Identifying market segments

Companies cannot connect with all costumers in large, broad, or diverse markets.

They need to identify the market segments they can serve effectively. This decision requires a keen
understanding of consumer behavior and careful strategic thinking about what makes each segment
unique and different.

To compete more effectively, many companies are now embracing target marketing.

Effective target marketing requires that marketers

1. Identify and profile distinct groups of buyers who differ in their needs and wants (Market
segmentation)
2. Select one or more market segments to enter (Market targeting)
3. For each target segment, establish, communicate, and deliver thr right benefit(s) for the
company’s market offering (Market positioning)

Market segmentation, targeting, and positioning are known as the “STP” of marketing. This chapter will
focus on the first two steps; Chapter 10 Discusses the third step. Chapters 11 & 12 describe how
effective market segmentation, targeting, and positioning can build strong brands that grow over time
and withstand competitive attacks.

Bases forSegmenting Consumer Markets

Market segmentation divides a market into well-defined slices. A market segment consists of a group of
customers who share a similar set of needs and wants. The marketer’s task is to identify the appropriate
number and nature of market segments and decide which one(s) to target.

We use two broad groups of variables to segment consumer markets. Some researchers define
segments by looking at descriptive characteristics-geographic, demographic, and psychographic-and
asking whether these segments exhibit different needs or product responses. For example, they might
examine the differing attitudes of “professionals,” “blue collars,” and other groups toward, say, “safety”
as a product benefit.

Other researchers define segments by looking at behavioral considerations, such as consumer responses
to benefits, usage occasions, or brands, then seeing whether different characteristics are associated with
each consumerresponse segment. For example, do people who want “quality” rather than “low price” in
an automobile differ in their geographic, demographic, and/or psychographic makeup?

Regardless of which type of segmentation scheme we use, the key is adjusting the marketing program to
recognize customer differences.
The 4 basic types of market segmentation are:

1. Demographic

2. Psychographic

3. Geographic

4. Behavioral