Marketing Management

Arab World Edition

Kotler, Keller, Hassan, Baalbaki, and Shamma

Chapter 8

Identifying
Market Segments
and Targets
Chapter Questions

1. What are the different levels of market

segmentation?
2. How can a company divide a market into
segments?
3. How should a company choose the most attractive
target markets?
4. What are the requirements for effective
segmentation?

Copyright © 2012 Pearson Education 8-3

 Chapter Question 1:
What are the different
Levels of Market Segmentation levels of market
segmentation?

Effective target marketing requires that

marketers:
• Identify and profile distinct groups of buyers who
differ in their needs and preferences
• Select one or more market segments to enter
• Establish and communicate the distinctive benefits
of the market offering

Copyright © 2012 Pearson Education 8-4

 Chapter Question 1:
What are the different
Levels of Market Segmentation levels of market
segmentation?

Mass marketing vs. micromarketing.

Most companies are turning to micromarketing at one of
four levels:
• Segments
• Niches
• Local areas
• Individuals

Copyright © 2012 Pearson Education 8-5

 Chapter Question 1:
Segment Marketing What are the different
levels of market
segmentation?

A market segment consists of a group of customers who

share a similar set of needs and wants.

A flexible market offering has 2 parts:

• Naked solution: Product
and service elements that
all segment members
value
• Discretionary options:
Some segment members
value options but not all
Flexible market offerings such
as discretionary options have
helped Air Arabia better match
segment needs.

Copyright © 2012 Pearson Education 8-6

 Chapter Question 1:
What are the different
levels of market
Segment Marketing segmentation?

Preference segments:
• Homogeneous preferences exist when consumers
want the same things
• Diffused preferences exist when consumers want
very different things
• Clustered preferences reveal natural segments from
groups with shared preferences

Copyright © 2012 Pearson Education 8-7

 Chapter Question 1:
What are the different
levels of market
Niche Marketing segmentation?

• A niche is a more narrowly defined customer group

seeking a distinctive mix of benefits.
• Marketers usually identify niches by dividing a segment
into sub segments.

Throughout the Arab world,

Hallmark offers greeting cards
addressing different religious
occasions and holidays, and in
different languages.

Copyright © 2012 Pearson Education 8-8

 Chapter Question 1:
What are the different
levels of market
Niche Marketing segmentation?

The Long Tail

• Chris Anderson explains the long tail equation:
• The lower the cost of distribution, the more you can
economically offer without having to predict demand;
• The more you can offer, the greater the chance that you
will be able to tap latent demand for minority tastes; and
• Aggregate enough minority taste, and you may find a
new market.

Copyright © 2012 Pearson Education 8-9

 Chapter Question 1:
What are the different
levels of market
segmentation?
Individual Marketing
• Ultimate level of segmentation leads to “segments of
one,” “customized marketing,” or “one-to-one marketing”
• Customization combines operationally driven mass
customization with customized marketing in a way that
empowers consumers to design the product and service
offering of their choice.

McDonald’s found great success with its

McArabia grilled chicken sandwich across
the Arab world, and attempted to build on
that by introducing other Arab-world based
menu items, such as a grilled kofta.

Copyright © 2012 Pearson Education 8-10

 Chapter Question 2:
How can a company divide
Bases for Segmenting Consumer a market into segments?

Markets

• Geographic
• Demographic
• Psychographic
• Behavioral

Copyright © 2012 Pearson Education 8-11

 Chapter Question 2:
How can a company divide
a market into segments?
Geographic Segmentation

Geographic segmentation calls for dividing the market into

different geographical units such as regions, counties, cities,
or neighbourhoods.

Copyright © 2012 Pearson Education 8-12

 Chapter Question 2:
How can a company divide
a market into segments?
Demographic Segmentation

Certain demographic variables have been used to segment

markets:
•Age and life cycle
•Life stage
•Gender

•Income

•Generation

•Social class

Wedding planning
has become a major
industry in the Arab
world.

Copyright © 2012 Pearson Education 8-13

 Chapter Question 2:
How can a company divide
a market into segments?
Psychographic Segmentation

One of the most popular

classification systems based on
psychographic measurements is
VALS:

Fig. 8.1: The VALS

Segmentation System

Copyright © 2012 Pearson Education 8-14

 Chapter Question 2:
How can a company divide
a market into segments?
Behavioral Segmentation

In behavioral segmentation, marketers divide buyers into

groups on the basis of their knowledge of, attitude toward, use
of, or response to a product.
Decision Roles Behavioral Variables
• Initiator • Occasions
• Influencer • Benefits
• Decider • User Status
• Buyer • Usage Rate
• User • Buyer-Readiness
• Loyalty Status
• Attitude

Copyright © 2012 Pearson Education 8-15

 Chapter Question 2:
How can a company divide
a market into segments?
Behavioral Segmentation

Buyer-Readiness Stage
The Brand Funnel illustrates variations in the buyer-readiness
stage

Fig. 8.2:
Brand
Funnel

Copyright © 2012 Pearson Education 8-16

 Chapter Question 2:
How can a company divide
a market into segments?
Behavioral Segmentation

Loyalty Status

Marketers usually envision four groups based on brand loyalty status:

1. Hard-core loyals. Consumers who buy only one brand all the time.

2. Split loyals. Consumers who are loyal to two or three brands.

3. Shifting loyals. Consumers who shift loyalty from one brand to another.

4. Switchers. Consumers who show no loyalty to any brand.

Copyright © 2012 Pearson Education 8-17

 Chapter Question 2:
Behavioral Segmentation How can a company divide
a market into segments?

Fig. 8.3: Behavioral Segmentation Breakdown

Copyright © 2012 Pearson Education 8-18

 Chapter Question 2:
How can a company divide
Bases for Segmenting Business a market into segments?

Markets

• Demographic
• Operating variable
• Purchasing approaches
• Situational factors
• Personal characteristics

Copyright © 2012 Pearson Education 8-19

 Chapter Question 2:
Bases for Segmenting Business How can a company divide
Markets a market into segments?

Box 8.1: Major Segmentation

Variables for Business Markets

Copyright © 2012 Pearson Education 8-20

 Chapter Question 3:
How should a company
Market Targeting choose the most attractive
target markets?

• Once the firm has identified its market-segment opportunities, it

must decide how many and which ones to target.
• A seven-step approach is shown in Table 8.2.

Table 8.2: Steps in the Segmentation Process

Copyright © 2012 Pearson Education 8-21

 Chapter Question 4:
What are the requirements
Market Targeting for effective segmentation?

To be useful, segments must rate favorably on five key criteria:

• Measurable
• Substantial
• Accessible
• Differentiable
• Actionable

Copyright © 2012 Pearson Education 8-22

 Chapter Question 4:
What are the requirements
for effective segmentation?
Evaluating and Selecting
the Market Segments

After evaluating different

segments, the company
can consider five patterns of
target market selection:
•Single-segment
concentration
•Selective specialization
•Product specialization
•Market specialization
Fig. 8.4: Five Patterns of
•Full market coverage Target Market Selection

Copyright © 2012 Pearson Education 8-23

 Credits

• Slide 1 Live’ly ad courtesy of Live’ly. Reproduced with permission

• Slide 5 Getty Images: AFP / Nasser Younes
• Slide 7 FotoLibra: Philip Carr
• Slide 9 Getty Images: New York Daily News
• Slide 13 VALS™ ©, SRI Consulting Business Intelligence. Used with
permission
• Slide 19 Adapted from Thomas V. Bonoma and Benson P. Shapiro,
Segmenting the Industrial Market (Lexington MA: Lexington Books, 1983)
• Slide 20 Adapted from Market-Based Management, 4th edition, Prentice
Hall, (Best, R.J., 2005) copyright © 2005. Printed and electronically
reproduced by permission of Pearson Education, Inc., Upper Saddle River,
New Jersey
• Slide 22 adapted from Defining the Business: The Starting Point of
Strategic Planning, Prentice Hall (Abell, D.F., 1980), pp.192–196, copyright
© 1980. Printed and electronically reproduced by permission of Pearson
Education, Inc., Upper Saddle River, New Jersey