Identifying Market Segments and Target Customers

12/7/2023
Discussion Questions
1 1. What are the different levels of market

segmentation?
6 2. In what ways can a company divide a
Identifying Market market into segments?
3. What are the requirements for effective
Segments and Target segmentation?
Customers 4. How should business markets be
segmented?
5. How should a company choose the most
attractive target markets?
16/e Copyright © 2023 Pearson Education, Inc. Publishing as Prentice Hall 6-2
Marketing Strategy Marketing Strategy
• Market segmentation is dividing a market into • Differentiation creating a unique offering that
distinct groups of buyers with different needs, sets your company & gives CA
characteristics, or behaviors and who might
require separate MKT strategies • Positioning determining a distinctive place you
want your product to occupy in the minds of
• Market targeting (or targeting) consists of target customers
evaluating each segment’s attractiveness &
selecting the best ones to enter
Copyright © 2023 Pearson Education, Inc. Publishing as Prentice Hall 6-3 Copyright © 2023 Pearson Education, Inc. Publishing as Prentice Hall 6-4
Marketing Strategy Segmenting Consumer Markets
Geographic
Demographic
FIGURE: Designing a Customer-Driven Market Strategy

Psychographic Behavioral
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12/7/2023
Segmenting Consumer Markets Geographic Segmentation
Major Segmentation Variables for Consumer Markets

• Divides a market into different geographical
Nations, regions, states, counties, cities, units
Geographic neighborhoods, population density
– Firms choose to operate in one or a few or all
(urban, suburban, rural), climate
areas, considering local differences
Age, life-cycle stage, gender, income,
Demographic occupation, education, religion, ethnicity, – Hyperlocal social MKT targets consumers in
generation specific communities or neighborhoods using digital
& social media
Psychographic Lifestyle, personality
– Some approaches combine geographic data with
Behavioral Occasions, benefits, user status, usage demographic data
rate, loyalty status
Demographic Segmentation Age and Life-cycle Stage
• Wants & abilities change with age

• Divides a market into groups based
on demographic variables – Crest and Colgate offer 3 lines of products to
target kids, adults, and other older consumers
• The most popular bases
• Can be very tricky variables & guard
– Easier to measure than other variables
against stereotypes
– Highly associated to consumer needs – Target market of some products may be
and wants psychologically young
– Ford introduced inexpensive sports car—
Mustang
Age and Life-cycle Stage Gender
• People in the same part of the

life-cycle may differ in their life
stage
̶ Life stage is a person’s major
concern like going through a divorce,
taking care of an old parent or living Women:
together ̶ Influence 80% of consumer
̶ Opportunities lie in coping with the purchases
major concerns of life-stage ̶ Make 75% of new home decisions
̶ Purchase 60% of cars
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Income Gender and Income
• Victoria’s Secret studied

women & learned that
while women need
underwear, they want
lingerie
• Tricky variable & guard
against stereotypes • It went on to develop
the retail chain very
̶ Blue-collar workers’ color
TV buying successfully based on
this insight
̶ Economical car buying
Race and Culture Psychographic Segmentation
Hispanic Americans
Multicultural marketing • Divides buyers into groups based
tailoring MKT programs Asian Americans on psychological traits, lifestyle, or
to resonate with specific values
cultural groups African Americans ̶ People in the same demographic
• Requires targeted MKT group can exhibit very different
activities like different LGBT psychographic profiles
msgs, media, channels, ̶ It also consumers’ sexual orientation &
and so on gender identity (lesbian, gay, bisexual,
& transgender (LGBT) market)
Behavioral Segmentation Behavioral Segmentation
• Divide buyers on the basis of their knowledge,

attitudes, uses, or responses to a product • Occasion segmentation divides buyers
based on the occasions when buyers get the
̶ Behavior variables may be the best starting point for
building market segments
idea to buy, actually make purchase, or use
the item
• Variables are ̶ Time of day, week, month, year (Mother’s Day)
̶ Occasions
̶ Benefits sought
• Benefit segmentation divides buyers based
on the different benefits they seek from a
̶ User status
product
̶ Usage rate
̶ Loyalty status
̶ Buyer-readiness stage
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Behavioral Segmentation Consumer Attitudes

• User Status—Nonusers, ex-users, potential users,
1st time users, regular users
• Usage Rate—Light, medium, heavy
̶ Heavy beer drinkers account for 87% of beer
consumption
• Loyalty Status—Hard-core, split, shifting,
switchers
• Buyer-Readiness Stage— Unaware, aware, Enthusiastic Positive Indifferent Negative Hostile
informed, interested, intend to buy
• Attitude—Enthusiastic, positive, indifferent,
negative, hostile
Behavioral Segmentation Breakdown Using Multiple Segmentation Bases
• Marketers rarely use only one or a few

variables
̶ They often use multiple segmentation bases to
create more precise target groups
̶ Each segment has distinct demographics, lifestyles,
preferences, and buying patterns
Segmenting Business Markets Segmenting International Markets
Demographic Industry, company size, location Geographic Location:

Grouping countries by regions
Operating Variables Technology, user status, Economic Factors:

customer capabilities Grouping countries by level of income of population or level
of economic development
Purchasing Approach Power structure, nature of
existing relationship Political-legal Factors:
Grouping countries by the type & stability of govt, receptivity to
Situational Factors Urgency, specific application, foreign firms, monetary regulations, & amount of bureaucracy
size of order
Cultural Factor:
Personal Characteristics Buyer-seller similarity, loyalty, Grouping countries by language, values, religion, etc.
risk attitude
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Segmenting International Markets Effective Segmentation Criteria
To be useful, market segments must be:
Intermarket segmentation (cross-market

segmentation) identifies consumer groups with
Measurable Accessible Substantial
similar needs & buying behavior across multiple
countries or markets.
Differentiable Actionable
Market Targeting Strategic Targeting (1)
• The process of identifying customers for whom • Involves identifying which customers to
the company will optimize its offering serve & which customers to ignore
• When designing, communicating, & delivering • Guided by 2 key factors:

its offering ̶ Target compatibility reflects a company’s ability
to create value for customers
̶ Which customers will it prioritize?
̶ Target attractiveness reflects customers’
̶ Which customers will it ignore? potential to create value for the company
Tactical Targeting (2) Evaluating Market Segments (3)
• Identifying effective & cost-efficient ways to

• Segment size & growth
reach strategically viable customers
̶ ―Right size and growth‖
• Guided by 2 key factors
• Structural factors
̶ Effectiveness is a company’s ability to reach all
target customers ̶ Competitors, new entrants, substitute products,
power of buyers, & power of suppliers
̶ Cost efficiency is a company’s ability to deploy
its resources to reach only its target customers • Company objectives & resources
̶ Matching with LT objectives, skills, & resources
ST & TT are not mutually exclusive; but integrally related to
identify target customers
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Selecting Target Market Segments (4) Undifferentiated (Mass) Marketing
• A market-coverage strategy in which a firm

decides to ignore segment differences and
go after the whole market with one offer
̶ Focuses on common needs rather than what’s
different
̶ Applies mass MKT
Fig: Market Targeting Strategy
Differentiated or Segmented Marketing Concentrated (Niche) Marketing
• A market-coverage strategy in which a firm

targets several market segments & designs • A market-coverage strategy in which a
firm goes after a large share of one or a
separate offers for each
few niches
̶ Goal is to achieve higher sales & stronger position
̶ Firm achieves a strong market position because
̶ More expensive than undifferentiated MKT of its greater knowledge of consumer needs in
the niches & the special reputation
̶ Appropriate when firms lack resources
Micro Marketing Choosing a Targeting Strategy

• Company’s resources
̶ Limited resources & concentrated MKT
• Tailoring products & MKT programs to the • Degree of product variability
needs & wants of specific individuals & local ̶ Uniform products & undifferentiated MKT
customer segments • Market variability
̶ Local marketing is tailoring MKT programs to the ̶ Same tastes & undifferentiated MKT
needs & wants of local customers
• PLC stage
̶ Individual marketing is tailoring MKT programs to
̶ Introductory stage & undifferentiated MKT
the needs & preferences of individual customers
• Competitors’ MKT strategies
̶ When competitors use differentiated or concentrated
MKT, undifferentiated MKT can be suicidal
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Socially Responsible Target Marketing Socially Responsible Target Marketing
• Smart targeting makes companies more • Children are especially vulnerable audience
efficient & effective
̶ Marketers of soft drinks & fast food have been
̶ Targeting helps the company satisfy consumer criticized for their MKT efforts directed toward
needs most profitably children
̶ Targeting benefits consumers in fulfilling their needs ̶ Some digital technologies may make children even
with tailored offerings more vulnerable
• Avoid targeting of disadvantaged or • Marketers use sophisticated analytical

vulnerable consumers with controversial or techniques using personal info
potentially harmful products ̶ This helps track consumers’ digital movements &
̶ Fast-food chains have generated controversy build detailed customer profiles
Socially Responsible Target Marketing Megamarketing

• Blocked markets are characterized by high
• All targeting is not bad entry barriers
̶ Colgate-Palmolive's- Colgate Junior toothpaste • Megamarketing is the strategically
coordinated application of economic,
• Issue is not who is targeted but rather how &
for what they are targeted
psychological, political, & public relations skills
to gain cooperation of a number of parties to
• Socially responsible MKT calls for operate in a given market
segmentation & targeting that serve the ─ Encompasses power & public relations beyond the
interests of the company & those targeted 4 Ps
─ Used by Pepsi to enter India
Pepsi used Megamarketing in India Marketing Debate
Is mass marketing dead?

Take a position:
1. Mass marketing is dead.
2. Mass marketing is still a viable way to build
a profitable brand.

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12/7/2023

1 1. What are the different levels of market

Marketing Strategy Marketing Strategy

Marketing Strategy Segmenting Consumer Markets

FIGURE: Designing a Customer-Driven Market Strategy

Segmenting Consumer Markets Geographic Segmentation

Major Segmentation Variables for Consumer Markets

Demographic Segmentation Age and Life-cycle Stage

• Wants & abilities change with age

Age and Life-cycle Stage Gender

• People in the same part of the

Income Gender and Income

• Victoria’s Secret studied

Race and Culture Psychographic Segmentation

Behavioral Segmentation Behavioral Segmentation

• Divide buyers on the basis of their knowledge,

Behavioral Segmentation Consumer Attitudes

Behavioral Segmentation Breakdown Using Multiple Segmentation Bases

• Marketers rarely use only one or a few

Segmenting Business Markets Segmenting International Markets

Demographic Industry, company size, location Geographic Location:

Operating Variables Technology, user status, Economic Factors:

Segmenting International Markets Effective Segmentation Criteria

To be useful, market segments must be:

Intermarket segmentation (cross-market

Market Targeting Strategic Targeting (1)

• When designing, communicating, & delivering • Guided by 2 key factors:

Tactical Targeting (2) Evaluating Market Segments (3)

• Identifying effective & cost-efficient ways to

Selecting Target Market Segments (4) Undifferentiated (Mass) Marketing

• A market-coverage strategy in which a firm

Differentiated or Segmented Marketing Concentrated (Niche) Marketing

• A market-coverage strategy in which a firm

Micro Marketing Choosing a Targeting Strategy

Socially Responsible Target Marketing Socially Responsible Target Marketing

• Avoid targeting of disadvantaged or • Marketers use sophisticated analytical

Socially Responsible Target Marketing Megamarketing

Pepsi used Megamarketing in India Marketing Debate

Is mass marketing dead?

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