Segmenting and Targeting Markets

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Segmenting and Targeting Markets
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chapter
Prepared by Deborah Baker Texas Christian
University
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Learning Objectives
1. Describe the characteristics of markets and
market segments. 2. Explain the importance of
market segmentation. 3. Discuss criteria for
successful market segmentation.
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chapter
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Learning Objectives (continued)
4. Describe the bases commonly used to segment
consumer markets. 5. Describe the bases for
segmenting business markets. 6. List the steps
involved in segmenting markets.
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chapter
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Learning Objectives (continued)
7. Discuss alternative strategies for selecting
target markets. 8. Explain how and why firms
implement positioning strategies and how product
differentiation plays a role. 9. Discuss global
market segmentation and targeting issues.
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chapter
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Learning Objective
1
Describe the characteristics of markets and
market segments.
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Market Segmentation
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A Market is...
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(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.
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Learning Objective
2
Explain the importance of market segmentation.
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The Importance of Market Segmentation
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• 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

Competitive Advantage
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Learning Objective
3
Discuss criteria for successful market
segmentation.
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Criteria for Successful Segmentation
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Criteria for Segmentation
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Learning Objective
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Describe the bases commonly used to segment
consumer markets.
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Segmentation Bases
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Characteristics of individuals, groups, or
organizations used to divide a total market
into segments. (variables)
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Bases for Segmentation
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Geographic Segmentation
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Segmenting markets by region of the country or
world, market size, market density, or climate.
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Geographic Segmentation
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• Region of the country or world
• Market size
• Market density
• Climate

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Benefits of Regional Segmentation
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• 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
• React more quickly to competition

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Demographic Segmentation
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Segmenting markets by age, gender, income,
ethnic background, and family life cycle
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Bases for Demographic Segmentation
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• Age
• Gender
• Income
• Ethnic background
• Family Life Cycle

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Ethnic Background
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• Largest ethnic markets are
• African-American
• Hispanic-American
• Asian-American
• Will comprise 1/3 of U.S. population by 2010 with
  buying power of a trillion dollars

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Family Life Cycle
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Age
MaritalStatus
Children
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Psychographic Segmentation
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Market segmentation on the basis of personality,
motives, lifestyles, and geodemographics.
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Bases for Psychographic Segmentation
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Lifestyle Segmentation
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• How time is spent
• Beliefs
• Socioeconomic characteristics

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Geodemographic Segmentation
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Segmenting potential customers into neighborhood
lifestyle categories. Combines geographic,
demographic, and lifestyle segmentation.
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VALS 2 Dimensions
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Benefit Segmentation
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The process of grouping customers into market
segments according to the benefits they seek
from the product .
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Usage-Rate Segmentation
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Dividing a market by the amount of product
bought or consumed.
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The 80/20 Principle
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A principle holding that 20 percent of all
customers generate 80 percent of the demand.
80/20
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Learning Objective
5
Describe the bases for segmenting business
markets.
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Macrosegmentation
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The process of dividing business markets into
segments based on general characteristics such as
geographic location, customer type, customer
size, and product use.
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Microsegmentation
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The process of dividing business markets into
segments based on the characteristics of
decision-making units within a macrosegment.
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Business Marketing Segmentation
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Learning Objective
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List the steps involved in segmenting markets.
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Steps in Segmenting a Market
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Learning Objective
7
Discuss alternative strategies for selecting
target markets.
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Target Market
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A group of people or 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.
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Strategies for SelectingTarget Markets
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Undifferentiated Targeting Strategy
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Marketing approach that views the market as one
big market with no individual segments and thus
requires a single marketing mix.
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Undifferentiated Targeting Strategy
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• Advantages
• Potential savings on production and marketing
  costs
• Disadvantages
• Unimaginative product offerings
• Company more susceptible to competition

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Concentrated Targeting Strategy
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A strategy used to select one segment of a market
for targeting marketing efforts.
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Niche
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One segment of a market.
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Concentrated Targeting Strategy
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• Advantages
• Concentration of resources
• Meets narrowly defined segment
• Small firms can compete
• Strong positioning
• Disadvantages
• Segments too small, or changing
• Large competitors may market to niche segment

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Multisegment Targeting Strategy
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A strategy that chooses two or more well-defined
market segments and develops a distinct marketing
mix for each.
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Multisegment Targeting Strategy
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• Advantages
• Greater financial success
• Economies of scale
• Disadvantages
• High costs
• Cannibalization

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Costs of Multisegment Targeting
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Cannibalization
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Situation that occurs when sales of a new product
cut into sales of a firms existing products.
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Learning Objective
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Explain how and why firms implement positioning
strategies and how product differentiation
plays a role.
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Positioning
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Developing a specific marketing mix to influence
potential customers overall perception of a
brand, product line, or organization in general.
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Position
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The place a product, brand, or group of products
occupies in consumers minds relative to
competing offerings.
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Effective Positioning
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• Assess the positions of competing products
• Determine the dimensions of these positions
• Choose an effective market position

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Product Differentiation
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A positioning strategy that some firms use to
distinguish their products from those of
competitors.
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Perceptual Mapping
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A means of displaying or graphing, in two or more
dimensions, the location of products, brands, or
groups of products in customers minds.
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Perceptual Mapping--Levis
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Red TabBasics
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Positioning Bases
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Repositioning
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Changing consumers perceptions of a brand in
relation to competing brands.
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Learning Objective
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Discuss global market segmentation and targeting
issues.
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Global Issues
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Trends
Global Market Standardization