SEGMENTING AND TARGETING

MARKETS

CHAPTER 4
LEARNING OUTCOMES
Describe the characteristics of markets
and market segments

Explain the importance of market

segmentation

Discuss criteria for successful market

segmentation

Describe the bases commonly used to

segment consumer markets
 • Describe the bases for segmenting
business markets

• List the steps involved in segmenting markets

• Discuss alternative strategies for selecting

target markets

• Explain one-to-one marketing

• Explain how and why firms implement

positioning strategies and how product
differentiation plays a role
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 or organizations with

Market needs or wants and the ability
and willingness to buy.

A subgroup of people or
Market organizations sharing one or more
Segment characteristics that cause them
to have similar product needs.

The process of dividing a market

Market
into meaningful, relatively similar,
Segmentation identifiable segments or groups.
THE CONCEPT 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
 More precise More
Market definition of accurate
segmentation customers marketing
needs and objectives
wants

Improved
resource
allocation

Better
marketing
results
CRITERIA FOR SEGMENTATION

Members of targeted
Accessibility segments must be reachable
with
marketing mix.
Unless segment responds to a
Responsiveness marketing mix differently, no
separate treatment is needed.
BASES FOR SEGMENTING CONSUMER
MARKETS

Segmentation
Bases
Characteristics of
individuals, groups, or
organizations used to
divide a total market into
segments.
(variables)
BASES FOR SEGMENTATION

Geography
Geography

Demographics
Demographics

Psychographics
Psychographics

Benefits
Benefits Sought
Sought

Usage
Usage Rate
Rate
GEOGRAPHIC SEGMENTATION

 Region of the country or world

 Market size

 Market density

 Climate
DEMOGRAPHIC
SEGMENTATION
Age
Age

Gender
Gender

Income
Income

Ethnic
Ethnic background
background

Family
Family life
life cycle
cycle
PSYCHOGRAPHIC
SEGMENTATION

Psychographic Market segmentation

Segmentation
on the basis of
personality, motives,
lifestyles, and
geodemographics.
BENEFIT SEGMENTATION

Benefit The process of grouping

Segmentation
customers into market
segments according to the
benefits they seek from the
product.
 Dividing a market by the
Usage-Rate
Segmentation amount of product bought
or consumed.

A principle holding that

80/20 20 percent of all customers
Principle generate 80 percent of
the demand.
BASES FOR SEGMENTING BUSINESS
MARKETS

Producers
Producers

Resellers
Resellers

Government
Government

Institutions
Institutions

Company
Company Buying
Buying
Characteristic
Characteristic Processes
Processes
ss
BASES FOR SEGMENTING BUSINESS
MARKETS

Company Characteristics

 Geographic location
 Type of company
 Company size
 Volume of purchase
 Product use
BUYER CHARACTERISTICS
BUYER CHARACTERISTICS

Demographic
Demographiccharacteristics
characteristics

Decision
Decisionstyle
style

Tolerance
Tolerancefor
forrisk
risk

Confidence
Confidencelevel
level

Job
Jobresponsibilities
responsibilities
STEPS IN SEGMENTING MARKETS

Select Choose Select Profile Select Design,

a bases descript and target impleme
market for ors analyze market nt,
segmen segment s maintain
for tation s marketin
study g
mix
STRATEGIES FOR SELECTING TARGET
MARKETS

A group of people or
Target
Market
organizations for which
an organization designs,
implements, and
maintains a marketing
mix intended to meet the
needs of that group,
resulting in mutually
satisfying exchanges.
Undifferentiated Multisegment Concentrated
UNDIFFERENTIATED TARGETING
STRATEGY

Undifferentiated A marketing approach

Targeting that views the market as
Strategy one big market with no
individual segments and
thus
requires a single
marketing mix.
 UNDIFFERENTIATED TARGETING
STRATEGY
Advantage:

 Potential savings on
production and marketing
costs

Disadvantages:

 Unimaginative product
offerings
 Company more susceptible
Undifferentiated
Strategy
to competition
CONCENTRATED TARGETING
STRATEGY

Concentrated A strategy used to select

Targeting Strategy one
segment of a market for
targeting marketing
efforts.

Niche
One segment of a
market.
CONCENTRATED TARGETING
STRATEGY

Advantages:
 Concentration of
resources
 Meets narrowly defined
segment
 Small firms can compete
 Strong positioning

Disadvantages:
 Segments too small, or
Concentrated changing
Strategy  Large competitors may
market to niche segment
MULTISEGMENT TARGETING
STRATEGY

Multisegment A strategy that chooses

Targeting two or more well-defined
Strategy market segments and
develops a distinct
marketing
mix for each.
MULTISEGMENT TARGETING
STRATEGY

Advantages:

 Greater financial success

 Economies of scale

Disadvantages:

 High costs
 Cannibalization
Multisegment
Strategy
ONE-TO-ONE MARKETING

One-to-One
Marketing
 One-to-One
One-to-One Has
Has aa 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
 Trends (one-to-one marketing)

1. One-size-fits all marketing no longer

effective.
2. Direct and personal marketing will grow
to meet needs of busy consumers.
3. Consumers will be loyal to companies that
have earned—and reinforced—their
loyalty.
4. Mass-media approaches will decline as
technology allows better customer
tracking.
POSITIONING

Positioning
Developing a specific
marketing mix to influence
potential customers’ overall
perception of a brand,
product line, or organization
in general.
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
PRODUCT
DIFFERENTIATION

Product A positioning strategy

Differentiation that some firms use to
distinguish their products
from those of
competitors.

Distinctions can be real

or perceived.
POSITIONING BASES
Attribute
Attribute

Price
Price and
and Quality
Quality

Use
Use or
or Application
Application

Product
Product User
User

Product
Product Class
Class

Competitor
Competitor

Emotion
Emotion
REPOSITIONING

Changing consumers’
Repositioning
perceptions of a brand in
relation to competing
brands.
Positioning and Product Differentiation
THANK
YOU…