Part 2: Understanding marketing
Chapter 5: Market segmentation
Step 3: Segment the market
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PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
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When we finish this lecture you
should
• Know how to define generic markets and product
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markets
Know what market segmentation is and how to
implement it
Understand how the segmentation process varies in
international markets
Know some of the computer-based approaches to
segmentation
Understand the three basic approaches to marketoriented strategy planning
Know what positioning is and why it is useful
Understand what perceptual mapping is and why it is
useful
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PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
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Understanding markets
• Definition of segmentation
‘One of the most important principles in marketing
involves identifying and understanding the needs
of particular groups of customers.’
(Marketing: Creating and Delivering Value, 4/e, Quester et al. p. 150)
• Marketers often aim their products at particular
segments of the population
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A company’s market
• Definition of a market
‘A market is a group of potential customers with
similar needs, who are willing to exchange
something of value for various need-satisfying
goods and/or services.’
(Marketing: Creating and Delivering Value, 4/e, Quester et al. p. 150)
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Figure 5.1 Narrowing down to target markets
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PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
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From generic markets to product
markets
• Definition of generic market
‘A market with broadly similar needs, with sellers
offering various, and often diverse, ways of
satisfying those needs.’
(Marketing: Creating and Delivering Value, 4/e, Quester et al. p. 151)
• Definition of product market
‘A market with very similar needs, with sellers
offering similar, or substitute, products to satisfy
those needs.’
(Marketing: Creating and Delivering Value, 4/e, Quester et al. p. 151)
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Naming product markets and generic
markets
• A complete product-market definition includes a
four-part description:
What:
1. product type (type of product/type
of service)
To meet what:
2. customer (user) needs
For whom:
3. customer type
Where:
4. geographic area
(Marketing: Creating and Delivering Value, 4/e, Quester et al. pp. 151–152).
‫ﴀ‬Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
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Figure 5.2 Relationship between generic-market
and product-market definitions
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Market segmentation
• A two-step process of
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Naming broad product markets and
Segmenting these broad product markets in order to
select target markets and develop suitable marketing
mixes
• Involves
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Disaggregating—breaking down all possible needs into
some generic markets and broad product markets
Aggregating—clustering people with similar needs into a
market segment
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Figure 5.3 A market grid diagram with submarkets
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position in a market—those with similar positions
can be aggregated into potential target markets:
(a) product market showing three segments; (b)
product market showing six segments
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Criteria for segmenting a broad
product market
• ‘Good’ market segments should meet the following
criteria:
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Customers within a segment are homogeneous
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Similar responses to marketing mix
Similar segmenting dimensions
Customers in different segments are heterogeneous
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Different responses to marketing mix
Different segmenting dimensions
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Criteria for segmenting a broad
product market (continued)
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Segment is substantial
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Segment is big enough to be profitable
Segmenting dimensions are operational
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Useful for identifying customers
Helpful in deciding on the marketing mix
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Developing strategies in a broad
product market
• Single target market approach
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Select one homogeneous segment as the target
• Multiple target market approach
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Select two or more target segments
Develop a different marketing mix for each segment
• Combined target market approach
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Combine submarkets into a single target market
Develop one marketing mix for the combined target
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Figure 5.5 Target marketers versus combiners
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demand curve for its target market; (b) combiner
sees one demand curve for its combined target
market; (c) segmenter sees one demand curve for
each submarket
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Figure 5.7 Possible segmenting dimensions for
business/organisational markets
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Figure 5.8 Relationship of potential target-market
dimensions to marketing mix decision areas
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Figure 5.9 Possible segmenting dimensions and
typical breakdowns for consumer markets
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Examples of possible segmenting
dimensions for consumer markets
• Customer related
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Geographic location (fast-food outlets)
Age (insurance policies)
Sex (clothing)
Family size (refrigerators)
Income (cars)
Education (magazines)
• Situation related
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Benefits offered (toothpaste)
Consumption/use patterns (cameras)
Brand familiarity (health care products)
Buying situation (soft drinks)
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Segmenting dimensions
qualifying and determining
• Qualifying dimensions
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Segmenting dimensions relevant to the product market
Are there characteristics typical of customers who are at
least potentially interested in the relevant product type?
• Determining dimensions
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Segmenting dimensions that affect the purchase of a
specific product or brand
Why does a potential customer select one brand over
another?
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Segmenting international markets
• Success in international marketing requires even
more attention to segmentation
• There are over 228 countries in the world
• Each country has unique culture/s
• Major differences in language, customs, beliefs,
religions, ethics, race and income distribution
patterns
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Computer-based methods
of segmenting
• Clustering—search for similar patterns within sets
of data
• Data mining—the detection of relevant patterns in
a database
• Conjoint analysis—technique to assist marketing
managers in determining how much importance
customers place on certain elements of the
company’s marketing mix
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Differentiation and positioning
• Competitive advantage—the marketing mix of a
company is perceived to by the target market as
superior to those of its competitors
• Positioning—how customers regard proposed
and/or present brands’ images in a market in
relation to competitor offerings
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Perceptual mapping
• Perceptual mapping can be used to
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Show how (potential) customers view a company’s
current or potential offerings
Show how customers view competitors' offerings
See what kind of offerings different segments see as ideal
See what offerings are likely to appeal to which segments
Help with combining and segmenting—by revealing which
segments view the market in similar (or dissimilar) ways
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Figure 5.11 Hypothetical ‘product space’ map
representing consumers’ perceptions of different
home loans
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Repositioning
• Companies are sometimes faced with the problem
of how to change their current positioning
• The positioning that has served the brand well for
10–20 years may have become stale or lost
meaning
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What we will be doing in the next
chapter
• In Chapter 6 we will be discussing consumer
behaviour
• Chapter 6 covers
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Buyer behaviour domestically and globally
The psychology of buying
The problem-solving processes that are used in buying
situations
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