Chapter 8
Segmenting and Targeting Markets
What is a Market?
A group of actual or potential customers for a
particular product.
A market has:
 Purchasing power
 Willingness to spend money
 Authority to spend money
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
Criteria for Segmentation
Substantiality
Segment must be large
enough to warrant a special
marketing mix.
Identifiability
and
Measurability
Segments must be identifiable and
their size measurable.
Accessibility
Members of targeted segments
must be reachable with
marketing mix.
Responsiveness
Unless segment responds to a
marketing mix differently, no
separate treatment is needed.
Bases for Segmenting
Consumer Markets
Geography
• Region
• Market size
• Market
density
• Climate
Demographics
•
•
•
•
Age
Gender
Income
Race/
ethnicity
• Family life
cycle
Psychographics
•
•
•
•
Personality
Motives
Lifestyle
Geodemographics
Benefits
• Benefits
sought
Usage Rate
•
•
•
•
Former
Potential
1st time
Light or
irregular
• Medium
• Heavy
Family Life Cycle
6
Psychographic Segmentation
Psychographic
Segmentation
7
Market segmentation on
the basis of personality,
motives, lifestyles, and
geodemographics.
Benefit Segmentation
Usage-Rate
Segmentation
80/20
Principle
8
Dividing a market by the
amount of product bought
or consumed.
A principle holding that
20 percent of all customers
generate 80 percent of
the demand.
Bases for Segmenting
Business Markets
Producers
Resellers
Government
Institutions
Company
Characteristics
Buying
Processes
Bases for Segmenting Business
Markets- Company Characteristics
 Geographic Location
 Type of Company
 Company Size
 Volume of Purchases
 Product use
Buyer Characteristics
Demographic characteristics
Decision style
Tolerance for risk
Confidence level
Job responsibilities
Steps in Segmenting Markets
Select
a
market
for
study
1
Choose
bases
for
segmentation
Select
descriptor
Profile
and
analyze
segments
Select
target
markets
Design,
implement
maintain
marketing
mix
2
3
4
5
6
Target Markets
Target
Market
13
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.
Target Market Strategies
Undifferentiated
14
Multi-segment
Concentrated
Cannibalization
Cannibalization
15
Situation that occurs
when sales of a new
product cut into sales
of a firm’s existing
products.
One-to-One Marketing
 An individualized
marketing method that
utilizes customer
information to build
long-term,
personalized, and
profitable
relationships with each
customer
Positioning Strategy
 Creating the
perceptions
customers have
about our
product relative
to competitors
Positioning Bases
 Attribute
 Price and Quality
 Use or Application
 Product User
 Product Class
 Competitor
 Emotion
Perceptual Mapping
Perceptual
Mapping
A means of displaying or
graphing, in two or more
dimensions, the location of
products, brands, or groups
of products in customers’
minds.
Perceptual Map
Repositioning
Repositioning
Changing consumers’
perceptions of a brand
in relation to competing
brands.
Perceptual Maps –
Tea Industry
 1980s
Traditional flavor
* Tetley
*Lipton
*Luzianne
Iced
Hot
*Nestea
*Celestial Seasons
Unique flavor
From South-Western College Publishing
Repositioning – Tea Industry
Mid -1990s
Traditional flavor
*Tetley Rounds
*Tetley
*Lipton Rounds
*Lipton
Iced
*Luzianne
*Arizona
Hot
*Lipton Natural
*Nestea
*Snapple
*Celestial Seasons
*Lipton flavored
From South-Western Publishing Company
Unique flavor