MARKETING MANAGEMENT

PART 3: DEVELOPING A VIABLE

MARKET STRATEGY
Chapter 6: Identifying Market Segments and Target
Customers
Subject Expert : Dr. Masri bin Abdul Lasi
Module Lecturer : Dr. Masri bin Abdul Lasi
SCAN ME FOR LECTURER’S INFORMATION

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Learning Outcome
After studying this chapter you should be able to
• Explain the essence of targeting.
• Define the principles of strategic leadership.
• Describe how to effectively communicate and deliver offerings to target customers.
• Explain how to develop strategies to target multiple market segments.
• Describe how to segment consumer markets.
• Describe how to segment business markets

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Identifying Target Customers
• Targeting. The process of identifying customers for whom the
company will optimize its offering
• There are many techniques for identifying target customers.
• Once the firm has identified its market 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 in order to develop an
offering that can fulfill these customers’ needs better than the
competition

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The Logic of Targeting
• Mass marketing
• the firm ignores segment differences and goes after the whole market with
one offer
• Targeted marketing
• Sell different products to all the different segments of the market
• One-to-one approach
• Mass customization
• The ability of a company to meet each customer’s requirements—to prepare
on a mass basis individually designed products, services, programs, and
communications.

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Strategic v s Tactical Targeting
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• Strategic targeting
• Focuses on customers whose needs the company can fulfill by ensuring that
its offerings are customized to their needs
• Tactical targeting
• identifies the ways in which the company can reach these strategically
important customers

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Strategic Targeting
• Target compatibility
• Can the company create superior value for target customers?
• Target attractiveness
• Can these customers create superior value for the company?
• Target compatibility
• A reflection of the company’s ability to outdo the competition in fulfilling the
needs of target customers

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Target Compatibility
• Business infrastructure
• Access to scarce resources
• Skilled employees
• Technological expertise
• Strong brands
• Collaborator networks

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Target Compatibility
• Core competency
• A source of competitive advantage and makes a significant contribution to
perceived customer benefits
• Has applications in a wide variety of markets
• Is difficult for competitors to imitate

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Target Attractiveness
• Target attractiveness
• The ability of a market segment to create superior value for the company
• Monetary value
• Strategic value
• Monetary value
• Customer revenues
• Costs of serving customers
• Strategic value
• Social value
• Scale value
• Information value

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Tactical Targeting
• Defining the customer profile
• Demographic factors
• Geographic factors
• Behavioral factors
• Psychographic factors
• Aligning customer value and customer profile
• Effectiveness
• Efficiency
• Bringing segments to life
• Personas
• Detailed profiles of one, or perhaps a few, hypothetical target consumers, imagined in
terms of demographic, psychographic, geographic, or other descriptive attitudinal or
behavioral information

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Single-Segment Targeting
• Niche marketing
• With single-segment concentration,
the firm markets to only one
particular segment.
• Companies targeting single segments
often focus on smaller, well-defined
groups of customers that seek a
distinctive mix of benefits.

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 Targeting Multiple Segments
• Product specialization
• Market specialization
• As markets become more fragmented, an
increasing number of companies develop
offerings targeting a greater number of smaller
customer segments.
• With market specialization, on the other hand,
the firm concentrates on serving many needs of
a particular customer group, such as by selling
an assortment of products only to university
laboratories.

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Segmenting Consumer Markets
• Market segmentation
• Divides a market into well-defined slices
• Market segmentation divides a market into well-defined slices.
• A market segment consists of a group of consumers who share a
similar set of needs and/or profile characteristics.
• Common types of segmentation include demographic, geographic,
behavioral, and psychographic.

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Demographic Segmentation
• Age
• Life-cycle stage
• Gender
• Income
• Race and culture
• Age
• Our wants and abilities change with age
• Life cycle stage
• A person’s major concern (e.g., divorce)

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Demographic Segmentation
• Gender
• Men and women have different attitudes and behave differently
• Income
• Income segmentation is a long-standing practice
• Race and culture
• Hispanic Americans
• Asian Americans
• African Americans

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Geographic Segmentation
• Geographical segmentation
• Divides the market into geographic units such as nations, states, regions,
counties, cities, or neighborhoods
• Combining geographic data with demographic data
• Nielsen Claritas’ PRIZM
• Education and affluence
• Family life cycle
• Urbanization
• Race and ethnicity
• Mobility

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Behavioral Segmentation
• Marketers divide buyers into groups on the basis of their actions
• User status
• Usage rate
• Buyer-readiness stage
• Loyalty status
• Occasions
• Mobility

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Psychographic Segmentation
• Buyers are divided into groups on the basis
of psychological traits, lifestyle, or values
• In psychographic segmentation, buyers are
divided into groups on the basis of
psychological traits, lifestyles, or values.
• Psychographic segmentation is important
because demographic, geographic, and
behavioral characteristics of consumers do
not always accurately reflect their underlying
needs.

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Segmenting Business Markets
• Demographic factors
• Operating variables
• Purchasing approaches
• Situational factors
• Personal characteristics

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Discussion Questions
• Consider the choices you make when you buy an airline ticket.
• Think about options such as boarding group, seat assignment, cabin class,
baggage charges, and so on.
• Why do airlines use a mass customization strategy rather than a mass
marketing strategy?
• Grocery stores rely on market segmentation. Compare and contrast
how and why different chains use segmentation as they target their
customers.
• How have Whole Foods and Trader Joe’s used segmentation?
• How does the approach used these companies compare to more traditional
grocery chains like Kroger?

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