Segmenting and Targeting Markets
chapter
6
Prepared by
Deborah Baker
Texas Christian University
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Learning Objectives
1. Describe the characteristics of markets
and market segments.
chapter
6
2. Explain the importance of market
segmentation.
3. Discuss criteria for successful market
segmentation.
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Learning Objectives (continued)
4. Describe the bases commonly used to
segment consumer markets.
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6
5. Describe the bases for segmenting
business markets.
6. List the steps involved in segmenting
markets.
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Learning Objectives (continued)
7. Discuss alternative strategies for
selecting target markets.
chapter
6
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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Learning Objective
Describe the characteristics of
markets and market segments.
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Market Segmentation
Market
People or organizations with
needs or wants and the ability and
willingness to buy
Market
Segment
A subgroup of people or
organizations sharing one or more
characteristics that cause them to
have similar product needs.
Market
Segmentation
The process of dividing a market
into meaningful, relatively similar,
identifiable segments or groups.
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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.
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Learning Objective
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
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3
Learning Objective
Discuss criteria for successful
market segmentation.
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Criteria for Successful
Segmentation
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Substantiality
Identifiability
Criteria
for
Market
Segments
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Accessibility
Responsiveness
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Criteria for Segmentation
Substantiality
Segment must be large
enough to warrant a special
marketing mix.
Identifiability
Measurability
Segments must be identifiable
and their size measurable.
Members of targeted segments
must be reachable with
Accessibility
marketing mix.
Unless segment responds to a
Responsiveness marketing mix differently, no
separate treatment is needed.
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4
Learning Objective
Describe the bases commonly
used to segment consumer markets.
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Segmentation Bases
Characteristics of
individuals, groups,
or organizations used
to divide a total market
into segments.
(variables)
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Bases for Segmentation
Geography
Demographics
Bases
Used to
Segment
Consumer
Markets
Psychographics
Benefits Sought
Usage Rate
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Geographic Segmentation
Segmenting markets by
region of the country or
world, market size, market
density, or climate.
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Geographic Segmentation
 Region of the country or world
 Market size
 Market density
 Climate
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Benefits of Regional Segmentation
 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
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
 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
Age
Marital
Status
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Children
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Psychographic Segmentation
Market segmentation on
the basis of personality,
motives, lifestyles, and
geodemographics.
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Bases for
Psychographic Segmentation
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Personality
Motives
Lifestyles
Psychographic
Segmentation
Geodemographics
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Lifestyle Segmentation
 How time is spent
 Beliefs
 Socioeconomic
characteristics
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Geodemographic Segmentation
Segmenting potential
customers into
neighborhood lifestyle
categories.
Combines geographic,
demographic, and lifestyle
segmentation.
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VALS 2 Dimensions
Abundant Resources
Statusoriented
Principleoriented
Actionoriented
Actualizers
Minimal Resources
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Fulfillers
Achievers
Experiencers
Believers
Strivers
Makers
Strugglers
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Benefit Segmentation
The process of grouping
customers into market
segments according to
the benefits they seek
from the product .
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Usage-Rate Segmentation
Dividing a market by the
amount of product
bought or consumed.
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The 80/20 Principle
A principle holding that
20 percent of all customers
generate 80 percent
of the demand.
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Learning Objective
Describe the bases for
segmenting
business markets.
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Macrosegmentation
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
The process of dividing
business markets into
segments based on the
characteristics of decisionmaking units within a
macrosegment.
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Business Marketing Segmentation
Geographic
Macrosegmentation
Customer Type
Customer Size
Product Use
Business
Markets
Purchasing Criteria
Microsegmentation
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Purchasing Strategy
Importance
Personal
Characteristics
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6
Learning Objective
List the steps involved
in segmenting markets.
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Steps in Segmenting a Market
Select
a
market
for
study
Choose
bases
for
segmentation
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Select
descriptors
Profile
and
analyze
segments
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Select
target
markets
Design,
implement,
maintain
mkting
mix
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Learning Objective
Discuss alternative strategies
for selecting target markets.
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Target Market
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 Selecting
Target Markets
Undifferentiated Concentrated
Strategy
Strategy
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Multisegment
Strategy
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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
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
$
$
$
$
$
$
$
Product design costs
Production costs
Promotion costs
Inventory costs
Marketing research costs
Management costs
Cannibalization
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Cannibalization
Situation that occurs when
sales of a new product
cut into sales of a
firm’s existing products.
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8
Learning Objective
Explain how and why firms implement
positioning strategies and
how product differentiation
plays a role.
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Positioning
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
The place a product, brand,
or group of products
occupies in consumers’
minds relative to competing
offerings.
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Effective Positioning
 Assess the positions of
competing products
 Determine the dimensions of
these positions
 Choose an effective market
position
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Product Differentiation
A positioning strategy that
some firms use to
distinguish their products
from those of competitors.
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Perceptual Mapping
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--Levi’s
High Price
Vintage
Red Line
Slates
Classic
Red Tab
Dry Goods
501
Dockers
Classics
Red Tab
Basics
L2
Designer
Dockers
Premium
Red Tab
Elesco
Silver Tab
Old product
Low Price
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New product
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Positioning Bases
Attribute
Price and Quality
Use or Application
Product User
Positioning
Bases
Product Class
Competitor
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Repositioning
Changing consumers’
perceptions of a brand
in relation to
competing brands.
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Learning Objective
Discuss global market segmentation
and targeting issues.
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Global Issues
Trends
Global Market
Standardization
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