CUSTOMERS,

SEGMENTATION, AND
TARGET MARKETING
Chapter 5, “Marketing Strategy - Text and Cases” by
Ferrell and Hartline, 6 t h Ed.
Buyer Behavior in Consumer Markets
◦ Is often irrational and unpredictable as consumers often say one thing but do another.
◦ Can progress through five stages: need recognition, information search, evaluation of
alternatives, the purchase decision, and post-purchase evaluation.
◦ Does not always follow these stages in sequence and may even skip stages enroute to the purchase.
◦ May be characterized by loyalty where consumers simply purchase the same product that they
bought last time.
◦ Often involves a parallel sequence of activities associated with finding the most suitable
merchant. That is, while consumers consider which product to buy, they also consider where they
might buy it.
◦ May occur with only one merchant for a particular product category if the consumer is fiercely
loyal to that merchant.
Excellent book on this : “Buyology” by Martin Lindstrom.
Exhibit 5.1 The Consumer Buying Process
Overall, the consumer buying process can be affected by:
◦ The complexity of the purchase and decision-making process.

◦ Individual factors, such as age, life cycle, occupation, socioeconomic status, perceptions,
motives, interests, attitudes, opinions, and lifestyles.

◦ Social influences such as culture, subculture, social class, family, reference groups, and
opinion leaders.

◦ Situational influences, such as physical and spatial influences, social and interpersonal
influences, time, purchase task or usage, and the consumer’s disposition.
EXHIBIT 5 . 2 Common Situational Influences in the Consumer Buying
Process
Business Markets
◦ Purchase products for use in their operations, such as acquiring raw
materials to produce finished goods or buying office supplies or leasing cars.
◦ Four types of buyers: commercial markets, reseller markets, government
markets, and institutional markets.
◦ Possess four unique characteristics not typically found in consumer markets:
◦ The buying center: economic buyers, technical buyers, and users.
◦ Hard and soft costs: soft costs (downtime, opportunity costs, human resource costs)
are just as important as hard costs (monetary price or purchase costs).
◦ Reciprocity: business buyers and sellers often buy products from each other.
◦ Mutual dependence: sole-source or limited-source buying makes both buying and
selling firms mutually dependent.
The Business Buying Process
◦ Follows a well-defined sequence of stages, including:
(1) Problem recognition
(2) Development of product specifications
(3) Vendor identification and qualification
(4) Solicitation of proposals or bids
(5) Vendor selection
(6) Order processing
(7) Vendor performance review

◦ Can be affected by several factors, including environmental conditions,

organizational factors, and interpersonal and individual factors.
Market Segmentation
◦ Is the process of dividing the total market for a particular product or
product category into relatively homogeneous segments or groups.
◦ Should create groups where the members are like each other, but where
the groups are dissimilar from each other.
◦ Involves a fundamental decision of whether to segment at all?
◦ Typically allows firms to be more successful since they can tailor
products to meet the needs or requirements of a particular market
segment.
Traditional Segmentation Approach - Mass Marketing
◦ Involves no segmentation whatsoever as it is aimed at the total (whole) market
for a particular product.
◦ Is an undifferentiated approach that assumes that all customers in the market
have similar needs and wants that can be reasonably satisfied with a single
marketing program.
◦ Works best when the needs of an entire market are relatively homogeneous.
◦ Is advantageous in terms of production efficiency and lower marketing costs.
◦ Is inherently risky because a standardized product is vulnerable to competitors
that offer specialized products that better match customers’ needs.
Traditional Segmentation Approach - Differentiated Marketing
◦ Involves dividing the total market into groups of customers having relatively common or
homogeneous needs and attempting to develop a marketing program that appeals to one
or more of these groups.

◦ May be necessary when customer needs are similar within a single group, but their needs
differ across groups.

◦ Involves two options: the multi-segment approach and the market concentration
approach.
Traditional Segmentation Approach - Niche Marketing

◦ Involves focusing marketing efforts on one small, well defined market segment or niche
that has a unique, specific set of needs.

◦ Requires that firms understand and meet the needs of target customers so completely
that, despite the small size of the niche, the firm’s substantial share makes the segment
highly profitable.
Individualized Segmentation Approaches
◦ Have become viable due to advances in technology, particularly communication technology
and the internet.
◦ Are possible because organizations now can track customers with a high degree of specificity.
◦ Allow firms to combine demographic data with past and current purchasing behavior so they
can tweak their marketing programs in ways that allow them to precisely match customers
needs, wants, and preferences.
◦ Will become even more important in the future because their focus on individual customers
makes them critical to the development and maintenance of long-term relationships.
◦ Can be prohibitively expensive to deliver.
◦ Depend on two important considerations: automated delivery of the marketing program and
personalization.
Individualized Segmentation Approaches - One-to-one Marketing
◦ Involves the creation of an entirely unique product or marketing program for each
customer in the target segment.

◦ Is common in business markets where unique programs and/or systems are designed for
each customer.

◦ Is growing rapidly in consumer markets, particularly in luxury and custom-made

products, as well as in services and electronic commerce.
Individualized Segmentation Approaches – Mass Customization
◦ Refers to providing unique products and solutions to individual customers on a mass
scale.

◦ Is now cost effective and practical due to advances in supply chain management,
including real-time inventory control.

◦ Is used quite often in business markets, especially in electronic procurement systems.

Individualized Segmentation Approaches – Permission Marketing
◦ Is different from one-to-one marketing because customers choose to become a member
of the firm’s target market.
◦ Is commonly executed via the opt-in e-mail list, where customers permit a firm to send
periodic e-mail about goods and services that they have an interest in purchasing.
◦ Has a major advantage in that customers who opt-in are already interested in the goods
and services offered by the Firm.
◦ Allows a firm to precisely target individuals, thereby eliminating the problem of wasted
marketing effort and expense.
Successful Segmentation

◦ Requires that market segments fulfill five related criteria. Segments

must be identifiable and measurable, substantial, accessible,
responsive, and viable and sustainable.

◦ Involves avoiding ethically and legally sensitive segments that are

profitable but not viable in a business sense.

◦ Involves avoiding potentially viable segments that do not match the

firm’s expertise or mission.
 Identifying Market Segments
◦ Involves selecting the most relevant variables to identify and define the target market, many of which
come from the situation analysis section of the marketing plan.
◦ Involves the isolation of individual characteristics that distinguish one or more segments from the total
market. These segments must have relatively homogeneous needs.
◦ In consumer markets involves the examination of factors that fall into one of four general categories:
1. Behavioral segmentation; the most powerful approach because it uses actual consumer behavior or product usage
helps to make distinctions among market segments.
2. Demographic segmentation; which divides markets using factors such as gender, age, income, and education.
3. Psychographic segmentation; which deals with state-of-mind issues such as motives, attitudes, opinions, values,
lifestyles, interests, and personality.
4. Geographic segmentation; which is often most useful when combined with other segmentation variables. One of the
best examples is geodemographic segmentation, or geo-clustering.
◦ In business markets it is often based on type of market (commercial, reseller, government, or
institutional) or on other characteristics such as type of organization, organizational characteristics,
benefits sought or buying processes, personal or psychological characteristics, or relationship intensity.
 Target Marketing Strategies
◦ Are based on an evaluation of the attractiveness of each segment and whether each offers
opportunities that match the firm’s capabilities and resources.

◦ Include:
1. Single segment targeting
2. Selective targeting
3. Mass market targeting
4. Product specialization
5. Market specialization

◦ Should also consider issues related to noncustomers such as reasons why they do not buy
and finding ways to remove obstacles to purchase.
 7 Segmentation Mistakes That Are Costing Your Business
Money
Sreeram Sreenivasan
www.singlegrain.com
◦ https://www.singlegrain.com/marketing-strategy/7-segmentation-mistakes-th
at-will-cost-your-business-money/

Example video about hyper targeting inside store / outlet:

IPSOS – Who are your consumers?
https://1drv.ms/v/s!AqGU8rTZVTchrHYD3HRxU9L88Wmm?e=ViOryI