Chapter # 10

Identifying market
segments and selecting
Targeting markets
 Definitions of Segmentation
and Targeting

Market Segmentation : Dividing a market into

distinct groups of buyers on the basis of needs,
characteristics, or behavior who might require
separate products or marketing mixes.

Market Targeting : The process of evaluating each

market segment’s attractiveness and selecting one
or more segments to enter.
 Levels of market segmentation

The starting point is mass marketing – seller engage

in mass mass production, mass distribution and mass
promotion of one product for all buyer.
Example: Model T- Ford (black), Coke in a 6.5
ounce bottle
• Lower cost, lower price or higher margin (Benefit)
• Mass marketing is dying
Thus many companies are turning to micro marketing
at one of the four levels: segments, niches, local areas
and individual’
 Levels of market segmentation

A. Segment marketing: A market segment consists of

a group of customers who share similar set of wants.
Segment vs. sector –
Advantages:
• Fine- tuned product and service
• Appropriate price
• Best distribution and communication channel
• Clear picture of its competitors
A flexible market offering consists of two parts :
(Anderson and Narus )
• A naked solution
• Discretionary option
 Levels of market segmentation

B. Niche marketing: a more narrowly defined

segment seeking a distinctive mix of benefit. Marketer
usually identify niches by dividing a segment into sub-
segment.

A niche is attractive if –
• customer in the niche have a distinct set of needs
• they will pay premium to the firm
• do not attract other competitors
• has size, profit and growth potential
 Levels of market segmentation

C. Local Marketing : Tailoring marketing programs to

the needs and wants of local customer groups (trading
area, neighborhood.)
Example: local news- paper, Unilever, Citibank
• increases manufacturing and marketing cost (disadv)

D. Individual marketing:Tailoring products and

marketing programs to suit the taste of individual
customers - also labeled “segments of one”
“customized Marketing” and “one-to-one marketing”
 Requirements for
Effective Segmentation
• Size, purchasing power,
Measurable profiles of segments can be
measured.
• Segments must be effectively
Accessible
reached and served.

• Segments must be large

Substantial or profitable enough
to serve.
• Segments must respond
Differential differently to different marketing
mix elements & actions.
• Must be able to attract and
Actionable serve the
segments.
 Bases for segmenting
consumer marketing
Geographic segmentation
Country, country region, city ete

Demographic segmentation
Age, gender, income, occupation, education,
religion

Psychographic segmentation
Lifestyle, and personality

Behavioral segmentation
Occasions, benefits, user state, user rate, loyalty
status, readiness stage, attitude toward product.
 Geographic segmentation

SEGMENTATION SELECTED SEGMENTATION

BASE VARIABLES
Southwest, Mountain States, pacific,
Region
southern, northern
City or metro Size Major metropolitan areas, small cities,
towns
Density of area Urban, suburban, exurban, rural
Climate Temperate, hot, humid, rainy
 Demographic segmentation

Age Under 6, 6-11,12-19, 20-34, 35-49, 50-64, 65+

Family size 1-2, 3-4, 5-6, 7+

Family life Bachelorhood, Honeymooners Parenthood,

cycle Post-parenthood & Dissolution

Gender Male, female

Under $10,000; $10,000-$15,000; $15,000-

Income $20,000; $20,000-$30,000; $30,000-$50,000;
$50,000-100,000;100,00 and over
 Demographic segmentation (cont.)

Professional and technical, farmer, military,

Occupation retired, students and unemployed

Some high school, high school graduate,

Education some college, college graduate, postgraduate
Religion Muslim, Hindu, catholic, protestant etc.
Race White, black, Asian etc.
Nationality Bangladeshi, Indian, British, American, etc.
Lower- lower, Upper-lower, middle, upper-
Social class
middle, lower- upper, upper- upper
 Psychographic segmentation

Life style Culture -oriented, sport-oriented, outdoor-

oriented

personality Compulsive, gregarious, authoritarian,

ambitious
 Behavioral segmentation

Occasions Regular occasion, special occasion

Benefit Quality, service, economy, speed
User status Non-user, ex-user, potential user, first
time user, regular user
Usage rate Light user, medium, heavy user
Loyalty status None, medium, strong, absolute
Readiness stage Unaware, aware, informed, interested,
desirous, intending to buy
Attitude towards Positive, indifference, negative, hostile
product
 Bases for Segmenting
Business Markets
Demographics
Industry, Company size and Location

Operating Variable
Technology, User-nonuser status, Customer capabilities

Purchasing Approaches
Purchasing-function organization, power structure, Nature of
existing relationships, General purchase policies,Purchasing criteria

Situational Factors
Urgency, Specific application, Size of order

Personal Characteristics
Buyer-seller similarities, Attitude towards risk, Loyalty
 Market Targeting
Target market: A target market consists of a set of buyers
who share common needs or characteristics that the
company decides to serve.
Evaluating Market Segments
 Segment Size and Growth: Analyze sales, growth rates
and expected profitability.
 Segment Structural Attractiveness: Consider effects of
Competitors, Availability of Substitute Products and, the
Power of Buyers & Suppliers.
 Company Objectives and Resources: Company skills &
resources relative to the segment(s). Look for Competitive
Advantages.
 Market Targeting (cont.)

Company can consider the following five patterns of

target market selection.
Single - segment concentration
Selective specialization
Product specialization
Market specialization
Full market coverage
 Single - segment concentration
M1 M2 M3
P1
 A market coverage strategy in
P2 which a firm goes after a large
share of one segment or niches.
P3
 Especially appealing when company resources are limited.
 It generally serve the area that may be unimportant to or
overlooked by large company.
 It is highly profitable and involves higher than normal risks.
 Porsche – sports car market, Volkswagen – small car
market
 Selective specialization

M1 M2 M3
P1
P2
P3

• The firm selects a number of segments

• Each one is attractive
• Their may be little or no synergy among the segments
• Advantage of diversifying the firm’s risk
• Example – A television attracting both young and old
customers
 Product specialization

M1 M2 M3

P1
P2
P3

• A firm produces certain product that is selling to several

segment
• Example – Microscope manufacturer who sells to
universities, Govt. and commercial laboratories.
 Market specialization
M1 M2 M3

P1
P2
P3

• The firm concentrates on serving many needs of a

particular customer group.
• Example – a firm sells an assortment an assortments
of product only to university laboratories
 Full market coverage

M1 M2 M3 • The firm attempts to serve all

P1 customer groups with all the
products they needs
P2 • Only very large firm such as IBM,
General Motors and Coca- cola can
P3 under take the full market coverage.

• A large firm can cover a whole market in two broad ways

A. Undifferentiated Marketing
B. Differentiated Marketing
 A. Undifferentiated Marketing

 A market coverage strategy in which a firm decides to

ignore market segment differences and go after the whole
market with one offer.
 It focuses on what is common in needs of consumer
rather that what is different
 It relies on mass distribution and mass advertising.
 Decreases the total cost and as a result company can
set lower price
 As a result it can easily attract the price sensitive
customer.
 B. Differentiated Marketing
 A market coverage strategy in which a firm decides to
target several market segments and designs separate offer
for each.
 Companies hopes for higher sales and a stronger position
within each market segment.
 It increases costs of doing business. The following costs
are
• Product modification cost
• Manufacturing cost
• Administrative cost
• Inventory cost
• Promotion cost
So company should cautious about over segmentation.