Segmenting and

Targeting Markets
Market Segmentation

Describe the
characteristics
of markets and
market segments
A Market Is...
1) people or organizations with

2) needs or wants, and with

3) the ability and

4) the willingness to buy.

A group of people that lacks any one of these

characteristics is NOT a market.
Market Segmentation
People
Peopleor
ororganizations
organizationswith
withneeds
needsor
orwants
wants
Market
Market and
andthe
theability
abilityand
andwillingness
willingnesstotobuy.
buy.

AAsubgroup
subgroupofofpeople
peopleorororganizations
organizationssharing
sharing
Market
Market one
oneorormore
morecharacteristics
characteristicsthat
thatcause
causethem
them
Segment
Segment to
tohave
havesimilar
similarproduct
productneeds.
needs.

The
Theprocess
processofofdividing
dividingaamarket
marketinto
into
Market
Market meaningful,
meaningful,relatively
relativelysimilar,
similar,identifiable
identifiable
Segmentation
Segmentation segments
segmentsor
orgroups.
groups.
LO1 The Concept of Market
Segmentation

Beyond the Book

The Importance of Market
Segmentation

Explain the
importance
of market
segmentation
The Importance of
Market Segmentation
 Markets have a variety of product needs and
preferences

 Marketers can better define customer needs

 Decision makers can define objectives and

allocate resources more accurately

LO2
Criteria for Successful
Segmentation

Discuss criteria for

successful market
segmentation

LO3
Criteria for Segmentation

Segment must be large enough to

Substantiality
warrant a special marketing mix.

Identifiability Segments must be identifiable and

and Measurability their size measurable.

Members of targeted segments must

Accessibility be reachable with marketing mix.

Unless segment responds to a marketing

Responsiveness mix differently, no separate treatment is
needed.

LO3
Bases for Segmenting
Consumer Markets

Describe the bases

commonly used
to segment
consumer markets

LO4
Bases for Segmentation
Geography
Geography

Demographics
Demographics

Psychographics
Psychographics

Benefits
Benefits Sought
Sought

Usage
Usage Rate
Rate

LO4
Geographic Segmentation

 Region of the country or world

 Market size

 Market density

 Climate

© iStockphoto.com/Pawel Gaul / ©
iStockphoto.com/Contour99
LO4
Benefits of
Regional Segmentation

 New ways to generate sales in sluggish

and competitive markets
 Scanner data allow assessment of best-
selling brands in region
 Regional brands appeal to local
preferences
 Quicker reaction to competition

LO4
Demographic Segmentation

Age
Age

Gender
Gender

Income
Income

Ethnic
Ethnic

Family
Familylife
lifecycle
cycle
LO 4
Ethnic Segmentation
 Largest ethnic markets in
U.S. are:
 Hispanic Americans
 African Americans
 Asian Americans

Companies must make products

geared toward specific ethnic
groups as they continue to
expand.

© Foodpix/Jupiterimages/Getty Images
LO4
Family Life Cycle

Age

Marital Children
Status

LO4
LO4
Exhibit 8.1
Family Life Cycle
Psychographic
Segmentation

Psychographic
Psychographic
Segmentation
Segmentation

Market segmentation on the basis of

personality, motives, lifestyles, and
geodemographics.

LO4
Bases for Psychographic
Segmentation

Personality
Personality

Motives
Motives

Lifestyles
Lifestyles

Geodemographics
Geodemographics

LO4
Personality and Motive Segmentation
Personality
Personality

Reflects a person’s traits, attitudes,

and habits.

Motives
Motives

Marketers might appeal to emotional,

rational, or status motives, among others.

LO4
Lifestyle Segmentation

 How time is spent

 Importance of things around them
 Beliefs
 Socioeconomic characteristics

LO4
Geodemographic Segmentation

Geodemographic
Geodemographic
Segmentation
Segmentation
Segmenting
Segmentingpotential
potential
customers
customersinto
into
neighborhood
neighborhoodlifestyle
lifestyle
categories.
categories.

Combines
Combinesgeographic,
geographic,
demographic,
demographic,and
andlifestyle
lifestyle
segmentation.
segmentation.
LO4
Benefit Segmentation

Benefit
Benefit
Segmentation
Segmentation

The process of grouping customers

into market segments according to
the benefits they seek from the
product.

LO4
Usage-Rate Segmentation

Usage-Rate
Usage-Rate Dividing
Dividingaamarket
marketby
bythe
theamount
amount
Segmentation of
Segmentation ofproduct
productbought
boughtor
orconsumed.
consumed.

AAprinciple
principleholding
holdingthat
that20
20
80/20
80/20
Principle percent
percentof
ofall
allcustomers
customersgenerate
generate
Principle
80
80percent
percentof
ofthe
thedemand.
demand.

LO4
Bases for Segmenting
Business Markets

Describe the bases

for segmenting
business markets

LO5
Bases for Segmenting Business
Markets
Producers
Producers

Resellers
Resellers

Government
Government

Institutions
Institutions

Company
Company Buying
Buying
Characteristics
Characteristics Processes
LO5 Processes
Company Characteristics
Important segmentation variables:
 Geographic location
 Type of company
 Company size
 Product use

LO5
Buyer Characteristics
Business
Businesscustomers
customerswho whoplace
placean
an
order
orderwith
withthe
thefirst
firstfamiliar
familiarsupplier
supplierto
to
Satisficers
Satisficers satisfy
satisfyproduct
productandanddelivery
delivery
requirements.
requirements.

Business
Businesscustomers
customerswho whoconsider
consider
numerous
numeroussuppliers,
suppliers,both
bothfamiliar
familiarand
and
Optimizers
Optimizers unfamiliar,
unfamiliar,solicit
solicitbids,
bids,and
andstudy
studyall
all
proposals
proposalscarefully
carefullybefore
beforeselecting
selecting
one.
one.

LO5
Buyer Characteristics
Demographic
Demographiccharacteristics
characteristics

Decision
Decisionstyle
style

Tolerance
Tolerancefor
forrisk
risk

Confidence
Confidencelevel
level

Job
Jobresponsibilities
responsibilities

LO5
Steps in Segmenting a Market

List the steps

involved in
segmenting
markets

LO6
Steps in Segmenting Markets

1 2 3 4 5 6
Select Choose Select Profile Select Design,
a market bases descriptors and target implement,
for for analyze markets and
study segmen- segments maintain
tation marketing
mix

Note that steps 5 and 6 are actually marketing activities

that follow market segmentation (steps 1 through 4).

LO6
Strategies for Selecting
Target Markets

Discuss alternative
strategies for
selecting target
markets

LO7
Strategies for Selecting
Target Markets
A group of people or organizations for which
Target
Target an organization designs, implements, and
maintains a marketing mix intended to meet
Market
Market the needs of that group, resulting in mutually
satisfying exchanges.

LO7
Strategies for Selecting
Target Markets

Undifferentiated Concentrated Multisegment

Strategy Strategy Strategy
LO 7
 Undifferentiated Targeting Strategy

A marketing approach that views the market

Undifferentiated
Undifferentiated as one big market with no individual segments
Targeting
Targeting and thus
Strategy
Strategy
uses a single
marketing mix.

LO7
 Undifferentiated Targeting
Strategy

Advantage:

 Potential savings on production

and marketing costs

Disadvantages:

 Unimaginative product offerings

 Company more susceptible to

Undifferentiated
Strategy competition

LO7
 Concentrated Targeting
Strategy
A strategy used to select one
Concentrated
segment of a market for targeting
Targeting Strategy
marketing efforts.

Niche
One segment of
a market.

LO7
 Concentrated Targeting
Strategy
Advantage:

 Concentration of resources
 Meets narrowly defined segment
 Small firms can compete
 Strong positioning

Disadvantages:
 Segments too small, or
changing
Concentrated  Large competitors may
Strategy
market to niche segment
LO7
 Multisegment Targeting
Strategy

A strategy that
Multisegment chooses two or more
Targeting well-defined market
Strategy segments and
develops a distinct
marketing
mix for each.

LO7
 Multisegment Targeting
Strategy
Advantage:

 Greater financial success

 Economies of scale

Disadvantages:
 Higher costs
 Cannibalization

Multisegment
Strategy
LO7
 Costs of Multisegment Targeting
Strategy
 Product design costs

 Production costs
 Promotion costs
 Inventory costs
 Marketing research costs
 Management costs
 Cannibalization
Multisegment
Strategy
LO7
One-to-One Marketing

Explain one-to-one
marketing

LO8
One-to-One Marketing
One-to-One
One-to-One Has
Hasaa Goal
Goal of…
of…
Marketing
Marketing is...
is...

Individualized
Individualized Cost
Cost Reduction
Reduction

Information-Intensive
Information-Intensive Customer
Customer Retention
Retention

Long-Term
Long-Term Increased
Increased Revenue
Revenue

Personalized
Personalized Customer
Customer Loyalty
Loyalty

LO8
One-to-One Marketing
Trends
Trends

•One-size-fits all marketing no longer relevant

•Direct and personal marketing efforts will grow to meet

needs of busy consumers.

•Consumers will be loyal to companies that have

earned—and reinforced—their loyalty.

•Mass-media approaches will decline as technology

allows better customer tracking.

LO8
Positioning

Explain how and why

firms implement
positioning strategies
and how product
differentiation
plays a role

LO9
Positioning

Positioning is…
developing a specific marketing mix to
influence potential customers’ overall
perception or a brand, product line, or
organization in general.

LO9
Effective Positioning
1. Assess the positions
occupied by competing
products

2. Determine the dimensions

underlying these positions

3. Choose a market position

where marketing efforts
will have the greatest
impact

LO9
Product Differentiation

Product Differentiation is…

a positioning strategy that some firms
use to distinguish their products from
those of competitors.

© SuperJam
LO9
Perceptual
Mapping
Perceptual Mapping is…
a means of displaying or graphing, in
two or more dimensions, the location
of products, brands, or groups of
products in customers’ minds.

LO9
Exhibit 8.3
Perceptual Map and Positioning
Strategy for Saks’ Department
Stores

LO 9 SOURCE: Vanessa O’Connell, “Park Avenue Classic or Soho Trendy?” Wall Street Journal, April 20, 2007, B1.
Positioning Bases
Attribute
Price and Quality
Use or Application
Product User
Product Class
Competitor
Emotion
LO9
Repositioning

Repositioning is…
changing consumers’ perceptions of a
brand in relation to competing brands.

LO9
 Chapter 6 Videos

Beyond the Book ReadyMade – Segmenting and

Targeting Markets
How does ReadyMade communicate the
demographics of its reader base to advertisers
who want to see specific statistics that do not
easily represent ReadyMade’s target market?

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