Chapter 7 Segmenting and
Targeting Markets
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
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.
Bases for Segmentation
Geography
Bases
Used to
Segment
Consumer
Markets
Demographics
Psychographics
Benefits Sought
Usage Rate
Geographic Segmentation
• Region of the country or world
• Market size
• Market density
• Climate
Bases for
Demographic Segmentation
• Age
• Gender
• Income
• Ethnic background
• Family Life Cycle
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
Family Life Cycle
Age
Marital
Status
Children
Bases for
Psychographic Segmentation
Personality
Motives
Lifestyles
Psychographic
Segmentation
Geodemographics
Lifestyle Segmentation
• How time is spent
• Beliefs
• Socioeconomic
characteristics
Geodemographic Segmentation
Segmenting potential customers
into neighborhood lifestyle
categories.
Combines geographic,
demographic, and lifestyle
segmentation.
Quartiles of County Residents of Asian Descent
CLARTAS’ PRIZM
62 American clusters
Each cluster is a member of 15 social groups arranged by
urbanization density and socio-economic standing.
County
City
High
$ $
Low
RURAL
TOWN
2nd CITY
SUBURB
URBAN
CLARTAS’ PRIZM
62 American clusters
Each cluster is a member of 15 social groups arranged by
urbanization density and socio-economic standing.
01: BLUE BLOOD ESTATES05: KIDS & CUL-DE-SACS
07: MONEY & BRAINS
09: AMERICAN DREAMS
12: UPWARD BOUND
14: COUNTRY SQUIRES
18: YOUNG INFLUENCIALS
28: BIG CITY BLEND
31: LATINO AMERICA
40: MILITARY QUARTERS
41: SHOTGUNS & PICKUPS
62: HARD SCRABBLE
To look up a ZIP code use
http://www.velocity.claritas.com/YAWYL/Default.wjsp?System=WL
For definitions of each cluster, see
http://www.qmsoft.com/solutions/prizm.htm for complete descriptions
VALS 2 Dimensions
Abundant Resources
Principleoriented
Statusoriented
Actionoriented
Actualizers
Minimal Resources
Fulfillers
Achievers
Experiencers
Believers
Strivers
Makers
Strugglers
Benefit Segmentation
The process of grouping
customers into market segments
according to
the benefits they seek
from the product .
Usage-Rate Segmentation
Dividing a market by the amount
of product
bought or consumed.
The 80/20 Principle
A principle holding that
20 percent of all customers
generate 80 percent
of the demand.
Steps in Segmenting a Market
Select
a
market
for
study
Choose
bases
for
segmentation
Select
descriptors
Profile
and
analyze
segments
Select
target
markets
Design,
implement,
maintain
mkting
mix
Strategies for Selecting
Target Markets
Undifferentiated Concentrated
Strategy
Strategy
Multisegment
Strategy
Undifferentiated
Targeting Strategy
Advantages:
 Potential savings on
production and marketing
costs
Disadvantages:
 Unimaginative product
offerings
 Company more
susceptible to competition
Concentrated
Targeting Strategy
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
Multisegment
Targeting Strategy
Advantages:
 Greater financial success
 Economies of scale
Disadvantages:
 High costs
 Cannibalization
Costs of Multisegment Targeting
$
$
$
$
$
$
$
Product design costs
Production costs
Promotion costs
Inventory costs
Marketing research costs
Management costs
Cannibalization
Cannibalization
Situation that occurs when sales
of a new product
cut into sales of a
firm’s existing products.
Positioning
Developing a specific marketing
mix to influence potential
customers’ overall perception of
a brand, product line, or
organization in general.
Effective Positioning
• Assess the positions of competing
products
• Determine the dimensions of these
positions
• Choose an effective market position
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
New product
Positioning Bases
Attribute
Price and Quality
Use or Application
Product User
Positioning
Bases
Product Class
Competitor
Repositioning
Changing consumers’
perceptions of a brand
in relation to
competing brands.
Guess Who Owns Theses Brands?
What are the segments that each is
directed toward?
See http://www.gloss.com/interim_flash.html
High
Product Positioning
Low
Low
Richness
High
Why Do Consumers Purchase Technology?
Primary Motivation
High
Career
Entertainment
Status
Fast
Forwards
Mouse
Potatoes
Cyber-snobs
Technostrivers
Gadget
Grabbers
X-techs
Handshakers
Media
Junkies
Country
Clubbers
High
Low
Neohearthminders
Low
Disposable Income
Disposable Income
Technology pessimists Technology optimists
Family
Traditionalists
Sidelined Citizens
Source: Forrester Research, Inc.