Segmenting and
Targeting Markets
1
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.
2
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
3
No Market Segmentation
Segmented by Sex
Segmented by Age
The Basis of Market
Segmentation
– the study of the
market based on where
customers live
 Geographic
–Region, city, area, county, state,
country
Segmenting Consumer Markets

Geographic Segmentation: Dividing
an overall market into homogeneous
groups on the basis of their locations
– Does not ensure that all consumers in a
location will make the same buying
decision.
– Help in identifying some general patterns.

Using Geographic Segmentation
– Demand for some goods and services can
vary according to the geographic region
– Most major brands get 40-80 percent of
their sales from what are called core
regions
– Climate is another important segmentation
factor
• Northern consumers, for example, eat more
soup than Southerners
• Southerners use more chlorine for their
swimming pools than Northern residents
Demographic- personal
characteristics of a population
–
–
–
–
–
–
–
Age,
Gender
Family size
Marital Status
Family life cycle
Household income
Occupation
– Education
– Religion
– Nationality, social
class
– Home Value
– Social Class
– Geographic
Region(s)
Demographics, con’t

Age Cohorts
– Baby Boom generation – 1946 - 1964
– Generation X – Baby Bust generation
– Generation Y – Echo Boomers or
Millennium Generation
– Ethnic Segmentation – ethnic makeup &
cultural tastes
– Socioeconomic – social status or economic
position
• Income, Occupation, Class or social position
Demographics, con’t
Status – household all those
living together under one roof
 Family Life Cycle – reflects the
family characteristics, age of
parents, age of children, whether
children are living at home
 Marital
Young couple
(no children
Young couple with
children
Bachelor
Family Life
Cycle
Middle aged couple
with children
Single again
Death or divorce
Middle aged couple
with no children
Older couple
Psychographics
•What makes them
tick?
•What's their
lifestyle
•Likes
•Dislikes
•Values
•Attitudes
Psychographic Characteristics
Psychographics

Study of consumers based on social and
psychological characteristics
– Personality, values, opinions, beliefs, motivations,
attitudes,
– Lifestyle elements including activities and interests
– Need for status Role of money (does it buy
material things, self-esteem, etc?)
– Ethics/"moral compass“
– Risk-taker vs. conservative
– Spendthrift vs. hoarder of money
Psychographics, con’t

Activities
– Different magazines represent market
segment

Attitudes
– Eating healthy, becoming physically fit

Personality & values
– Personality characteristics & values
Psychographic Profile
The F3 Gang – fuel, food, and fast
 One-stop wonders
 Saving Sams & Samanthas
 Earth Worshippers

Behavioral Analysis

Segmenting the market based on
product-related behavior
– What specific benefits are customers
seeking?
– What motivates this group to purchase?
– What are the purchasing trends of this
group?
http://www.sric-bi.com/VALS/presurvey.shtml
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.
22
Undifferentiated
Targeting Strategy
Marketing approach that views
the market as one big market
with no individual segments and
thus requires a single marketing
mix.
23
Niche
One segment of
a market.
24
Behavior/Usage Segmentation

Markets can be segmented by how often or
how heavily consumers use a specific product
– 80/20 Principle - 80% of revenue generated by 20%
of customers
Light Users
80%
Heavy Users
20%
25
The 80/20 Principle
A principle holding that
20 percent of all customers
generate 80 percent
of the demand.
26
Cannibalization
Situation that occurs when sales
of a new product
cut into sales of a
firm’s existing products.
27
Toothpaste Segmentation
Benefit
Segment
Psychographics Favored
Brands
Economy
(low price)
Value oriented
Brands on sale
Medicinal
(decay
prevention)
Cosmetic
Hypochondriac
Conservative
Crest
High sociability
active
Aqua-Fresh
Ultra Brite
Taste
High self(good tasting) involvement
Colgate
Toothpaste Segmentation
Benefit
Segment
Economy
(low price)
Medicinal
(decay
prevention)
Cosmetic
Taste
(good tasting)
Demographics Behavior
Men
Heavy users
Large families
Heavy users
Teens, young
adults
Children
Smokers
Spearmint
lovers