6

WEEK SIX
Targeting Attractive Market Segments

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Decision Processes

o Market segmentation
o Target marketing
o Positioning

6-2
The Concept of Market Segmentation

6-3
Most Markets are Heterogeneous

o Variation among market segments in

o Product preferences
o Size and growth in demand
o Media habits
o Hence markets are:
o Complex entities that can be defined
(segmented) in a variety of ways

6-4
Importance of Market Segmentation

o Causes:
o Population growth has slowed and more
product markets are maturing
o Social and economic forces as expanding
disposable incomes
o Higher educational levels
o Increasing importance toward
microsegmentation
o Implementing sharply focused marketing
programs
6-5
Objectives of Market Segmentation

o Identifying a homogeneous segment

that differs from other segments
o Specifying criteria that define the
segment
o Determining segment size and
potential

6-6
How are Market Segments Best Defined?

o Segmentation decisions are based on:

o Who the customers are?
o Where they are?
o How they behave?

6-7
Demographic Segmentation

‡ Common attributes:
‡ Age
‡ Sex
‡ Income
‡ Occupation
‡ Education
‡ Race and ethnic origin
o Industrial market segmentation:
o Macrosegmentation
o Microsegmentation
6-8
Geographic Segmentation

o Trade area
o Area within a geographically defined
region
o Geodemographic Segmentation
o Involves both demographic and
geographic factors

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Behavioral Segmentation

o Consumer needs
o Product usage and purchase influence
o Lifestyle
o Organizational behavioral attributes

6-10
Criteria for Segmentation

Segment
Segment must
must be
be large
large
Substantiality
Substantiality enough
enough to
to warrant
warrant aa special
special
marketing
marketing mix.
mix.
Identifiability
Identifiability Segments
Segments must
must be
be identifiable
identifiable
Measurability
Measurability and
and their
their size
size measurable.
measurable.
Members
Members ofof targeted
targeted segments
segments
Accessibility
Accessibility must
must be
be reachable
reachable with
with
marketing
marketing mix.
mix.
Unless
Unless segment
segment responds
responds to to aa
Responsiveness
Responsiveness marketing
marketing mix
mix differently,
differently, no
no
separate
separate treatment
treatment isis needed.
needed.
6-11
Targeting Strategies

o Three common strategies are:

o Niche-market
o Mass-market
o Growth-market

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Niche-market Strategy

o Used to serve segments seeking

specialized benefits
o Designed to avoid direct competition
with larger firms

6-13
Mass-market Strategy

o Objective:
o Capture sufficient volume to gain
economies of scale and a cost advantage
o Approach:
o Design separate products and marketing
programs for differing segments
o Requires substantial resources,
including production capacity, and
good mass-marketing capabilities
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Growth-market Strategy

o Often target one or more fast-growth

segments
o Often favored by smaller competitors
to avoid direct confrontations
o Requires strong R&D and marketing
capabilities

6-15