Marketing
and
Segmentation
Suppose a teenage girl is looking for a pair of jeans.
What influences her?
1. Demographics
1. Demographics
2. Psychographics
1. Demographics
2. Psychographics
3. Perceptual clues
1.
2.
3.
4.
Demographics
Psychographics
Perceptual clues
Symbolism
1.
2.
3.
4.
5.
Demographics
Psychographics
Perceptual clues
Symbolism
Past experience
1.
2.
3.
4.
5.
6.
Demographics
Psychographics
Perceptual clues
Symbolism
Past experience
Group dynamics
1.
2.
3.
4.
5.
6.
Demographics
Psychographics
Perceptual clues
Symbolism
Past experience
Group dynamics
Rituals
Family
Reference groups
Race & ethnic factors
Social class
Subculture
Culture
Market Segmentation
“Smart marketing starts with smart segmentation.”
Jeffrey J. Fox
 Target Market: A group of people or organizations
which a business creates and maintains a marketing mix
specifically designed to satisfy the needs of group
members
 Market Segment: Individuals, groups, or organizations
with one or more similar characteristics that cause them
to have similar product needs
 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
Marketing Concept:
“All marketing strategies should
be based on known customer
needs and or wants.”
Segmentation is the practical application of
marketing research and consumer behavior.
Reminder:
The “marketing mix” consists of:
Product
Price
Promotion
Distribution (Place)
Almost no one tries to sell
to everyone!
Major kinds of segmentation:
1. Undifferentiated marketing strategy:
Generic Differentiation
Same marketing mix for ALL segments
Overlooks segment differences
4-Ps designed for everyone
Advantage:
Concentrated resources
Major kinds of segmentation:
1. Undifferentiated marketing strategy:
Generic Differentiation
Same marketing mix for ALL segments
Overlooks segment differences
4-Ps designed for everyone
Disadvantage:
4-Ps for everyone?
Competing against focused firms
Concentrated
Undifferentiated
2. Full-coverage marketing strategy:
Segmented Differentiation
Treat each segment as separate market
4-Ps designed for every market
Advantage:
Focus…
2. Full-coverage marketing strategy:
Segmented Differentiation
Treat each segment as separate market
4-Ps designed for every market
Disadvantage:
Development costs
(must weigh increased costs
increased sale)
Concentrated
Undifferentiated
3. Single Marketing Strategy:
Targeted Differentiation
Niche Marketing
Go after one segment (ethnic marketing)
Advantage: Sharp focus… good expertise
efficiency… high profits
gives smaller firms a chance
good place to start
3. Single Marketing Strategy:
Targeted Differentiation
Niche Marketing
Go after one segment (ethnic marketing)
Disadvantage:
More risk… eggs in one basket
Competition can wipe you out
Major kinds:
4. Concentrated marketing strategy:
Hybrid Differentiation
Single product to several segment
5. Micromarketing
Local marketing and individual marketing
Mass Customization
Build-to-Order (BTO)
Concentrated
Undifferentiated
Which is this?
8-27
To work, segments must have:
1. Substantiality
Must be large enough
enough money, customers, etc
enough room to grow
Basic marketing rule:
The best product, best prices, and
best business in the world
will fail if there are no customers!
Basic marketing rule:
The best product, best prices, and
best business in the world
will fail if there are no customers!
To work, segments must have:
2. Identifiablity
Must be able to identify segment
and measure it
To work, segments must have:
3. Reachability
Must be accessible
must be actionable
(can action be taken?)
The Segmentation Tradeoff:
Synergies vs. Cannibalization
• Organizational Synergy
Increased customer value through efficient
marketing and manufacturing
• Cannibalization
• “Tiffany/Walmart” Strategies
two-tier products
8-33
The five key steps in segmenting and
targeting markets that link market needs to a
firm’s marketing program
8-34
Segments should be based on what
people VALUE!
Ryan Hamilton
Step 1.

Criteria to Use in Forming the Segments
• Simplicity and Cost-Effectiveness of assigning
potential buyers to Segments
8-37
Step 1.

Criteria to Use in Forming the Segments
• Simplicity and Cost-Effectiveness of assigning
potential buyers to Segments
• Potential for increased Profit
8-38
Step 1.

Criteria to Use in Forming the Segments
• Simplicity and Cost-Effectiveness of assigning
potential buyers to Segments
• Potential for increased Profit
• Similarity of needs of potential buyers
within a Segment
8-39
Step 1.

Criteria to Use in Forming the Segments
• Simplicity and Cost-Effectiveness of assigning
potential buyers to Segments
• Potential for increased Profit
• Similarity of needs of potential buyers
within a Segment
• Difference of needs of buyers among Segments
8-40
Step 1.

Criteria to Use in Forming the Segments
• Simplicity and Cost-Effectiveness of assigning
potential buyers to Segments
• Potential for increased Profit
• Similarity of needs of potential buyers
within a Segment
• Difference of needs of buyers among Segments
• Potential of a marketing action to reach
a Segment
8-41
Step 1.
Common Segments
Geographical
Climate
Region
City size
Population density
8-42
Market Segmentation
1. Geographic
Market Segmentation
1. Geographic
2. Demographic
Step 1.

Common Segments
Demographics
Age (Generational marketing)
Gender (?)
Marital status
Income
Education
Occupation
Racial and Ethnic
8-48
Market Segmentation
1. Geographic
2. Demographic
3. Psychographic
Step 1.

Common Segments
Psychographics
Perception
Gender (?)
Motivation
Personality
Attitudes
http://www.expedia.com/Waterloo-Hotels-Baymont-Inn-SuitesWaterloo.h17890.HotelInformation?chkin=10%2F29%2F2013&chkout=10%2F30%2F2013&rm1=
a2&hwrqCacheKey=3ac1ed16-2067-4bf3-b2a08b521c84be7aHWRQ1381949822543&c=30126d42-02ed-4261-9ade64b0ef193af1
&
8-50
Market Segmentation
1. Geographic
2. Demographic
3. Psychographic
The Nine Nations
Montana economic development?
From east to west
Or
From north to south
Step 1.

Common Segments
Lifestyle
Combination of:
Place
Person
Products
VALs
8-54
Step 1.
Common Segments
Usage
Use-related
usage rate
brand loyalty
http://www.youtube.com/watch?v=vbsyEI78m5s
awareness
Use-situation
where… when… why… with whom
8-58
Step 1.
Common Segments
Behavioral
Product features
Usage rates (frequency)
80/20 rule
Long tail
Selling small amounts to few customers,
BUT have lots of things to sell (Netflix)
8-59
Step 1.

Common Segments
Socio-cultural
Culture and subculture
Social class
Religion
https://www.youtube.com/watch?v=ouZLD2vfD6Q
8-61
Subculture
Social class may be hard to define, but we all know it when we see it.
Segmentation bases, variables, and
breakdowns for U.S. consumer markets
8-68
The five key steps in segmenting and
targeting markets that link market needs to a
firm’s marketing program
8-69
Step 2:
Target Marketing
The process of evaluating each market
segment’s attractiveness and selecting
one or more segments to enter.
Marketing positioning
Arranging for a product to occupy a clear,
distinctive , and desirable place
relative to competing products
in the minds of target consumers.
Product positioning: is the
place an offering occupies in a
consumer’s mind on important
attributes relative to competitive
products.
8-73
Product differentiation: is a
marketing strategy that involves
a firm using different marketing
mix activities to help consumers
perceive the product as being
different and better than
competing products.
8-74
8-75
Prince Sports targets racquets at specific market segments
8-76
Step 3
Market-product grids show alternative strategies
for a lawnmower manufacturer
8-77
The five key steps in segmenting and
targeting markets that link market needs to a
firm’s marketing program
8-78
STEP 4: SELECT TARGET MARKETS

Criteria to Use in Selecting
Target Markets
• Two Types of Criteria
 Those that divide a market into Segments
 Those that actually pick the Target Segments
8-79

Criteria to Use in Selecting Target Markets
• Market Size
• Expected Growth
• Competitive Position
• Cost of reaching the Segment
• Compatibility with organizational
objectives and resources
8-80
Perceptual Map Example
A Perceptual Map to Reposition
chocolate milk for adults:
• Identify Important Attributes for Adult Drinks
• Discover How Adults See Competing Drinks
• Discover How Customers See Chocolate Milk
• Reposition Chocolate Milk to Make It
More Appealing to Adults
8-81
A perceptual map: is a means of
displaying or graphing in two
dimensions the location of products or
brands in the minds of consumers to
enable a manager to see how
consumers perceive competing
products or brands, as well as the
firm’s own product or brand.
8-82
A perceptual map of the location of
beverages in the minds of American adults
8-83
The strategy American dairies are using to
reposition chocolate milk to reach adults
8-84
Step 5
Do it!