7
Identifying Market
Segments and Targets
Chapter Questions
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What are the different levels of market
segmentation?
How can a company divide a market into
segments?
What are the requirements for effective
segmentation?
How should business markets be segmented?
How should a company choose the most
attractive target markets?
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Effective Targeting Requires
Marketers to:
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Identify and profile distinct groups of buyers
who differ in their needs and preferences
Select one or more market segments to enter
Establish and communicate the distinctive
benefits of the market offering
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What Is a Market Segment?
A market segment consists of a
group of customers who share a
similar set of needs and wants.
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Segmenting Consumer Markets
Geographic
Demographic
Psychographic
Behavioral
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Geographic Segmentation
Geographic segmentation divides the market
into geographical units such as nations,
states, regions, counties, cities, or
neighborhoods. The company can operate in
one or a few areas, or it can operate in all
but pay attention to local variations.
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SEC Rural Consumers
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Demographic Segmentation
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Age and life cycle
Life stage
Gender
Income
Generation
Social class
Race and Culture
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Age and Lifecycle Stage
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Gender and Income
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SEC Classification: Urban Markets
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Psychographic Segmentation
and The VALS Framework
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Behavioral Segmentation Based
on Needs and Benefits
Needs
and Benefits
Decision Roles
User and Usage
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Behavioral Segmentation:
Decision Roles
Initiator
Influencer
Decider
Buyer
User
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Behavioral Segmentation:
Behavioral Variables
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Occasions
Benefits
User Status
Usage Rate
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Buyer-Readiness
Loyalty Status
Attitude
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Figure 7.2 Example of a Brand Funnel
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Loyalty Status
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Hard-core
Split loyals
Shifting loyals
Switchers
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Figure 7.3 Behavioral
Segmentation Breakdown
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Segmenting for Business Markets
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Demographic
Operating variable
Purchasing approaches
Situational factors
Personal characteristics
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Segmenting for Business Markets
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Demographic:
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Industry
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Company Size
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Location
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Segmenting for Business Markets
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Operating Variables:
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Technology
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User or non-user status
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Customer capabilities
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Segmenting for Business Markets
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Purchasing Approaches:
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Purchasing-function organization (centralized or
decentralized)
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Power structure
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Nature of existing relationships
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General purchasing policies
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Purchasing criteria
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Segmenting for Business Markets
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Situational Factors:
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Urgency
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Specific application
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Size or order
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Segmenting for Business Markets
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Personal Characteristics:
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Buyer-seller similarity
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Attitude toward risk
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Loyalty
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Steps in Segmentation Process
1.
2.
3.
4.
5.
6.
7.
Need-based segmentation
Segment identification (distinct & identifiable
– based on segmentation bases)
Segment attractiveness
Segment profitability
Segment positioning
Segment acid test
Market mix strategy
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Effective Segmentation Criteria
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Measurable (characteristics, size and
purchasing power of the segment)
Substantial (large & profitable)
Accessible (reachable and servable)
Differentiable
Actionable
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Attractiveness of a Market Segment
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The following are some examples of aspects that
should be considered when evaluating the
attractiveness of a market segment:
Size of the segment (number of customers and/or
number of units)
Growth rate of the segment
Competition in the segment
Brand loyalty of existing customers in the segment
Attainable market share given promotional budget and
competitors' expenditures
Required market share to break even
Sales potential for the firm in the segment (Actionable)
Expected profit margins in the segment
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Market Targeting Strategies
Five Patterns of Target Market Selection
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Marketing Management,
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MARKET
28
7-28
Porter’s Five Forces Model
Threat of Rivalry
Threat of Buyer
Bargaining Power
Threat of Supplier
Bargaining Power
Threat of
Substitutes
Threat of
New Entrants
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Figure 7.4 Possible Levels
of Segmentation
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Strategies for Reaching Target
Market
Undifferentiated
Marketing
Differentiated Marketing
Concentrated Marketing
Micromarketing
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For Review
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What are the different levels of market
segmentation?
How can a company divide a market into
segments?
What are the requirements for effective
segmentation?
How should business markets be segmented?
How should a company choose the most
attractive target markets?
Copyright © 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the
United States edition of Marketing Management, 14e.
7-32