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Market Segmentation

and Target Markets

chapter 7
Harcourt, Inc.

Objectives
Understand

the concepts: market,


segmentation, and target markets
Learn the advantages and
disadvantages of target marketing
Explain the steps in target market
selection
Dr. Rosenbloom

Objectives
Discuss

segmentation criteria,
strategies, bases, and information
sources
Understand market profiling and
positioning strategies
Discuss differences for business
and international marketing
Dr. Rosenbloom

What is a market?
Individuals

or organizations

who:

Are willing, able, and capable of


purchasing a firms product
Segmentation is critical because
demand is often heterogeneous
Dr. Rosenbloom

What is market segmentation?

Market

Segmentation

Process of dividing a large


market into smaller target
markets, or customer groups
with similar needs and/or
desires
Dr. Rosenbloom

Market Segmentation
Mass
Market
Niche

Standardized
Marketing
Mix

Niche

Micromarketing

Micromarketing
Dr. Rosenbloom

The
Individual

Personalization

Target Marketing
Advantages

Easier analysis of potential and actual


consumers
Tailoring of products to market
Assessment of demand potential
Identify competing products
Increased sales effectiveness and cost
efficiencies
Product positioning and easy identification
of opportunities
Dr. Rosenbloom

Target Marketing
Disadvantages

Increased marketing costs


Personalization can become
burdensome to manage
Faux segmentation may be viewed
cynically
Narrow segmentation can impact
brand loyalty
Ethics and stereotyping issues
Dr. Rosenbloom

Target Market Selection


Identify Total Market
Determine Need for
Segmentation
Determine Bases for
Segmentation
Assess Potential
Profitability of Segment
and Select Target Segment

Profile Each Selected


Segment

Select Positioning
Strategy
Develop and Implement
Appropriate Marketing Mix

Dr. Rosenbloom

Monitor, Evaluate and


Control

Market Criteria
Segmentable

markets are:

Heterogeneous
Measurable
Substantial
Actionable
Companies must be able to respond to
preferences with an appropriate marketing mix

Accessible
Market must be efficiently reachable
Dr. Rosenbloom

External Factors

Stage

in product life cycle


Competition
Product specific issues
Market for the product

Dr. Rosenbloom

Segmentation Variables
Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Segmentation

Benefits-Sought

Dr. Rosenbloom

Demographic Segmentation
Income Level

Age

Family

Ethnicity

Education
Dr. Rosenbloom

Demographic Segmentation
Age

Some products are


marketed to
specific age
groups

Dr. Rosenbloom

Demographic Segmentation
Age

Some products are


marketed to
specific age
groups

Dr. Rosenbloom

Demographic Segmentation
Income

Level

Some products are


marketed to
consumers with
different income
levels

Dr. Rosenbloom

Demographic Segmentation
Income

Level

Some products are


marketed to
consumers with
different income
levels

Dr. Rosenbloom

Demographic Segmentation
Bartles and James

Dr. Rosenbloom

Hal Riney and


Partners

Demographic Segmentation
Family

Some products are


marketed to
consumers with
special family
consideration
Family Life Cycle
Bachelor, marriage,
married with children,
retired, etc.
Dr. Rosenbloom

Functions Of Advertising
KinderCare

Dr. Rosenbloom

The Martin Agency

Demographic Segmentation
Family

Some products are


marketed to
consumers with
special family
consideration
Family Life Cycle
Bachelor, marriage,
married with children,
retired, etc.
Dr. Rosenbloom

Demographic Segmentation
Education

Some products are


marketed to
consumers with
certain educational
levels

Dr. Rosenbloom

Demographic Segmentation
Ethnicity

Some products are


marketed to
consumers from
specific ethnic
backgrounds

Dr. Rosenbloom

Demographic Segmentation
Ethnicity

Some products are


marketed to
consumers from
specific ethnic
backgrounds

Dr. Rosenbloom

Segmentation Variables
Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Segmentation

Benefits-Sought

Dr. Rosenbloom

Geographic Segmentation
When

an organization localizes its


marketing efforts to accommodate the
unique needs of specific geographic
regions

Dr. Rosenbloom

Geographic Segmentation
When

an organization localizes its


marketing efforts to accommodate the
unique needs of specific geographic
regions

Dr. Rosenbloom

Geographic Segmentation
Metropolitan

Statistical Areas

An urbanized area of 50,000 and a total


metropolitan area population of at least
100,000
Charlottesville, Virginia

Dr. Rosenbloom

Geographic Segmentation
Primary

Metropolitan Statistical

Areas

An urbanized county or cluster of


counties with a population of more
than 1 million
Gary/Hammond, Indiana

Dr. Rosenbloom

Geographic Segmentation
Consolidated

Metropolitan
Statistical Area

A metropolitan area that includes at


least two PMSAs
Baltimore, Maryland and Washington,
D.C.

Dr. Rosenbloom

Segmenting Consumer Markets


Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Segmentation

Benefits-Sought

Dr. Rosenbloom

Psychographic Segmentation
Grouping customers together
based on social class,
lifestyles and psychological
characteristics (attitudes,
interests and opinions)
PRIZM analysis from Claritas

Dr. Rosenbloom

Segmenting Consumer Markets


Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Segmentation

Benefits-Sought

Dr. Rosenbloom

Benefits-Sought Segmentation
Markets

can be
segmented based
on the benefits that
consumers desire
from using a
specific product

Dr. Rosenbloom

Benefits-Sought Segmentation
American Pork
Council

Dr. Rosenbloom

Bozell, Incorporated

Segmenting Consumer Markets


Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Segmentation

Benefits-Sought

Dr. Rosenbloom

Situation Segmentation
Purchase

situation or occasion

Physical surroundings
Social surroundings
Temporal perspective
How much time to make a purchase?

Task definition
Pre-purchase attitude
Dr. Rosenbloom

Segmenting Consumer Markets


Demographic
Segmentation

Segmentation

Geographic
Segmentation

Situation
Segmentation

Psychographic

Behavior/Usage

Segmentation

Segmentation

Benefits-Sought

Dr. Rosenbloom

Behavior/Usage Segmentation

Markets can be segmented by how often or how


heavily consumers use a specific product

80/20 Principle - 80% of revenue generated by 20%


of customers
Light Users
80%

Heavy Users
20%

Dr. Rosenbloom

Segmentation Data
Internal

sources

In-house customer and marketing databases


Data mine to explore patterns and
relationships in collected data

External

sources

Lists of catalog/magazine subscribers


U.S. Census information
Mediamark, CACI Marketing Systems, etc.
Dr. Rosenbloom

Positioning Strategy
Differentiation

through:

Price/quality emphasize value


in terms of
quality, price, or
both

Dr. Rosenbloom

Positioning Strategy
Differentiation

Differentiation

through:

through:

Product attributes characteristics as a


positioning base
Product usage positioning based
on a products
typical use
Dr. Rosenbloom

Symbol - use of a
symbol or icon to
position a product
in the consumer
consciousness

Positioning Strategy
Differentiation

through:

Product user - the


typical user of a
product

Dr. Rosenbloom

Positioning Strategy
Differentiation

through:

Product class positioning against


another type of
product or product
class

Dr. Rosenbloom

Positioning Strategy
Differentiation

through:

Competition comparisons to a
products
competition
(directly or
indirectly)
Dr. Rosenbloom

Segmenting Business Markets


Demographics

Industry size, growth potential, etc.

Operating

Characteristics

Technology, brand-user status, etc.

Purchasing

Approaches

Purchasing policies, size of orders,


etc.
Dr. Rosenbloom

Segmenting Business Markets


Product

Use or Usage Situation

The way the product will be used


and customer service levels
required

Situational

Factors

Urgency, special product uses

Buyers

Personal Characteristics
Dr. Rosenbloom

Segmenting Global Markets


Economic

Stage of development in a host


country

Political/Legal

Regulations and laws

Cultural

Language barriers, differences in


consumer customs
Dr. Rosenbloom

Segmenting Global Markets


Some

segments transcend
national borders

Rich around the world


Older and comfortable
Indulged kids
Emerging middle class
Women employed outside the
house
Dr. Rosenbloom

Market Segmentation

Differentiated
Concentrated
Undifferentiated

Dr. Rosenbloom

Differentiated Marketing
Differentiated

Marketing

An organization
targets multiple
market
segments and
develops
segment
specific mixes
Dr. Rosenbloom

Concentrated Marketing
Concentrated

Marketing

When an
organization
concentrates its
marketing
efforts on a
smaller segment
of a larger
market
Dr. Rosenbloom

Undifferentiated Marketing
Undifferentiated

Marketing

An organization
develops one
strategy
appropriate for
all members of
the total market

Dr. Rosenbloom