Marketing
and
Segmentation
Suppose a teenage girl is looking for a pair of jeans.
What influences her?
1.
2.
3.
4.
5.
6.
Demographics
Psychographics
Perceptual clues
Symbolism
Past experience
Group dynamics
Rituals
Family
Reference groups
Race & ethnic factors
Social class
Subculture
Culture
Market Segmentation
“Smart marketing starts with smart segmentation.”
Jeffrey J. Fox
 Target Market: A group of people or organizations
which a business creates and maintains a marketing mix
specifically designed to satisfy the needs of group
members
 Market Segment: Individuals, groups, or organizations
with one or more similar characteristics that cause them
to have similar product needs
 Market Segmentation: The process of dividing a total
market into groups with relatively similar product needs
to design a marketing mix that matches those needs
Marketing Concept:
“All marketing strategies should
be based on known customer
needs and or wants.”
Segmentation is the practical application of
marketing research and consumer behavior.
Reminder:
The “marketing mix” consists of:
Product
Price
Promotion
Distribution (Place)
Almost no one tries to sell
to everyone!
Concentrated
Undifferentiated
Major kinds:
1. Undifferentiated marketing strategy:
Generic Differentiation
Same marketing mix for ALL segments
Overlooks segment differences
4-Ps designed for everyone
Advantage:
Concentrated resources
Major kinds:
1. Undifferentiated marketing strategy:
Generic Differentiation
Same marketing mix for ALL segments
Overlooks segment differences
4-Ps designed for everyone
Disadvantage:
4-Ps for everyone?
Competing against focused firms
Major kinds:
2. Single Marketing Strategy:
Targeted Differentiation
Niche Marketing
Go after one segment (ethnic marketing)
Advantage: Sharp focus… good expertise
efficiency… high profits
gives smaller firms a chance
good place to start
Major kinds:
2. Single Marketing Strategy:
Targeted Differentiation
Niche Marketing
Go after one segment (ethnic marketing)
Disadvantage:
More risk… eggs in one basket
Competition can wipe you out
Major kinds:
3. Full-coverage marketing strategy:
Segmented Differentiation
Treat each segment as separate market
4-Ps designed for every market
Advantage:
Focus…
Major kinds:
3. Full-coverage marketing strategy:
Segmented Differentiation
Treat each segment as separate market
4-Ps designed for every market
Disadvantage:
Development costs
(must weigh increased costs
increased sale)
Major kinds:
4. Concentrated marketing strategy:
Hybrid Differentiation
Single product to several segment
5. Micromarketing
Local marketing and individual marketing
Mass Customization
Build-to-Order (BTO)
To work, segments must have:
1. Substantiality
Must be large enough
enough money, customers, etc
enough room to grow
Basic marketing rule:
The best product, best prices, and
best business in the world
will fail if there are no customers!
To work, segments must have:
2. Identifiablity
Must be able to identify segment
and measure it
To work, segments must have:
3. Reachability
Must be accessible
must be actionable
(can action be taken?)
The Segmentation Tradeoff:
Synergies vs. Cannibalization
• Organizational Synergy
Increased customer value through efficient
marketing and manufacturing
• Cannibalization
• “Tiffany/Walmart” Strategies
two-tier products
8-24
The five key steps in segmenting and
targeting markets that link market needs to a
firm’s marketing program
8-25
Step 1.

Criteria to Use in Forming the Segments
• Simplicity and Cost-Effectiveness of assigning
potential buyers to Segments
• Potential for increased Profit
• Similarity of needs of potential buyers
within a Segment
• Difference of needs of buyers among Segments
• Potential of a marketing action to reach
a Segment
8-26
Step 1.
Common Segments
Geographical
Climate
Region
City size
Population density
8-27
Market Segmentation
1. Geographic
Market Segmentation
1. Geographic
2. Demographic
Step 1.

Common Segments
Demographics
Age (Generational marketing)
Gender (?)
Marital status
Income
Education
Occupation
Racial and Ethnic
8-32
Market Segmentation
1. Geographic
2. Demographic
3. Psychographic
Step 1.

Common Segments
Psychographics
Perception
Gender (?)
Motivation
Personality
Attitudes
http://www.expedia.com/Waterloo-Hotels-Baymont-Inn-SuitesWaterloo.h17890.HotelInformation?chkin=10%2F29%2F2013&chkout=10%2F30%2F2013&rm1=
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8-34
Market Segmentation
1. Geographic
2. Demographic
3. Psychographic
The Nine Nations
Step 1.

Common Segments
Lifestyle
Combination of:
Place
Person
Products
VALs
8-37
Step 1.
Common Segments
Usage
Use-related
usage rate
brand loyalty
http://www.youtube.com/watch?v=vbsyEI78m5s
awareness
Use-situation
where… when… why… with whom
8-39
Step 1.
Common Segments
Behavioral
Product features
Usage rates (frequency)
80/20 rule
Long tail
Selling small amounts to few customers,
BUT have lots of things to sell (Netflix)
8-40
Step 1.

Common Segments
Socio-cultural
Culture and subculture
Social class
Religion
8-41
Social class may be hard to define, but we all know it when we see it.
Segmentation bases, variables, and
breakdowns for U.S. consumer markets
8-47
The five key steps in segmenting and
targeting markets that link market needs to a
firm’s marketing program
8-48
Step 2:
Target Marketing
The process of evaluating each market
segment’s attractiveness and selecting
one or more segments to enter.
Marketing positioning
Arranging for a product to occupy a clear,
distinctive , and desirable place
relative to competing products
in the minds of target consumers.
Product positioning: is the
place an offering occupies in a
consumer’s mind on important
attributes relative to competitive
products.
8-51
Product differentiation: is a
marketing strategy that involves
a firm using different marketing
mix activities to help consumers
perceive the product as being
different and better than
competing products.
8-52
8-53
Prince Sports targets racquets at specific market segments
8-54
Step 3
Market-product grids show alternative strategies
for a lawnmower manufacturer
8-55
The five key steps in segmenting and
targeting markets that link market needs to a
firm’s marketing program
8-56
STEP 4: SELECT TARGET MARKETS

Criteria to Use in Selecting
Target Markets
• Two Types of Criteria
 Those that divide a market into Segments
 Those that actually pick the Target Segments
8-57

Criteria to Use in Selecting Target Markets
• Market Size
• Expected Growth
• Competitive Position
• Cost of reaching the Segment
• Compatibility with organizational
objectives and resources
8-58
Perceptual Map Example
A Perceptual Map to Reposition
chocolate milk for adults:
• Identify Important Attributes for Adult Drinks
• Discover How Adults See Competing Drinks
• Discover How Customers See Chocolate Milk
• Reposition Chocolate Milk to Make It
More Appealing to Adults
8-59
A perceptual map: is a means of
displaying or graphing in two
dimensions the location of products or
brands in the minds of consumers to
enable a manager to see how
consumers perceive competing
products or brands, as well as the
firm’s own product or brand.
8-60
A perceptual map of the location of
beverages in the minds of American adults
8-61
The strategy American dairies are using to
reposition chocolate milk to reach adults
8-62
Step 5
Do it!