult versio ; adit ages can enjoy Wh iS Fpidy become consumers of me meals. vet specific age of Hifestage groups, Fy, een busy marketing their devices 10 groyn, rarer market, Feedback fFO™ Parents SUREELd hy i montspacked Kindle Fire tablet over 10 their you et babysitting purposes. To tap this Young-faniy Unlimited, a multimedia subscription service Complete with parental contols, the service It provides access {0 a treasure trove of content from Nickelodeon, Disney, FreeTime Unlimited generate revenues fo, indle Fire tablets to young families. / to guard against stereotypes when using age and life-cycle colds fit the stereotypes of doddering whereas some 40-year ‘old couples are sending their children off to college, others are just beginning new families. Thus, age is often a poor pre. dicior of a person's life cycle, health, work or family status needs, and buying power. aikers have Gender. Gender segmentation has long been used in market ing clothing, cosmetics, toiletries, toys, and magazines. For example, P&G was among the first to use gender segments tion with Secret, a deodorant brand specially formulated fora woman's chemistry, packaged and advertised to reinforce the female image. More recently, the men’s personal care industry has exploded, and many cosmetics brands that previously catered mostly to women—from L’Oréal, Nivea, and Sephora 10 Unilever's Dove brand—now successfully market men's lines. For example, Dove's Men+Care line calls itself “The authority on man maintenance.” The brand provides a full line of body washes ("skin care built in”), body bars (“fight dryness"), antiperspirants (“tough on sweat, not Ot face care (“take better care of your face”), and hair ‘care ("3X stronger hair”) Going in the other direction, GoldieBlox markets 2 cok lection of engineering toys for girls. >> Designed by a female engineer from Stanford University, the brand’s goal is "to E¢7 ‘Chapter 6: Customer Value-Drven Marketing Strategy Creating Value for Target Customers 20 Bitls building” and to inspire a future generation of female engineers. Aimed ag ‘Years old, GoldieBlox consists of storybooks and construction sets that require young a ‘0 solve a series of construction challenges. Initially funded by more than $250,000 raised Yi crowdfunding platform Kickstarte, the innovative product has recently won «0 TOs Industry Foundation Toy of the Year awards—Eilucational and People's Choice. As one ‘Writer notes, “Move over Barbie, there's a new girl in town. And she’s wearing overalls and construction boots"* 'ncome. The marketers of products and services such as automobiles, clothing, cosmet ‘cs, financial services, and travel have long used income segmentation. Many companies target affluent consumers with luxury goods and convenience services. Other marketers is Use high-touch marketing programs to court the well-to-do. Upscale retailer Saks Fi we Avenue provides exclusive services to is elite clientele of Fifth Avenue Club members. some of whom spend as much as $150,000 to $200,000 a year on clothing and Pot Sori from Saks alone. For example, Fifth Avenue Club members have access (0 a Saks Personal Stylist, The fashion-savvy, well-connected personal consultant gets t0 know ane helps to shape each client's personal sense of style, then guides her “through the maze 0 fashion must-haves.” The Personal Stylist pus the customer first, For example, if Saks doesn’t carry one of those must-haves thatthe client covets the personal stylist will find it elsewhere at no added charge.” Fe However oll compares tht vse inome segmentation target the fluent Forex ample, many retaiers—such as the Dollar General, Family Dollar, and Dollar Tree store chains—successfully target low- and middle-income groups. The core market for such stores is represented by families with incomes under $30,000. When Family Dollar real es- {ate experts scout locations for new stores, they look for lower-middle-class neighborkioods where people wear less-expensive shoes and drive old cars that drip a lot of oil. With their low-income strategies, dollar stores are now the fastest-growing retailers in the nation. restoration Psychographic Segmentation Psychographic segmentation Psychographic segmentation divides buyers into different segments based on social Dividing a market int different class, lifestyle, or personality characteristics. People in the same demographic group can ets ace have very different psychographic characteristics. LMesyle or personality characteristics In Chapter 5, we discussed how the products people buy reflect their lifestyles. AS a result, marketers often segment their markets by consumer lifestyles and base their marketing strategies on lifestyle appeals. For example, retailer Anthropologie, with its whimsical, “French flea market” store atmosphere, sells a Bohemian-chie lifestyle to which its young women customers aspire. )>And VF Corporation of- fers a closet full of more than 30 premium lifestyle brands that “fit the lives of consumers the world over, from commuters to cowboys, surfers to soccer moms, sports fans to rock bands." VF is the nation’s number-one jeans maker, with brands such as Lee, Riders, Rustler, and Wrangler. But jeans are not the only focus for VE. The company's brands are carefully separated into five major lifestyle seg- ments—Jeansweat, Imagewear (workwear), Outdoor and Action Sports, Sportswear, and Contemporary. The North Face and Timberland brands, both part of the Outdoor unit, offer top-of-the-line gear and apparel for outdoor enthusiasts. From the Sportswear unit, Nautica focuses on people who enjoy high-end casual apparel inspired by sailing and the sea. Vans began as a skate >> Differentiated marketing: VF Corporation offers a closet full of more than shoemaker, and Reef features surf-inspired footwear 30 premium ifestyle brands, each of which “taps into consumer aspirations to ‘and apparel. In the Contemporary unit, Lucy features, fashion, status, and wolLbeing” ina welldefined segment. upscale activewear, whereas 7 for All Mankind supplies tn premium denim and accessories sold in boutiques andSSS 202 Behavioral segmentation Dividing a market into segments based ‘on consumer know attitudes, uses fa product, or responses toa product Occasion segmentation Dividing the market into segments according to occasions when buyers Bet the idea to buy, actually make their Purchase, or use the purchased item Benefit segmentation Dividing the m et into segments according to the different benefits that consumers seek from the product. Par 3: Designing a Customer Valisorven Strategy nd MA At the othe and Nowdstrom nA of ty Saks markets uniforms for pol ’ @ you are, says the wenn our ti 1 such a high ena! department stores seh Horace Small, pst of the Iss ther fist eesponders. NO pany egment markets. For ¢ variables t0 seen Ramp i ‘On the one hand, Mountain De® dig, mn-way Personality. Its ads renring PTR, \-Cola Zero i o-your-owh Marketers also use personal ent soft drinks target different pe Youthfl reelions, adventurous 8 YOU ON that “M's different on the Mountain.” By contra’ © ata a Cerebral but good humors Pe ls promise "Real CoCo a aM 70 graphic ; Marketers sometimes Fo pal LES, Bad 5 My ribes"—eonunis of coe ESTO, ve TET conten For exampl cso an ganna pu aE ene fhe ane Scena eaaamwaor aed onconformists. Home Depot targets a a self enthusiasts; the Nike tribe consi gD product category target very differ ts ag ich, Behavioral Segmentation Behavioral segmentation divides buyer ito sem lites, uses, or responses conceming a product. Many market es are the best starting point for buikding market segment 1 into segments based on their knowledge any marketers believe that hey scaly male he pote oe we he pussed ems. Ocason segments help tas bud p protic wage Capoes advertises is soups more bean gence Winer mons. And for moe tan a decade, Sabucks as welcomed the autumn wihits Pumpkin pice Late (St) Sad only inthe lo date, the coffe chain are 200 millon cps fh cage aiid cocoon “Te never bent ‘bout Bring ny tongue with het beverage Tweed «Sacks customer ea Sil et compa ry tobe consmpen by promoting sag: Guig oom as ceene nce tenia Gr eeep jo entero Ue ers have promoted drinking orange juice as a cool, healthful refresher at other times. of the dy. Silay, whereas conus edo dk so dink ater in the day, Moura Dea todced Min Dew AM. (mitre of Monn Dew and orange uc) wo nee meng ‘consumption And Taco Bell's Fist Meal canpign aeons pul ines by promoting Min Dew A.M. nal stg Tico Bell lon withthe chain's AM. Crunshorap and beat ies sa reat way ost the day Benefits Sought. A powerful form of segmentation is group ing buyers according to the different benefits that they seek from a product. Benefit segmentation requires finding te major benefits people look for in a product clas, the kinds o People who look for each benefit, and the major brands tt deliver each benefit For example, people buying bicycles are looking fo any number of benefits, from competitive racing and spots Performance to recreation, fitness, touring, transport and just plain fun. To meet varying benefit preferences Schwinn makes affordable, quality bikes in seven msjt benefit groups: cruisers, hybrid, bike path, mountain, 1% urban, and kids. Bike path bikes are “Perfect for riders ¥¥® ‘want a comfortable and easy-riding bike with convenient fures for casual riding over all surfaces.” >> Schwinn's wbaChapter 6: Customer Value-Driven Marketing Strategy: Creating Value for Target Customers bikes are “for riders who want a functional, durable, and sty ‘casually in urban areas." Inall, Schwinn makes more than $0 different lines of bikes, cific benefit segment or subsegment. For example, Schwinn's Lakeshore bike (priced an affordable $170 to $220) is a steel frame classic cru sells at mass retailers, It allows for “relaxing exercise” ancl comes with handy for running errands. In contrast, the high-tech Vestige sustainably designed urban bike, with a frame made of natural, biodegra and coated in water-soluble paint. The Vest and the bike can be purchased only through select dealers. The Schwinn Vestige 203 ish bike to commute oF ride sd for a spe- at er bike with coaster brakes that rack on the back, bike (priced at $1470) is @ ble flax fibers. je of bamboo, combin 's fenders and grips are style with function and has a low carbon footprint. User Status. Markets can be segmented into nonusers, ex-user users, and regular users of a product. Marketers want to reinforce ers, altract targeted nonusers, and reinvigorate re Potential users group are consumers newlyweds—who can be turned into h the right start, P&G makes certain hospitals provide for newborns and then promotes then Usago Rate. Markets can also be segmented into light, medium, ¢ often a small percentage of the market but For instance, Carl's Jr estaurants, focus on a ers, ages 18 to 34, fully embrace the chai ning. That means they wolf down a lot more Thickburgers and Heavy users a age of total consum by parent company CKI young male custon like you mean it” posit ‘Sister chains Hardee's and Carl's, Jr use ‘commercials to attract an audience of If down a fot more of the chains’ featured mers in other >) Targeting heavy users: steamy hot-models-n-bikinis “young, hungry men,” who wol Thickburgers and other indulgent Items than consur segments, ena Pang Restaura News potential users, fist ind retain regular Us ips with ex-users, Included in the ing life-stage changes—such as new parents and For example, to get new parents off to its Pampers Swaddlers are the diaper most U.S. nas “the M1 choice of hospitals and heavy product users. {account for a high percent- and Hardee's restaurants, both owned et of “young, hungry men.” These 5 “If you're gonna eat, eat other indulgent items featured on the chains’ menus.?>T attract this audience, the company is known for its steamy hot-models-in-bikinis commercials, featuring models such as Kate Upton, Padma Lakshmi, Nina Agdal, and Hannah Ferguson to heat up the brands’ images. Such ads clearly show “what our target audience of young, hungry guys like,” says CKE’s chief executive.!" Loyalty Status. A market can also be segmented by consumer loyalty. Consumers can be loyal to brands (Tide), stores (Tar- ‘zet), and companies (Apple). Buyers can be divided into groups according to their degree of loyalty, Some consumers are con pletely Joyal—they buy one brand all the time and can't wait to tell others about it. For example, whether they own a MacBook Pro, an iPhone, or an iPad, Apple devotees are granitelike in their devotion to the brand, At one end are the quietly satis fied Apple users, folks who own one or several Apple devices and use them for browsing, texting, email, and social network- ing. At the other extreme, however, are the Apple zealots— the so-called MacHeads or Macolytes—who can't wait to tell anyone within carshot of their latest Apple gadget. Such loyal Apple devotees helped keep Apple afloat during the lean years ‘decade ago, and they are now at the forefront of Apple's huge iPhone, iPad, iPod, and iTunes empire. Other consumers are somewhat loyal—they are loyal to two or three brands of a given product or favor one brand while sometimes buying others. Still other buyers show no Toyalty to any brand—they either want something different each time they buy, or they buy ‘whatever's on sale. ‘A company can learn a Jot by analyzing loyalty patterns in its market. It should start by studying its own loyal customers, Highly loyal customers can be a real asset. They of- ten promote the brand through personal word of mouth and social media. Some companies204 actually put loyalists t0 wor tried-and-true customers- . provid share their product experiences detect which bran way from ns to c h ‘a company tomers who are shifting * weaknesses and take act Using Multiple Segmental Marketers rarely limit thei Rather, they often use ml better-defined target groups: S Acxiom, Esti, and Experian- geographic, demographic, lifesty! their markets down to zip codes ‘One of the leading consumer SEB! >> It classifies U.S. households into one based on specific consumer segments carry exotic names : ‘True Grit Americans. ‘>> Using Experian's mosaic USA segmentation system, marketers can paint a surprisingly precise picture of who you are and what you might buy. Mosiac USA segments carry colorful names such as Colleges and Cates, Birkenstocks and Beemers, Bohemian Groove, Rolling the Dice, Small Town Shallow Pockets, and True Grit Americans that help bring the segments to life. ZéhotonShutersok Part 3: Designing a Customer Value-Driven Strategy and Mis For example, Patagonia reties jvambassadors—10 Fiche py Moy Is Paar driven” Fines Of apparel ang gn ‘aid tn contrast, by studying is less.toyayy ay mpetitive with its own, By loo, Ye, pany can Team about its yg i the brand OM its alls Paragon rk for Je input for with others: . its brand, the ‘comy sorrect them. tion Bases jr segmentation analysis {0 Only ONE OF 8 Tey vagy ls Ikiple segmental om bases TOM 10 deny tem information services—such gq ne, real bas eementation stems yn provide mi vioral data to help companies "te te a rhoods, and even households, 8M 5 a ajtems i Experan’s Mosaic USA a fetye segment and 19 level of ae’ faterests, behavior, 3d Passions, Mogg teks and Beemers, Bohemian Groove, ge we Heights, Small Town Shallow Poon demographics. such as Birken 8. ang fe Mee ihe Birkenstocks and Beemer goy loco inthe Mid Class Melting Pot level of af’ tect ts of 40- to 65-year-olds Who have achieved fgg and ony and Tet the urban rat race TOF Ristic and any i ents tated near small eties. They find spits corportant than religion, Colleges and Cafes consuy rt mart ofthe Singles and Starters affluence level ng oe arinly white, under35 college graduates who ae gi finding themselves. They are often employed as suppor ceivice staff related to a university. They don’t make much money and tend to not have any savings. Mosaic USA and other such systems can help marketes to segment people and locations into marketable group of like-minded consumers. Each segment has its own patem of likes, distikes, lifestyles, and purchase behaviors. For example Bohemian Groove consumers, part of the Significant Singles group, ae urban singles ages 45 to 65 living in apartments ie smaller cities such as Sacramento, CA, and Haisburg, PA They tend to be laid back, maintain a large circle of fiends and slay active in community groups. They enjoy musi, heb bies, and the creative arts. When they go out to eat, they che places such as the Macaroni Grill or Red Robin, Their favorite TV channels are Bravo, Lifetime, Oxygen, and TNT, and they watch two times more CSI than the average American. Using the Mosaic system, marketers can paint a surprisingly precie picture of who you are and what you might buy. Such rich segmentation provides a powerful tool for marketers of all kinds. It can help companies identify and better understand key customer segments, reach them more ef ciently, and tailor market offerings and messages to their specific needs. Segmenting Business Markets Consumer and business marketers use many of the same variables to segment thet markets. Business buyers can be segmented geographically, demographically (ind try, company size), or by benefits sought, user status, usage rate, and loyalty stats. ¥e business marketers also use some additional variabl teristics, purchasing approaches, es, such as customer operating chara situational factors, and personal characteristics