MARKET SEGMENTATION

AND TARGETING
CHAPTER 4
 WHAT IS MARKET

 The term “MARKET” has been defined in many ways, all

depending on whose point of view is referred to.

 Another definition emphasized the buyers with “market as

a group of people or organizations that buy a particular
good, service, or concept.”

 Another definition of market stressed opportunity with the

statement ‘market is any mechanism that enables buyers
and sellers to strike bargains and to transact.”
 Types of Market

 Markets according to type of Institution

- There are three general types of markets according to type
of institution:
- 1. Consumer Markets
Buyers who intend to directly consume a product or
service constitute the consumer market. This market type may
be classified further into product related groupings like the
“real state market” which refers to the aggregate demand of
buyers of houses and lots. Another example is “the
educational services market”.
Organizational Markets

This second general type of market constitutes

buyers of product or services whose intention is
to produce another product or service.
International Markets

 This refers to all types of buyers found abroad including

consumers and organization. Car produces in Japan, for
example, consider Americans, Asians, and Europeans as
their international markets.

 Dairy farmers in New Zealand who export milk products

to the Philippines consider the Filipinos as a portion of
their international market.
MARKET SEGMENTATION
Market Segmentation

 A market segment is a sub-group of a particular market

which is composed of units with more or less similar
characteristics. People may have similar wants, financial
resources, geographic locations, buying attitudes, and
buying patterns.

 Market segmentation may be defined as the process of

identifying the various segments of a company’s
particular market.
 Market Segments for Books

THE MARKET
FOR BOOKS

SEGMENTS GENERAL
TEACHERS STUDENTS
PUBLIC

SUB-SEGMENTS ELEMENTARY HIGH SCHOOL COLLEGE

 THE ADVANTAGES OF MARKET
SEGMENTATION
 1. segmentation forces the marketer to be aware of
realities in the market.
 2. segmentation provides clues in the design of products
and marketing programs that will reach the prospective
customers.
 3. segmentation can help identify opportunities for new
product development.
 4. segmentation can help improve the strategic allocation
of marketing resources.
The Process of Segmenting Markets

1. identification of market segments in terms of

characteristics of prospective customers they
contain.
Segmenting the Motorcycle Market in a City

Segment No. Need Dimension Customer-related Nickname of

(benefit sought) Characteristics Product Market
1 Travel convenience; Young (18 to 21 years The fun lover
distinctive owner old)
ship of asset -unmarried, active, fun-
loving
2 Steady source of Older and more The bread-winner
income; economy mature(21-50 yrs old)
-low income and less
education

3 Travel convenience; Older and more The salaried

Job security mature(21-40 yrs old) employee
-income from salary
-higher education
4 Source of additional Retired(50 yrs old and The retiree
income above)
-income from pension
2. Determination of whether and to what extent
there are differences in the needs or benefits
sought by customers in the various segments.

3. Evaluation of the present and future

attractiveness of each segments.
BASES FOR MARKET SEGMENTATION

There are many ways of segmenting a market.

The best way is that which will suit the purpose of
the company or the marketer.
Markets may be segmented through any of the
four major categories: (1) geographic; (2)
demographic; (3) psychographic; and (4)
behavioral.
Geographic Segmentation

Requires dividing the market into different

geographical units like nations, regions,
provinces, cities, towns, or barangays. A
multinational company, for instance, may
segment its market into nations and treat each
country as unique.
Demographic Segmentation

Refers to dividing the market into

segments on the basis of demographic
variables like age, sex, family size, family
life cycle, income, occupation,
education, religion, race, and nationality
Psychographic Segmentation

Refers to the classification of the buyers or

consumers by some psychological
characteristics they posses in common.
They may be grouped according to social
class or lifestyle.
 Behavior Segmentation
 Is a term that refers to the grouping of buyers on the basis of
their knowledge, attitude, use, or response to a product.
Buyer behavior may be segmented according to various
categories namely:
 1. Purchase occasion
 2. benefits sought
 3. user status
 4. usage rate
 5. loyalty status
 6. readiness stage
 7. attitude toward product
Requirements for Effective
Segmentation
To be useful and effective, market segmentation
must meet the following requirements:
1. It must be measurable
2. It must be substantial
3. It must be accessible
4. It must be actionable
 Measurable

 The variables of a particular segment must be measurable. For

instance, if a segment is defined as men who are college
graduates and are currently employed, it would be relatively
easy to find information about the number of such men in the
population. It may also be easy to obtain information about
their number per age bracket.
Substantial

The segment must be large or wide enough to

be economically feasible. A narrow segment
consists of members with highly identical needs,
making it easier to design an appropriate
marketing program. A narrow segment,
however, will have fewer members and sales
potentials will be lower.
Accessible

Segmentation will be useful only if the segment

members can be reached economically by a
pre-designed marketing effort. This is possible if
the segment members are concentrated in
certain geographic areas, buy their needs at
particular stores, and is exposed to certain
media.
Actionable

For segmentation to be useful, the firm must

have the ability to serve the various segments. It
must be able to develop and implement
separate marketing programs for each
segment. Firms without efficient resources will
not benefit from segmentation.
SELECTING TARGET MARKETS

1. Size
- In choosing a market segment, it must be large
enough to be worth serving. Size, however, does
not necessarily refer to the number of potential
buyers but the volume of sales that may be
generated.
2. Expected growth

There are markets that are not currently

attractive but some of these may be expected
to grow in the future. An example is the solo ride
motorcycle market which is expected to grow
fast because of increasing oil prices.
3. Competitive position

The presence of the competition in the segment

considered lowers the firm’s chance of
successfully making profits. The strength of the
competition must be thoroughly analyzed.
4. Cost of reaching the segment

A market segment that is chosen must be easily

reached by the firm. If marketing efforts to reach
it will be too expensive, it may jeopardize profits,
and in that case, it must be not chosen.
 5. Compatibility with the firm’s
objectives and resources

If the firm does not have enough resources to

serve a prospective segment, the segment must
not be selected.