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8
Identifying
Market Segments
and Targets

Chapter Questions


What are the different levels of market
segmentation?
How can a company divide a market into
segments?
What are the requirements for effective
segmentation?
How should business markets be segmented?
How should a company choose the most
attractive target markets?

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

8-2

Effective Targeting Requires…


Identify and profile distinct groups of buyers
who differ in their needs and preferences
Select one or more market segments to enter
Establish and communicate the distinctive
benefits of the market offering

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

8-3

Publishing as Prentice Hall 8-4 . Copyright © 2011 Pearson Education. Inc.What is a Market Segment? A market segment consists of a group of customers who share a similar set of needs and wants.

The University of Newcastle .Segmentation Market segmentation is the process by which a market is divided into distinct subsets of customers with similar needs and characteristics that lead them to respond in similar ways to product offerings and marketing programs 6-5 Copyright  2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker Prepared by Anton Kriz.

Most Markets are Heterogeneous    6-6 Variation among market segments in  Product preferences  Size and growth in demand  Media habits  Competitor activities Hence markets are:  Complex entities that can be defined (segmented) in a variety of ways The critical issue is to find an appropriate segmentation method that will facilitate target marketing Copyright  2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker Prepared by Anton Kriz. The University of Newcastle .

social and economic forces such as expanding disposable incomes.Market Realities Making Segmentation Imperative Key reasons:  Firstly. a shift toward microsegmentation  Finally. education levels. employment patterns. The University of Newcastle . population growth has slowed and many markets are maturing  Secondly. firms are implementing sharply focused marketing programs and targeting of their services 6-7 Copyright  2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker Prepared by Anton Kriz. changing lifestyles  Thirdly.

Specify characteristics that define the segment 3. Determine segment size and potential Copyright  2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker Prepared by Anton Kriz. Identify a homogeneous segment that differs from other segments 2.Objectives of Market Segmentation  6-8 There are three important objectives concerning the market segmentation process 1. The University of Newcastle .

The University of Newcastle .How are Market Segments Best Defined?   6-9 Segmentation decisions are based on:  Who the customers are?  Where they are?  How they behave? Marketers divide segmentation descriptors into four major categories:  Demographic  Geographic  Behavioral  Psychographic Copyright  2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker Prepared by Anton Kriz.

How are Market Segments Best Defined?   6-10 Segmentation decisions are based on:  Who the customers are?  Where they are?  How they behave? Marketers divide segmentation descriptors into four major categories:  Demographic  Geographic  Behavioral  Psychographic Copyright  2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker Prepared by Anton Kriz. The University of Newcastle .

Publishing as Prentice Hall 8-11 .Segmenting Consumer Markets Geographic Demographic Psychographic Behavioral Copyright © 2011 Pearson Education. Inc.

Publishing as Prentice Hall 8-12 .Geographic Segmentation Copyright © 2011 Pearson Education. Inc.

Geographic Segmentation    Finding out: Where they are  Where consumers live. poor people in other area) 6-13 Copyright  2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker Prepared by Anton Kriz. work and shop makes a big difference to their buying characteristics Trade area  Area within a geographically defined region Geo-demographic Segmentation  Involves both demographic and geographic factors (wealthy people in a certain area. The University of Newcastle .

The University of Newcastle . cultural and ethnic background Industrial market segmentation:   Macrosegmentation (such as age of firms.Demographic Segmentation   Finding out: Who they are and what they do Common attributes:        Age Gender Income Occupation Education Religious. sex. ex: age. size) Microsegmentation (characteristics of the individuals who influence the purchasing decision. position within the organization) 6-14 Copyright  2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker Prepared by Anton Kriz.

Publishing as Prentice Hall 8-15 .Demographic Segmentation        Age and life cycle Life stage Gender Income Generation Social class Race and Culture Copyright © 2011 Pearson Education. Inc.

Age and Lifecycle Stage Copyright © 2011 Pearson Education. Publishing as Prentice Hall 8-16 . Inc.

Inc. Publishing as Prentice Hall 8-17 .Gender and Income Copyright © 2011 Pearson Education.

Inc. Publishing as Prentice Hall 8-18 .Generational Influences Copyright © 2011 Pearson Education.

Inc.Race and Culture Copyright © 2011 Pearson Education. Publishing as Prentice Hall 8-19 .

Psychographic Segmentation and The VALS Framework Copyright © 2011 Pearson Education. Publishing as Prentice Hall 8-20 . Inc.

loyalty. The University of Newcastle . purchase influence)    6-21 Psychographic and lifestyle Social class Organizational or firm behavioral attributes Copyright  2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker Prepared by Anton Kriz.Behavioral Segmentation   Finding out: How they behave  There is a number of insightful ways in which marketers have segmented markets in behavioral terms Behavior descriptors include:  Consumer needs (benefit sought)  Product-related (product usage.

Behavioral Segmentation Based on Needs and Benefits Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall 8-22 .

Inc.Behavioral Segmentation: Decision Roles Initiator Influencer Decider Buyer User Copyright © 2011 Pearson Education. Publishing as Prentice Hall 8-23 .

Inc. Publishing as Prentice Hall Buyer-Readiness Loyalty Status Attitude 8-24 .Behavioral Segmentation: Behavioral Variables     Occasions Benefits User Status Usage Rate    Copyright © 2011 Pearson Education.

Publishing as Prentice Hall 8-25 .2 Example of a Brand Funnel Copyright © 2011 Pearson Education.Figure 8. Inc.

Publishing as Prentice Hall 8-26 . Inc.Loyalty Status     Hard-core Split loyals Shifting loyals Switchers Copyright © 2011 Pearson Education.

Figure 8. Publishing as Prentice Hall 8-27 .3 Behavioral Segmentation Breakdown Copyright © 2011 Pearson Education. Inc.

Publishing as Prentice Hall 8-28 . Inc.Segmenting for Business Markets      Demographic Operating variable Purchasing approaches Situational factors Personal characteristics Copyright © 2011 Pearson Education.

Steps in Segmentation Process        Need-based segmentation Segment identification Segment attractiveness Segment profitability Segment positioning Segment acid test Market mix strategy Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall 8-29 .

Effective Segmentation Criteria      Measurable Substantial Accessible Differentiable Actionable Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall 8-30 .

Inc. Publishing as Prentice Hall 8-31 .Porter’s 5 Forces Model Threat of Rivalry Threat of Buyer Bargaining Power Threat of Supplier Bargaining Power Threat of Substitutes Threat of New Entrants Copyright © 2011 Pearson Education.

4 Possible Levels of Segmentation Copyright © 2011 Pearson Education. Publishing as Prentice Hall 8-32 .Figure 8. Inc.

Inc.For Review      What are the different levels of market segmentation? How can a company divide a market into segments? What are the requirements for effective segmentation? How should business markets be segmented? How should a company choose the most attractive target markets? Copyright © 2011 Pearson Education. Publishing as Prentice Hall 8-33 .