MM271
Introduction to Marketing
Topic 4
Identifying
Market Segments & Targets
Learning Objectives
By the end of this lecture, you will know
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Explain what market segmentation is, when to
use it, and the five steps involved in segmentation.
Recognize the different factors used to segment
consumer markets
Develop a market-product grid to use in
segmenting and targeting a market.
Understand how marketing managers position
products in a market.
2-2
1. An Overview
Segmentation

aggregate prospective buyers into groups
(segments) that:
have common needs; and
respond similarly to a marketing action of a firm
Targeting
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Evaluate the attractiveness of various segments
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Decide how many and which segments to enter
Positioning
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Define a product so that consumers will perceive it
to be different from other competing products
2-3
1. An Overview
Choose the bases of segmentation &
group buyers into segments
Develop a market-product grid
& estimate the size of market
Assess the attractiveness of
the segments
Pick the right one!!
2-4
2. Segmentation
2.1 Segmentation Variables – Consumer Market
Region
Density
Community
GEOGRAPHIC PSYCHOGRAPHIC
Age
Family
Gender DEMOGRAPHIC BEHAVIORAL
Income
Education
Occupation
Lifestyle
Personality
Occasions
Benefits
User status
Usage rate
Awareness
2-5
2. Segmentation
2.1 Segmentation Variables – Consumer Market
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Geographic
For marketers operate in more than one geographic area
Easy to localize marketing mix activities
Some companies seek to find untapped geographic areas
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E.g. countries, states, provinces, regions, cities, districts
Demographic
Most commonly used  easy to observe & measure
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Age: may not related to one’s need & buying power
Gender: used for clothing, cosmetics, toiletries, magazines;
now spread to cars, deodorants, sports & financial services
Income: used for car, boat, clothing, financial service, travel
2-6
2. Segmentation
2.1 Segmentation Variables – Consumer Market
 Psychographic
People in same demographic group may have very
different psychographic characteristics
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Lifestyle segmentation is gaining popularity as people are
buying products to express their way of living
Personality: marketers are trying to associate products with
their target market’s personality type
Behavioral
Based on consumer knowledge, attitudes, uses or
responses to a product
Some believe behavioral variables are the best starting
point for segmenting markets
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Occasion: when does one learn about, buy, or use a product?
Benefit: the product attributes that are useful to consumers
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User/usage: frequency & volume of purchase & use
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2-7
2. Segmentation
2.2 Develop Market-Product Grid
 Step 1
Classify the company’s available product into different
categories
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E.g.: breakfast, lunch, snacks, dinner
Step 2
Line up different market segment against the number of
product categories
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Step 3
Estimate the market size in each cell (market-product
combination)
In terms of sales revenue or number of customers
Could use crude “guest estimates” if formal marketing
research has yet to be conducted
2-8
3. Targeting
3.1 Assessing the attractiveness of each segment
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Market size
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Expected growth
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Company’s competitive position
Level of competition
Substitute products
Power of buyers
Powerful suppliers
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Cost of reaching the segment
Compatibility with the company’s objectives &
resources
2-9
3. Targeting
3.2 Targeting Strategies
 Undifferentiated strategy
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Differentiated strategy
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Concentration
Single-segment concentration
Product specialization
Market specialization
2-10
3. Targeting
3.2 Targeting Strategy
 Undifferentiated Strategy
1 product fits all
ignore market segment differences
modern marketers have strong doubts about this strategy
2-11
3. Targeting
3.2 Targeting Strategy
 Differentiated strategy
Different product offerings for different market segments
Hope to attain higher sales & market position in each one
Higher production & marketing costs
Product 1
Product 2
Product 3
Segment 1
Segment 2
Segment 3
2-12
3. Targeting
3.2 Targeting Strategy
 Concentrated strategy – Single segment
One product goes after one market segment
Hope to achieve strong market position in the segment for
greater knowledge, know-how & reputation
Higher risks if the market of the particular segment
suddenly turns negative
Product 1
Product 2 Product 3
Segment 1
Segment 2
Segment 3
2-13
3. Targeting
3.2 Targeting Strategy
 Concentrated strategy – Product Specialization
Product 1
Product 2
Product 3
Segment 1
Segment 2
Segment 3
2-14
3. Targeting
3.2 Targeting Strategy
 Concentrated strategy – Market Specialization
Product 1
Product 2
Product 3
Segment 1
Segment 2
Segment 3
2-15
3. Targeting
3.2 Targeting strategies
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Factors of considerations:
Company resources
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Limited resources 
The degree of product variability
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Standardized product 
Product’s life-cycle stage
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Early stages 
Market variability
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Similar tastes & preferences 
Competitors’ marketing strategies
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Be careful of using opposites
2-16
4. Positioning
4.1 Positioning for Competitive Advantage
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Definition
Create meaningful differences that distinguish one from its
competitors
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Steps:
Identify possible competitive advantage
Choose the right competitive advantage
Communicate & deliver the chosen position
2-17
4. Positioning
4.2 Identify possible competitive advantage
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Competitive advantage
An advantage over competitors gained by offering
consumers superior value through:
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Lower prices
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More benefits that justify higher prices
2-18
4. Positioning
4.2 Identify possible competitive advantage
 Ways for creating differentiation
SERVICES
PERSONNEL
PRODUCT
IMAGES
CHANNELS
ORGANIZATION/
HERITAGE
USER/USAGE
2-19
4. Positioning
4.2 Identify possible competitive advantage
 Criteria for selecting differentiation premise
1
IMPORTANT
2
SUPERIOR
3
PREEMPTIVE
2-20
4. Positioning
4.3 Select the right competitive advantage
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Perceptions of consumers
Which attributes are important for a particular product?
How do the consumer judge the existing products
according to the important attributes?
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Perceptual map
Illustrate two important attributes of a product class
Display the relative position of different products or brands
in the minds of consumers on the map
Identify the location in which the company wish to
“position”
2-21