Chapter 4

Identifying Market Segments

and Targets
Learning Objectives
1. Analyze the ways through which a company
divides the consumer market into segments
2. Evaluate the requirements for effective
segmentation.
3. Understand all the different levels of market
segmentation.
Target Marketing
The Target Marketing Process

Discover segments Analyse segment

Identify markets
on the basis of potential & finalise
with unfulfilled
consumer segments to target
needs
characteristics

Create a distinctive Differentiate product

positioning in the minds offering from
of consumers competitors
Business Standard, 22 August 2020
Business Standard, 1 September 2020
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Market segment

A group of customers who share a similar set of

needs and wants

Can a Marketer Create Segments ??

No………Never

Then What does a Marketer do ??

S(h)e just identifies the segments which are pre-existing

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It is so because needs and
segments can never be
created and the role of a
marketer is to identify the
needs and segments and
then offer something that
can satiate these needs.

Needs –> Segments ->

Demand management

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Bases for segmenting consumer markets
Segmenting with hybrid variables
Brands segment on various bases
Geographic Segmentation
• Geographical units
– Nations, states, regions, counties, cities, or
neighborhoods
Nielsen Claritas’ PRIZM (Potential Rating Index by Zip
Markets)
Education and affluence
Family life cycle
Urbanization
Race and ethnicity
Mobility
Demographic Segmentation

Age & life-

Life stage
cycle stage

Race & Gender

culture

Generation Income
• Age and life-cycle stage
– Our wants and abilities change with age
• Life stage
– A person’s major concern (e.g., divorce)
• Gender
– Men and women have
different attitudes and
behave differently
• Income
– Income segmentation is
a long-standing practice
• Generation

Millennials (Gen Y) Gen X

Baby Boomers Silent Generation

18
Psychographic Segmentation
• Buyers are divided into groups on the basis of
psychological/personality traits, lifestyle, or
values
VALS
Innovators. These consumers are on the leading edge of change, have the highest
incomes, and such high self-esteem and abundant resources that they can indulge in
any or all self-orientations. They are located above the rectangle. Image is
important to them as an expression of taste, independence, and character. Their
consumer choices are directed toward the "finer things in life.“

Thinkers. These consumers are the high-resource group of those who are motivated
by ideals. They are mature, responsible, well-educated professionals.
Their leisure activities center on their homes, but they are well informed about what
goes on in the world and are open to new ideas and social change. They have high
incomes but are practical consumers and rational decision makers.

Believers. These consumers are the low-resource group of those who are motivated
by ideals. They are conservative and predictable consumers who favor local
products and established brands. Their lives are centered on family, community,
and the nation. They have modest incomes.

Achievers. These consumers are the high-resource group of those who are

motivated by achievement. They are successful work-oriented people who get their
satisfaction from their jobs and families. They are politically conservative and
respect authority and the status quo. They favor established products and services
that show off their success to their peers.
Strivers. These consumers are the low-resource group of those who are
motivated by achievements. They have values very similar to achievers but
have fewer economic, social, and psychological resources. Style is extremely
important to them as they strive to emulate people they admire.

Experiencers. These consumers are the high-resource group of those who are

motivated by self-expression. They are the youngest of all the segments, with
a median age of 25. They have a lot of energy, which they pour into physical
exercise and social activities. They are avid consumers, spending heavily on
clothing, fast-foods, music, and other youthful favorites, with particular
emphasis on new products and services.

Makers. These consumers are the low-resource group of those who are

motivated by self-expression. They are practical people who value self-
sufficiency. They are focused on the familiar - family, work, and physical
recreation - and have little interest in the broader world. As consumers, they
appreciate practical and functional products.

Survivors. These consumers have the lowest incomes. They have too few
resources to be included in any consumer self-orientation and are thus located
below the rectangle. They are the oldest of all the segments, with a median age
of 61. Within their limited means, they tend to be brand-loyal consumers
Behavioral segmentation
• Marketers divide buyers into groups on the
basis of their knowledge of, attitude toward,
use of, or response to a product
• Needs and benefits
• Decision roles
– Initiator
– Influencer
– Decider
– Buyer
– User
User and usage-related variables

Occasions User status

Attitude Usage rate

Buyer-
Loyalty status readiness
stage
Marketing Funnel
Behavioral Segmentation Breakdown
How Should Markets Be Segmented?

 Demographic
 Operating variables
 Purchasing approaches
 Situational factors
 Personal characteristics
Market targeting
Evaluating and Selecting Market Segment

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To segment or NOT?
Effective Segmentation criteria
Porter’s five forces

Threat of Rivalry

Threat of
Threat of Substitutes
New Entrants

Threat of Buyer Threat of Supplier

Bargaining Power Bargaining Power
Evaluating & Selecting the Market Segments

Possible Levels of Segmentation

One-to-one marketing
Identify your prospects and customers

Differentiate customers in terms of their needs and

value to your company

Interact to improve your knowledge about customers’

needs and to build relationships

Customize products, services,

and messages to each customer
Legal and Ethical Issues
• Marketers must avoid
consumer backlash
– Labeling consumers
– Vulnerable groups
– Disadvantaged groups
– Potentially harmful
products
MCQs
1) Establishing and communicating the distinctive
benefit(s) of the company's market offering for
each target segment is called ________.
A) market research
B) market positioning
C) marketing effectiveness
D) market segmentation

B)
2) The process of selecting one or more market
segments to enter is called market ________.
A) targeting
B) dominance
C) positioning
D) segmentation

A)
3. A ________ consists of a group of customers who
share a similar set of needs and wants.
A) vertical marketing system
B) market basket
C) market share
D) market segment

D)
4. Hilton Hotels customizes rooms and lobbies
according to location. Northeastern hotels are
sleeker and more cosmopolitan. Southwestern
hotels are more rustic. This is an example of
________ segmentation.
A) demographic
B) behavioral
C) psychographic
D) geographic

D)
5. When Nike attempts to get close to its customers
at the local level by sponsoring local school teams
and providing shoes, equipment, and clothing to
many of them, Nike is using which of the
following marketing formats?
A) differentiated marketing
B) affiliate marketing
C) guerrilla marketing
D) grassroots marketing

D)
6. Regardless of the type of segmentation scheme
used, the key is adjusting the marketing program to
recognize ________.
A) the level of disposable income earned by the target group
B) customer differences
C) the cost-benefit relationship of narrowing the target market
D) customer complaints

B)
7. If a marketer decides to segment a market based
on neighborhoods, the marketer will have chosen
the ________ method of segmentation.
A) demographic
B) psychographic
C) geographic
D) cultural

C)
8. If a marketing manager segments the market into
culture-, sports-, or outdoor-oriented groups, he or
she is segmenting the market on the basis of
________.
A) loyalty status
B) behavioral occasions
C) user status
D) psychographic lifestyle

D)
9. When the Modern Museum of Art separated its
consumers by whether they were culture-oriented
or outdoor-oriented for its new exhibit on art that
used natural materials, they were using ________
segmentation.
A) psychographic lifestyle
B) personality
C) behavioral occasions
D) social class

A)
10. Robert is the owner of an automobile manufacturing company. He
calls for a board meeting and tells his directors that he wants to
build a car that lets the users experience power and exhilaration. He
tells them that the car must allow his users to soar from 0-60 mph in
about 4 seconds. He also adds in that the price of the car must be
affordable enough for anybody making a good salary. In accordance
with the given scenario, Robert is trying to segment the market on
the basis of ________.
A) occupation
B) family size
C) benefits
D) nationality

C)
11. If a marketing researcher uses such names or
categories as Blue Blood Estates, Winner's Circle,
Hometown Retired, or Shotguns and Pickups,
when doing segmentation research, the marketing
researcher is using ________ clusters.
A) PRIZM
B) behavioral
C) psychographic
D) demographic

A)