Week 4: Segmenting
Identifying market segments and target
 Companies cannot connect with all customers in a large, broad or diverse market.
 They can, however, divide such markets into groups of consumers and segments with
distinctive needs and wants.
 A company then needs to identify which market segments it can serve effectively. This
decision requires a keen understanding of consumer behaviour and careful strategic thinking
about what makes each segment unique and different.
 Identifying and satisfying the right market segments is often key to marketing success.
Who to serve? – Segmenting
 Bases for segmenting: demographic or
psychographic or behavioural (or needbased)
 Description of segments: demographic and
psychographic and behavioural
 Macro segmentation vs micro segmentation
 Customer profiles are a different way to
identify profiles
Macro vs micro segmentation
Consider an aluminium company: The firm first undertook Macro-segmentation. It looked at which
end-use market(s) to serve: automobile, residential, or beverage containers. It chose the residential
market, & it needed to determine the most attractive product application: semi-finished material,
building components, or aluminium mobile homes. Deciding to focus on building components, it
considered the best customer size and chose large customers.
 Macro-segmentation: Who to serve in terms of who not to serve given their size, income,
etc.?
The 2nd stage consisted of micro-segmentation. The company distinguished among customers
buying on price, service or quality.
 Micro-segmentation: Who to serve in terms of which profiles of customers exist among
those who potential set to serve?
The Ex-ante approach
Advantages
 Uses available
information.
 less expensive compared
to ad hoc marketing research.
 Can be easily transformed
in operative
recommendations.
Disadvantages
 Secondary data may not
be available
 Sought benefits are
deducted from ex ante criteria
and not directly observed into
the market.
The ex post approach
How to come up with a perceptual map of the marketplace as seen by the customers: market
research.
1. Qualitative research:
a. 3 main objectives: provide a cultural background
b. Better define the scope, e.g., which products are included or excluded. i.e., in a
segmentation about kids snacking, are biscuits included or excluded?
c. Produce a frame adapted to the category in the specific category in that market.
d. Produce the list of statements that will be used for the quantitative
analysis/segmentation
2. Quantitative research
a. Sample of 1000+ respondents, category users
b. We ask about the last time they consumed the category: when, where, how, what
(brand), why