C HAPTER

Segmentation

Market Segmentation – results in …

Market Segments –groups of people who think differently from the whole, but the same as each other

Product Differentiation
Soda? …

Market-product grid showing how different Reebok shoes reach customer groups with different needs

When to Segment Markets
When the expected gain in sales is larger than the expense of the process
•
Mass produced goods homogenized need but were cheap
•
Mass customization is now cheap & encourages choice, so companies segment by that choice
• Future?-Build-to-Order (BTO) -runs of 1, not 1001, like Dell Computers

Ann Taylor & Ann Taylor Loft
What is the danger of a two-segment strategy?
If danger is small, segmenting begins

Group Buyers into Segments

Criteria to Use in Forming the Segments
•
Potential for Increased Profit
•
Similarity of Needs of Buyers within a Segment
•
Difference of Needs of Buyers Among Segments
•
Potential of a Marketing Action to Reach a Segment
•
Simplicity and Cost of Assigning Buyers to Segments

Criteria for Segmentation
Substantiality
Segment must be large enough to warrant a special marketing mix.
Identifiability
Measurability
Accessibility
Responsiveness
Segments must be identifiable and their size measurable.
Members of targeted segments must be reachable with marketing mix.
Unless segment responds to a marketing mix differently, no separate treatment is needed.

Segmentation Variables:
Customer Characteristics
Demographic-Household
1) Age & Gender
2) Income
3) Ethnic Background
4) Family Life Cycle
Geographic-Location
1) Region of he world
2) Market size
3) Market density
4) Climate
Psychographic- Lifestyles
1) How time is spent
2) Values and Beliefs
3) Spending habits
4) Education

FIGURE 9-B Segmentation variables and breakdowns for U.S. consumer markets

Segmentation Variables: Usage
Usage Rate
Usage rate is the quantity consumed or patronage (store visits) during a specific period of time.
80/20 Rule
The 80/20 rule is a concept that suggests 80% of a firm’s sales are obtained from 20 % of its customers.

Comparison of users and nonusers for
Wendy’s,Burger King, and McDonald’s

Ways to Segment Organizational
Markets
•
Customer Characteristics

Geographic: Statistical Area
 Demographic: NAICS Code

Demographic: Number of Employees

Benefits Sought: Product Features

Chart Products to be Sold & Estimate of the size of the market
Selecting a target market for Wendy’s near a city university
?

Criteria used to Select the Target Market
•
Market Size
•
Expected Growth
• Compatibility with the Organization’s
Objectives and Resources
•
Cost of Reaching Segment
•
Competitive Position

Wendy’s
How can Wendy’s target different market segments with different advertising programs?

FIGURE 9-6 Advertising actions to reach specific student segments

Market-Product Strategies
Benefits & drawbacks of a co’s market-product strategies

POSITIONING THE PRODUCT
•
Product PositioningUsing Perceptual Maps

Identify Important Attributes for a
Product Class

Judgments of Existing Brands on These
Important Attributes
 Ratings of an “Ideal” Brand’s Attributes

Perceptual Map

Product Positioning using Perceptual Maps

Market segmentation involves aggregating prospective buyers into groups that (1) have common needs and
(2) will respond similarly to a marketing action.

Market segments are the relatively homogeneous groups of prospective buyers that result from the market segmentation process.

Product differentiation is a strategy that involves a firm’s using different marketing mix activities to help consumers perceive the product as being different and better than competing products.

A market-product grid is a framework to relate the market segments of potential buyers to products offered or potential marketing actions by the firm.

Usage rate is the quantity consumed or patronage (store visits) during a specific period of time.

The 80/20 rule is a concept that suggests
80 percent of a firm’s sales are obtained from 20 percent of its customers.

Product positioning refers to the place an offering occupies in consumers’ minds on important attributes relative to competitive products.

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 relative to its own and then take marketing actions.