Chapter 9

Identifying Market
Segments and Selecting
Target Markets
PowerPoint by Karen E. James
Louisiana State University - Shreveport

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 0 in Chapter 9
 Objectives

 Learn how companies identify the

segments that make up a market.
 Understand the criteria companies
use to choose the most attractive
market segments.

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 1 in Chapter 9
 Target Marketing

 Target marketing requires marketers to

take three major steps:
– Market segmentation: Identifying and profiling
distinct groups of buyers who differ in their
needs and preferences.
– Market targeting: Selecting one or more market
segments to enter.
– Market positioning: Establishing and
communicating the key distinctive benefit(s) of
the company’s market offering to each target.
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 2 in Chapter 9
 Using Market Segmentation

 Mass marketing is losing popularity

 Micromarketing can be undertaken at
four levels:
– Segment marketing
– Niche marketing
– Local marketing
– Individual marketing

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 3 in Chapter 9
 Using Market Segmentation

 Three patterns of preference

segments are typically identified:
– Homogeneous preferences
– Diffused preferences
– Clustered preferences

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 4 in Chapter 9
 Using Market Segmentation

Needs-based Segmentation Process

 Needs-based  Segment
segmentation profitability
 Segment  Segment
identification positioning
 Segment  Segment
attractiveness “acid test”
 Marketing-mix strategy
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 5 in Chapter 9
 Using Market Segmentation

 Useful market segments share

certain characteristics:
– Measurable
– Substantial
– Accessible
– Differentiable
– Actionable

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 6 in Chapter 9
Segmenting Consumer Markets

Bases for  Nation or

Segmentation country
 State or region
 Geographic  City or metro
 Demographic size
 Psychographic  Density
 Behavioral  Climate
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 7 in Chapter 9
Segmenting Consumer Markets

 Age, race, gender

Bases for
Segmentation  Income, education
 Family size
 Geographic  Family life cycle
 Occupation
 Demographic
 Religion, nationality
 Psychographic
 Generation
 Behavioral
 Social class
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 8 in Chapter 9
Segmenting Consumer Markets

Bases for  Lifestyle

Segmentation – Activities
– Interests
 Geographic – Opinions
 Demographic  Personality
 Psychographic  Core values
 Behavioral
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 9 in Chapter 9
Segmenting Consumer Markets

Bases for  Occasions

Segmentation  Benefits
 User status
 Geographic  Usage rate
 Demographic  Loyalty status
 Psychographic  Buyer-readiness
 Behavioral  Attitude
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 10 in Chapter 9
Segmenting Consumer Markets

 Multi-attribute segmentation via

geoclustering combines multiple
variables to identify smaller, better-
defined target groups
– PRIZM Geoclustering system uses
demographic, geographic, lifestyle, and
behavioral characteristics

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 11 in Chapter 9
Segmenting Business Markets

Bases for Segmentation

 Operating  Situational
variables factors
 Purchasing  Personal
approaches characteristics
 Demographic variables
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 12 in Chapter 9
Segmenting Business Markets

 Rackman and Vincentis proposed a

segmentation scheme that classifies
business buyers into three groups:
– Price-oriented customers: best served
via transactional selling
– Solution-oriented customers: best
served by means of consultative selling
– Strategic-value customers: best served
by means of enterprise selling
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 13 in Chapter 9
 Market Targeting Strategies

 Evaluating and selecting market

segments requires assessing the
segment’s overall attractiveness in
light of company’s objectives and
resources.
 Five patterns of target market
selection can then be considered.

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 14 in Chapter 9
 Market Targeting Strategies

Patterns of Target Market Selection

 Single-segment  Product
concentration specialization
 Selective  Market
specialization specialization
Full market coverage
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 15 in Chapter 9
 Market Targeting Strategies

 Targeting multiple segments may

result in cost economies
 Supersegment targeting may be
appropriate
 Blocked markets often require
megamarketing countermeasures
 Be aware of ethical concerns
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 16 in Chapter 9