Chapter 10
Target Markets:
Segmentation, Evaluation,
and Positioning
Objectives
• Learn what a market is
• Understand differences among targeting strategies
• Become familiar with segmentation variables
• Know what segment profiles are and how they
are used
• Evaluate market segments
• Identify factors that influence selection of specific
market segments
• Understand positioning
• Become familiar with sales forecasting methods
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What are Markets
• Group of people seeking products in a
specific product category (see Ch. 2
definition)
• Can be…
– specific location (flea market)
– large geographic area
– relationship between supply and demand
(market for given product)
– action word, as in market a product
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Market Requirements

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
Need/desire for a particular product
Have ability to purchase product
Willing to use buying power
Have authority to buy specific products
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Target Market Selection Process
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Step 1: Targeting Strategy
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Undifferentiated
Targeting Strategy
• A strategy in which an organization defines
an entire market for a particular product as
its target market, designs a single market
mix, and directs it at that market.
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Homogeneous Market
A market in which a large portion of
customers have similar needs for a product.
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Concentrated Targeting Strategy
Through Market Segmentation
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Heterogeneous Market
A market made up of individuals or
organizations with diverse needs for
products in a specific product class.
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Market Segmentation
The process of dividing a total market into
groups with relatively similar product needs
to design a marketing mix that matches
those needs.
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Market Segment
Individuals, groups, or organizations sharing
one or more similar characteristics that
cause them to have similar product needs.
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Conditions For Successful
Market Segmentation
1. Customer product needs are heterogeneous
2. Segments identifiable and divisible
3. Market divided so segments can be compared
on sales potential, costs, and profits
4. At least one segment has potential to justify
marketing expense
5. Segment can be reached with a particular
marketing mix
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Concentrated Target Strategy
Market segmentation strategy in which
an organization targets a single market
segment using one marketing mix
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Differentiated Targeting Strategy
Through Market Segmentation
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Differentiated Targeting Strategy
A strategy in which an organization targets
two or more segments by developing a
marketing mix for each segment.
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Step 2: Determine Which
Segmentation Variables to Use
• Segmentation Variable
– characteristics of individuals, groups,
or organizations used to divide a
market into segments
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Variables for Segmenting
Consumer Markets
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Demographic Variables
•
•
•
•
•
•
Age
Gender
Race
Ethnicity
Income
Education
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•
•
•
•
•
Occupation
Family size
Family life cycle
Religion
Social class
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Age Group Spending Levels
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Life Cycle Stages
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Family Life Cycle Stages
Source: Jason Fields, “America’s Families and Living Arrangements:
2003,” Current Population Reports, U.S. Census Bureau, 2003.
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Geographic Variables
• Climate
• Terrain
• City size
• Population density
• Urban/rural areas
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Market Density
The number of potential customers within a
unit of land area.
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Geodemographic Segmentation
A method of market segmentation that
clusters people in zip code areas and
smaller neighborhood units based on
lifestyle and demographic information.
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Micromarketing
An approach to market segmentation in
which organizations focus precise marketing
efforts on very small geographic markets.
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Psychographic Variables
• Personality characteristics
• Motives
• Lifestyles
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VALS Types
Take the VALS Survey
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Behavioristic Variables
• Dividing a market according to some feature
of consumer behavior toward a product
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Benefit Segmentation
The division of a market according to benefits
that consumers want from the product.
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Segmenting Business Markets
 Geographic Location
 Type of Organization
 Customer Size
 Product Use
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Step 3: Develop Market
Segment Profiles
• Similarities among potential customers
• Differences among people and
organizations in different segments
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Step 4: Evaluate Relevant
Market Segments
• Sales Estimates
– Market potential
– Company sales potential (breakdown
and buildup)
• Competitive Assessment
• Cost Estimates
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© Microsoft
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Step 5: Select Specific
Target Markets
• Choose market segmentation
• Available resources to compete in market
segmentation
• Confirm requirements of market segment
• Long-term growth of market segment
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Product Positioning and
Repositioning
• Product positioning
– creating and maintaining a certain concept
of a product in customers minds.
• Perceptual Mapping
• Bases for Positioning
• Repositioning
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Toothpaste Product Positions
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Perceptual Map
For Pain Relievers
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Developing Sales Forecast
• Sales forecast
– The amount of a product a company expects
to sell during a specific period at a specified
level of marketing activities.
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Executive Judgment
A sales forecasting method based on the
intuition of one or more executives.
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Surveys
 Customer Forecasting
 Sales Force Forecasting
 Expert Forecasting
 Delphi Technique
 Time Series Analysis
 Trend Analysis
 Regression Analysis
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Time Series Analysis
• Time series analysis – historical sales data used
to discover patterns in sales over time
• Trend analysis – aggregate sales data over many
years to determine trends in annual sales
• Cycle analysis – analysis over 3-5 years to
ascertain whether sales fluctuate in a consistent manner
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Time Series Analysis (cont’d)
• Seasonal analysis – daily, weekly, or monthly
sales figure to evaluate sales influences of seasonal
factors
• Random factor analysis – attributing erratic
sales variations to random events
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Regression Analysis
Predicting sales based on finding a
relationship between past sales and
one or more independent variables,
such as population or income
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Market Test
Making a product available to buyers in
one or more test areas and measuring
purchases and consumer responses to
marketing efforts.
McDonald’s Market Tests
Chicken Breast Strips
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Using Multiple
Forecasting Methods
• Diverse product lines
• Product sold to different market segments
• Variation in length of needed forecasts
• Verifying results of one method by using
others
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