Chapter 8

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 KNOWLEDGE
1. Understand levels of market segmentation
2. Explain Bases for segmenting consumer and business markets
3. Describe market targeting
OBJECTIVES

1. Classify levels of market segmentation

SKILL

2. Apply to analyzing some characteristics of segmentation

1. Have an active and positive attitude in class

ATTITUDE

2. Realize the importance of understanding market segment

levels

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 01 Levels of market segmentation

02
CONTENTS
TABLE OF

Bases for segmenting consumer markets

03 Bases for segmenting business markets

04 Market targeting

05 Market debate & discussions

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Chapter Questions

“ 1. What are the different levels of market segmentation?

2. How can a company divide a market into segments?
3. How should a company choose the most attractive
target markets?
4. What are the requirements for effective segmentation?

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Levels of market
segmentation

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Baby Boomers: A Lucrative Market

Born between 1946-1964 (46-54 ages)

Total : 76 million ≈ ¼ US population, but
controlling ¾ of US wealth
1 in 5 were actively resisting the aging process:
sales of hair replacement and hair coloring aids,
health club membership, skin-tightening creams, and
organic foods have all soared.
52% of boomers are willing to change brands, in
line with the population.

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What is the difference between Gen Z and Gen Y?

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Level of marketing segmentation- Mass marketing

Ford’s Model T, Coca-coca followed

a Mass Market Approach

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Level of marketing segmentation-
Micromarketing

Segments

Niche
Local areas

Individuals

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Segment marketing

•A market segment consists of a

group of customers who share a
similar set of needs and wants.
• Segment is partly fiction, in that
not everyone wants exactly the
same thing => Flexible
marketing offering

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Flexible Marketing Offerings
(Proposed by Anderson & Narus)

1. Naked solution: Product and

service elements that all segment
members value

▰ Discretionary options: Some

segment members value options but
not all

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Preference Segments

1. Homogeneous preferences exist when consumers want the

same things
2. Diffused preferences exist when consumers want very different
things
3. Clustered preferences reveal natural segments from groups
with shared preferences

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Niche Marketing

•A niche is a more narrowly defined customer

group seeking a distinctive mix of benefits.
•Niches are identified by dividing a segment
into subsegments.
• HERTZ, AVIS, ALAMO and others specialized in
airport rental cars for business and leisure travelers
•ENTERPRISE attacked the low-budget, insurance
replacement market: customers whose cars have
been wrecked and stolen.

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Niche Marketing

Gather.com: A Niche Social Networking Site

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The Long Tail

1. Chris Anderson explains the long tail equation:

▻ The lower the cost of distribution, the more you can
economically offer without having to predict demand;
▻ The more you can offer, the greater the chance that you
will be able to tap latent demand for minority tastes;
and
▻ Aggregate enough minority taste, and you may find a
new market.

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Local Marketing

1. Local marketing reflects a growing trend called grassroots

marketing: Marketing activities concentrates on getting as close
and personally relevant to individual customers as possible.
▻ In 2004, Baskin-Robbins dropped all TV advertising for its ice-cream
specialty stores for the first time in 17 years to focus on “three-mile
marketing,” with more emphasis on local events and promotions.

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Local Marketing

Baskin Robbins Focuses on Local Marketing

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Individual marketing

1. The ultimate level of segmentation leads to “segments of one,”

“customized marketing,” or “one-to-one marketing.”
2. Today customers are taking more individual initiative in
determining what and how to buy.
3. Customerization combines operationally driven mass
customization with customized marketing in a way that empowers
consumers to design the product and service offering of their
choice.

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The constraints of Customerization

1. Very difficult to implement for complex products such as

automobiles.
2. Able to raise the cost of goods by more than the
customer is willing to pay.
3. Customers cannot cancel the order after the company
has started work in the product.
4. The product may be hard to repair and have little sales
value.
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Bases for segmenting
consumer markets

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Segmenting Consumer Markets

Geographic

Demographic

Psychographic

Behavioral

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8.1:Major segmentation Variables for
consumer markets in the U.S

1. Geographic region 1. Generation

2. City or metro size 2. Nationality
3. Density 3. Social classes
4. Climate 4. Psychological lifestyle
5. Demographic age 5. Personality
6. Family size 6. Behavioral occasions
7. Family life cycle 7. Benefits
8. Gender 8. User status
9. Income 9. Usage rate
10. Loyalty status
10. Occupation
11. Readiness stage
11. Education
12. Attitude toward product
12. Religion Race
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Geographical segmentation

1. Geographic segmentation calls for dividing the market into

different geographical units such as nations, states, regions,
counties, cities, or neighborhoods.
2. Some approaches combine geographic data with
demographic data to yield even richer descriptions of
consumers and neighborhoods.
3. Craritas’ PRIZM NE model

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Claritas’ PRIZM NE

1. PRIZM (Potential Rating Index by Zip Markets) NE classifies over

half a million U.S residential neighborhoods into 14 distinct
groups and 66 distinct lifestyle segments based on the following
groups of factors:
▻ Education and affluence
▻ Family life cycle
▻ Urbanization
▻ Race and ethnicity
▻ Mobility

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Demographic Segmentation

Age & life cycle

Life stage

Gender

Income

Generation

Social class
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Demographic Segmentation- Age and
life-cycle stages

1. Consumers wants and abilities change with age.

▻ Toothpaste brands such as Crest and Colgate offer three main lines of
products to target kids, adults, and older consumers.
2. Life stage: Life stage defines a person’s major concern, such as
going through a divorce, going into a second marriage, taking
care of an older parent…
▻ These life stages present opportunities for marketers who can help
people cope with their major concerns.

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Demographic Segmentation- Gender

1. Men and women have different attitudes and behave differently,

based partly on genetic makeup and partly on socialization.
▻ Clothing, hairstyling, cosmetics, magazines…
2. It’s not enough to tout a product as masculine or feminine.
Hypersegmentation is now occurring within both male and
female personal care segments.
▻ Example : Dove Campaign for Real Beauty targets women who don’t look like, or
aspire to look like, fashion models.

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“Dove Campaign For Real Beauty”

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Demographic segmentation-Income

1. Income segmentation is long-standing practice in such

categories as automobiles, clothing, cosmetics, financial
services, and travel.
2. Increasingly, companies are finding their markets are
“hourglass shaped”.
▻ General Motors was “caught in the middle”, between highly
engineered German imports in the luxury market and high-value
Japanese and Korean models in the economy class, and has seen its
market share continually slide.

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Demographic segmentation-Generation

1. Generation: Each segmentation is profoundly influenced by the

times in which it grows up: the music, movies, politics, and
defining events of that period (cohort). People share the same
major cultural, political, and economic experiences and have
similar outlooks and values.

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Demographic Segmentation- Social Class

1.Social class: has a strong influence

on preferences in cars, clothing,
home furnishings, leisure activities,
reading habits, and retailers.

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Toyota Scion-Targets Gen Y Consumers
(born 1977-1994)

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Psychographic segmentation

1. In psychographic segmentation, buyers are divided into

different groups on the basis of psychological/personality
traits, lifestyle, or values. People within the same demographic
group can exhibit very different psychographic profiles.
2. One of the most popular commercially available classification
systems based on psychographic measurements is SRI
Consulting Business Intelligence’s (SRIC-BI) VALSTM
framework.

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Figure 8.1The VALS Segmentation System

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Behavioral Segmentation

1. Behavioral segmentation is based on buyers’:

▻ Knowledge of a product
▻ Attitude toward a product
▻ Use of a product
▻ Response to a product.

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Behavioral Segmentation- decision roles

▻ Initiator
▻ Influencer
▻ Decider
▻ Buyer
▻ User
▻ Be careful of change of buying roles

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Behavioral Segmentation- Behavioral
variables

1. Occasions: defined in terms of the time of day, week,

month, year or in terms of other well-defined temporal
aspects of consumer’s life.
▻ New year, Christmas, Valentine’s day, birthdays, weddings,
anniversaries, etc.
2. Benefits: Note every one buys a product wants the
same benefits from it.

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Behavioral Segmentation- Behavioral
variables

1. User status:
▻ nonusers, ex-users, potential users, first-time users, and
regular users.
2. Usage rate:
▻ Light, medium and heavy product users
3. Buyer readiness stage:
▻ Unaware, aware, informed, desire, intended to buy.

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Loyalty Status

Hard-core
loyals

Split loyals

Shifting
loyals

Switchers
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The Brand Funnel Illustrates Variations
in the Buyer-Readiness Stage

Aware
Ever tried
Recent trial
Occasional user
Regular user
Most often used
Aware

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Behavioral Segmentation- Attitudes

1. Five attitudes about products are

▻ Enthusiastic
▻ Positive
▻ Indifferent
▻ Negative
▻ Hostile

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Figure 8.3 Behavioral Segmentation
Breakdown

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The Conversion Model

USERS
NONUSERS
Convertible Strongly
unavailable
Shallow Weakly
unavailable
Average
Ambivalent

Entrenched
Available

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Bases for segmenting
business markets

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Bases for Segmenting Business Markets

Demographic

Operating Variable

Purchasing Approaches

Situation factors

Personal Characteristics

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MARKET TARGETING

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Market Targeting

1. Once the firm has identified its market-segment opportunities,

it must decide how many and which ones to target.
2. Marketers are increasingly combining several variables in an
effort to identify smaller, better-defined target groups.
3. This had led some market researchers to advocate a needs-
based market segmentation approach.

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Steps in Segmentation Process

Needs-based segmentation

Segment identification

Segment attractiveness

Segment profitability

Segment positioning

Segment acid test

Marketing-Mix Strategy
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Effective Segmentation Criteria

Measurable

Substantial

Accessible

Differentiable

Actionable
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Selecting The Market Segments

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M = market, P = Product 51 of 58
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Selecting The Market Segments

M = market, P = Product
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Selecting The Market Segments

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Crest Whitestrips Follows a Multisegment
Strategy

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Additional considerations

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Figure 8.5 Segment-by-Segment Invasion Plan 55 of 58
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Pepsi used Megamarketing in India

Megamarketing is the
strategic coordination
of economic,
psychological ,
political, and public
relations skills to gain
the cooperation of a
number of parties in
order to enter or
operate in a given
market.

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Ethical choice of market targets

1. Marketers must target segments carefully to avoid consumer

backlash.
▻ Some consumer may resist being labeled (single package, product for the old)
▻ Taking unfair advantage of vulnerable groups (children), or disadvantaged
groups (poor people).
▻ Promoting potentially harmful products.

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Effective Targeting Requires…

1. Identify and profile distinct groups of buyers who differ in their

needs and preferences
2. Select one or more market segments to enter
3. Establish and communicate the distinctive benefits of the market
offering

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MARKETING DEBATE

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Marketing Debate

1. Is mass marketing dead?

Take a position:
1. Mass marketing is dead.

or

2. Mass marketing is still a viable way to build

a profitable brand.

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Marketing Discussion

1. Think of various product categories.How would you classify

yourself in terms of the various segmentation schemes?
2. How would marketing be more or less effective for you
depending upon the segment involved?

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