Consumer Behavior

Market segmentation and target marketing

Market Segmentation
and
Target Marketing
 Consumer Behavior
Market segmentation and target marketing

Outline
• The concept of market segmentation
• Segmentation bases
– general vs. product-specific
– observable vs. latent
• Data sources for segmentation
• Segmentation criteria
• Target marketing
 Consumer Behavior
Market segmentation and target marketing

Market segmentation
Partitioning a market that is characterized
by heterogeneity in consumers’ response
to the marketing mix into more homo-
geneous submarkets.
 Consumer Behavior
Market segmentation and target marketing

Differences in consumer response

Response

B
B2

A2 A
A1
B1

marketing
x1 x2 variable
 Consumer Behavior
Market segmentation and target marketing

Segmentation bases
General Product-specific

Observable Behavioral characteris-

features tics (user status, loyalty
Observable of the physical and status, usage rate)
social environment Usage situations
(esp. demographics)
Awareness
Values, lifestyles and
Attitude (beliefs,
Latent psychographics,
evaluations)
personality variables
Intentions
 Consumer Behavior
Market segmentation and target marketing

In-class exercise:
Segmentation in the toothpaste market
Go to the web sites for Crest and Colgate and
study what types of toothpastes they offer to
appeal to different market segments. Use the
information provided on the web sites, or any
other information that you can find, to come
up with a list of variables that companies use
to segment the toothpaste market.
 Consumer Behavior
Market segmentation and target marketing

Segmentation bases
General Product-specific

Observable Behavioral characteris-

features tics (user status, loyalty
Observable of the physical and status, usage rate)
social environment Usage situations
(esp. demographics)
Awareness
Values, lifestyles and
Attitude (beliefs,
Latent psychographics,
evaluations)
personality variables
Intentions
 Consumer Behavior
Market segmentation and target marketing

Segmentation by behavioral characteristics

Category users
• Other brand loyals • Other brand switchers

Our consumers
Heavy users Light users
Loyals
Switchers

Nonusers (potential users)

Nonusers (Potential users)
 Consumer Behavior
Market segmentation and target marketing

Examples of behavioral segmentation

Nonusers Light Medium Heavy

(% of total/ (% of total/ (% of total/
(% of total)
volume) volume) volume)
Tooth-
paste 4.1 33.5/16.0 42.7/48.3 19.8/35.6

39.8 21.2/4.0 21.4/23.9 17.7/72.1

Cola

69.8 13.3/1.7 9.6/18.4 8.3/79.9

Beer

Toilet 4.8 30.0/6.9 23.7/16.5 41.5/76.6

 Consumer Behavior
Market segmentation and target marketing

Segmentation bases
General Product-specific

Observable Behavioral characteris-

features tics (user status, loyalty
Observable of the physical and status, usage rate)
social environment Usage situations
(esp. demographics)

Values, lifestyles and Awareness

Latent psychographics, Attitude (beliefs,
personality variables evaluations)
Intentions
 Consumer Behavior
Market segmentation and target marketing

Attitudinal segmentation
+++ -

Whitens Expensive
teeth

Crest Colgate
Gentle on
gums Tooth-
paste
-/+ Fights
Mentadent
cavities
++
 Consumer Behavior
Market segmentation and target marketing

Segmentation bases
General Product-specific

Observable Behavioral characteris-

features tics (user status, loyalty
Observable
of the physical and status, usage rate)
social environment Usage situations
(esp. demographics)
Values, lifestyles and Awareness
psychographics, Attitude (beliefs,
Latent
personality variables evaluations)
Intentions
 Consumer Behavior
Market segmentation and target marketing

The VALS 2 typology

 Consumer Behavior
Market segmentation and target marketing

VALS 2
VALS classifies consumers on the basis of two dimensions:
– self-orientation (primary motivation):
• Ideals (principle-oriented consumers): those who are guided in
their choices by abstract, idealized criteria (quality, integrity,
tradition);
• Achievement (status-oriented consumers): those who are guided
in their choices by the expected reactions, concerns, and desires
of groups to which they belong or aspire to belong;
• Self-expression (action-oriented people): those who are guided
in their choices by a desire for social or physical activity, variety,
and risk taking;
– resources: refers to the full range of psychological,
physical, demographic, and material means and capacities
people have to draw upon (age, education, income, self-
confidence, energy, intellectualism, novelty seeking,
innovativeness, impulsiveness, etc);
 Consumer Behavior
Market segmentation and target marketing

A segmentation scheme for toothpastes

Sensories Sociables Worriers Independents

principal flavor, product brightness of decay low price
benefit appearance teeth prevention
behavioral users of spear- smokers heavy users heavy users
characteristics mint flavor
demographics children teens, young large families men
adults
psycho- high self- high hypochondriac, high autonomy,
graphics involvement, sociability, conservative value-oriented
hedonistic active
 Consumer Behavior
Market segmentation and target marketing

Data sources for segmentation

• Simmons Market Research Bureau
– Product usage (by category and brand)
– Demographics
– Media behavior
– Psychographics
• Mediamark Research
– Similar to Simmons
 Consumer Behavior
Market segmentation and target marketing

1998 Mediamark data for toothpaste

(user status by gender)
Base: Total U.S. A B C D
Adults (‘000) ‘000 % down % across Index

All adults 195,192 187,163 100.0 95.9 100

Men 93,553 88,936 47.5 95.1 99

Women 101,639 98,228 52.5 96.6 101

 Consumer Behavior
Market segmentation and target marketing

1998 Mediamark data for toothpaste

(usage rates overall and for Glamour readers)
Total U.S.
Base: (195,192) A B C D
Adults Glamour ‘000 % down % across Index
(12,741)
Heavy
users in n.a. 38,596 100.0 19.8 100
general
Heavy
users,
n.a. 3,619 9.4 28.4 144
Glamour
readers
Note: Heavy users use toothpaste more than 14 times per week.
 Consumer Behavior
Market segmentation and target marketing

1998 Mediamark data for toothpaste

(usage rates overall and for Glamour readers)
Total U.S.
Base: (195,192) A B C D
Adults Glamour ‘000 % down % across Index
(12,741)
Light
users in n.a. 65,292 100.0 33.5 100
general
Light
users,
n.a. 3,074 4.7 24.1 72
Glamour
readers
Note: Light users use toothpaste fewer than 11 times per week.
 Consumer Behavior
Market segmentation and target marketing

• A segment of consumers interested in sporty cars would

like to purchase a car like the Porsche 911 at the price of a
Mazda Miata.
• A researcher investigating response to sales promotion
offers distinguishes coupon-prone from rebate-prone
shoppers, but finds that consumers in the coupon-prone
segment are as responsive to rebates as to coupons.
• There are two kinds of consumers who see higher prices in
a positive light, those who associate higher prices with
higher quality and those who feel good about being able to
buy products that not everybody can afford. However, a
producer of luxury goods has no way of knowing whether
a given consumer belongs to the first or second group.
 Consumer Behavior
Market segmentation and target marketing

• A company discovers that dieters are extremely fickle in

their food preferences over time.
• The break-even point for selling a piece of software at a
profit is 100,000 units and the company feels that there is a
segment of consumers who are interested in this product.
However, it proves difficult to determine how big the
potential market is.
• It is known that some consumers are more responsive to
factual appeals and others are more responsive to
emotional appeals. An advertiser has developed factual
and emotional ads to target the two kinds of consumers,
but cannot find print media to reach the two segments.
 Consumer Behavior
Market segmentation and target marketing

Segmentation criteria
differentiable: market response is homogeneous within
segments and heterogeneous between segments;
identifiable: individuals can be assigned to a segment based
on a meaningful profile of segment characteristics;
stable: segments and segment membership do not change in
the short run;
measurable: the size and purchasing power of relevant
segments can be determined;
actionable: the company is able to develop a marketing mix
that will appeal to the members of a given segment;
accessible: members of a segment can be reached with the
appropriate marketing mix;
 Consumer Behavior
Market segmentation and target marketing

Target marketing
• evaluation of the attractiveness of each market
segment and selection of target segments;
• evaluation of market segments based on
– market segment characteristics
– industry competition
– company objectives and resources
• selection of target segments can result in
– undifferentiated (mass) marketing
– differentiated marketing
– concentrated marketing