CHAPTER 9
IDENTIFYING MARKET
SEGMENTS AND SELECTING
TARGET MARKETS
IMPORTANT TOPICS OF THIS
CHAPTER
Elements of market segmentations
 Different levels of market segmentation
 Segmentation procedure
 Segmentation in consumer market
 Segmentation in business market
 Requirements for effective segmentation
 Market targetting

MARKET SEGMENTATION
Market Segmentation
Identify segment
Develop profiles
Market Targeting
Market Positioning
Evaluate
Positioning
Select
Communicate
MARKET SEGMENTATION

Levels of Segmentation:
»
Mass Marketing:

»
Segment Marketing:

»
Narrowly defined market
Local Marketing:

»
Identifiable segment
Niche Marketing:

»
Mass production, mass distribution and mass promotion
Satisfy needs of local customers
Individual Marketing:

Customized or one-to-one marketing
MARKET SEGMENTATION
(CONT.)

Patterns of Segmentation:
»
Homogeneous:

»
Diffused:

»
Similar preferences:no clear segment
No clear preferences :scattered around
Clustered:

Distinct preferences:concentrated market
MARKET SEGMENTATION
(CONT.)

Segmentation Procedures:
»
Survey stage:

»
Analysis stage:

»
Exploratory:
– Focus group interviews.
Multivariate techniques:
– Cluster Analysis, Factor analysis.
Profiling stage:

Description of the segment by age, income, education,
hobbies, etc.
BASES FOR SEGMENTATION
IN CONSUMER MARKETS

Segmentation by consumer characteristics:
»
Geographic:

»
Demographic:

»
Life style and personality
Behavioral:

»
Age and life cycle, gender, income, generation(baby boomers)
and social class.
Psychographics:

»
East, West, North, Europe, Asia
Occasions, benefits, usage rate and status, loyalty
Multi-Attribute Segmentation (Geoclustering):

PRIZM cluster ( clustering by zip codes)
BASES OF SEGMENTING IN
BUSINESS MARKETS

Micro Segmentation-firm bases:
»
»

Macro Segmentation-market bases:
»
»

Purchasing process/decision style
Decision making style-participative/nonparticipative
Location, size and number of employees
Total market share in the industry
Purchasing Process-first-time buyers,
novice and sophisticates buyers.
SEGMENTATION IN
BUSINESS MARKETS

Programmed buyers:
» Routine purchase

Relationship buyers:
» Knowledgeable about competition

Transaction buyers:
» Price and service sensitive buyers

Bargain hunters:
» Ready to switch to competition
SEGMENTATION IN
BUSINESS MARKET (CONT.)

First-time prospects:
» Customers who have not purchased yet.

Novices:
» Customers who are starting their relationships

Sophisticates:
» Established customers
REQUIREMENTS FOR
EFFECTIVE SEGMENTATION

Measurable:
» Size and power must be measured.

Substantial:
» Large enough to make profit.

Accessible:
» Easily reached and served.

Differentiable:
» Distinguishable and respond differently to different marketing
mix.

Actionable:
» Open to service.
MARKET TARGETING

Evaluating the Segments:
»
Overall attractiveness:

»

Size, growth and risk factor
Suitable for company’s objectives and resources
Selecting the Segments:
»
»
Single segment concentration
Selective specialization:

»
Product specialization:

»
Number of segments
Consumer Vs government
Market specialization:

Consumer Vs government
MARKET TARGETING
(CONT.)
»
Full market coverage (IBM, Coca Cola, GM, GE)


Undifferentiated marketing:
– standardization and mass production
Differentiated marketing:
– cost factor- production, manufacturing,
administrative, inventory and promotion
ADDITIONAL
CONSIDERATION

Ethical Choices of Market Target:
»

Segment Interrelationships and Super-segments:
»

Toothpaste
Segment-by-Segment Invasion:
»

Cigarettes, beer
Toyota and Nissan
Inter-segment Cooperation:
»
cooperation within the company