Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-1
IDENTIFYING
MARKET
SEGMENTS
AND TARGETS
CHAPTER
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-2
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
1. Explain what market segmentation is
and when to use it.
2. Identify the five steps involved in
segmenting and targeting markets.
3. Recognize the different factors used to
segment consumer and organizational
markets.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-3
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
4. Know how to develop a market-product
grid to identify a target market and
recommend resulting actions.
5. Explain how marketing managers
position products in the marketplace.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-4
SNEAKERS MARKETING WARS: JAY-Z,
YAO MING, AND A SWOOSHLESS
NIKE LINE FOR WAL-MART
How Do You
Stand Out on
Sneaker Walls?
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-5
SNEAKERS MARKETING WARS: JAY-Z,
YAO MING, AND A SWOOSHLESS
NIKE LINE FOR WAL-MART
New Segments
and Strategies
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-6
Age Segments
Competitive Trends
Gender Segments
Price Segments
Sport Segments
Lifestyle Segments
SNEAKERS MARKETING WARS: JAY-Z,
YAO MING, AND A SWOOSHLESS
NIKE LINE FOR WAL-MART
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-7
WHY SEGMENT MARKETS?
What Market Segmentation Means
Market Segments
Product Differentiation
Segmentation: Linking Needs to Actions
Market Segmentation
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-8
FIGURE 9-1 Market segmentationlinking
market needs to an organizations marketing
program
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WHY SEGMENT MARKETS?
What Market Segmentation Means
How Reeboks Segmentation Strategy
Developed
Using Market-Product Grids
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FIGURE 9-2 Market-product grid showing
how different Reebok shoes reach segments
of customers with different needs
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WHY SEGMENT MARKETS?
When to Segment Markets
Examples of Successful Market Segmentation
Build-to-Order (BTO)
Customer Relationship Management (CRM)
Mass Customization
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-12
Street & Smiths Baseball
What product/market segmentation strategy?
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Harry Potter
What product/market segmentation strategy?
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WHY SEGMENT MARKETS?
When to Segment Markets
The Segmentation Trade-Off:
CRM versus Synergy
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-15
Ann Taylor & Ann Taylor Loft
What is the danger of a two-segment strategy?
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Concept Check
1. Market segmentation involves
aggregating prospective buyers into
groups that have two key
characteristics. What are they?
A: The groups should (1) have common
needs and (2) respond similarly to a
marketing action.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-17

Concept Check
2. When should a firm segment its
markets?
A: A firm goes to the trouble and
expense of segmenting its markets
when this will increase its sales,
profit, and return on investment.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-18
FIGURE 9-3 The five key steps in
segmenting and targeting markets link
market needs of customers to the
organizations marketing program
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STEPS IN SEGMENTING AND
TARGETING MARKETS
Step 1: Group Potential Buyers into
Segments
Potential for Increased Profit
Criteria to Use in Forming the Segments
Similarity of Needs of Buyers within a Segment
Simplicity and Cost of Assigning Buyers to Segments
Difference of Needs of Buyers Among Segments
Potential of a Marketing Action to Reach a Segment
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STEPS IN SEGMENTING AND
TARGETING MARKETS
Step 1: Group Potential Buyers into
Segments
Ways to Segment Consumer Markets
Customer Characteristics
Geographic: Region
Demographic: Household
Psychographic: Lifestyle
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STEPS IN SEGMENTING AND
TARGETING MARKETS
Step 1: Group Potential Buyers into
Segments
Ways to Segment Consumer Markets
Buying Situations
Frequency Marketing
80/20 Rule
Benefits Sought: Product Features
Usage/Patronage: Usage Rate
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FIGURE 9-B Segmentation variables and
breakdowns for U.S. consumer markets
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Mac-Gray MicroFridge
What benefits sought and
what consumer market segments targeted?
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FIGURE 9-C Patronage of fast-food
restaurants by adults 18 years and older:
Simmons Market Research Bureau
NCS/NHCS Spring 2004 Adult Full-Year
Choices System Crosstabulation Report
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-25
FIGURE 9-4 Comparison of various kinds
of users and nonusers for Wendys,
Burger King, and McDonalds fast-food
restaurants
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STEPS IN SEGMENTING AND
TARGETING MARKETS
Step 1: Group Potential Buyers into
Segments
Variables to use in Forming Segments
Students in Dorms
Students in Apartments
Day Commuters
Night Commuters
Faculty/Staff
People Living in Area
People Working in Area
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STEPS IN SEGMENTING AND
TARGETING MARKETS
Step 1: Group Potential Buyers into
Segments
Ways to Segment Organizational Markets
Customer Characteristics
Geographic: Statistical Area
Demographic: NAICS Code
Demographic: Number of Employees
Benefits Sought: Product Features
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FIGURE 9-D Segmentation variables and
breakdowns for U.S. organizational markets
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Xerox WorkCenter C2424
What variables are used to
segment organizational markets?
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Concept Check
1. The process of segmenting and
targeting markets is a bridge between
what two marketing activities?
A: identifying market needs and taking
marketing actions
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-31

Concept Check
2. What are two main ways to segment
consumer and organizational
markets?
A: customer characteristics and buying
situations
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STEPS IN SEGMENTING AND
TARGETING MARKETS
Step 2: Group Products to be Sold
into Categories
Step 3: Develop a Market-Product Grid
and Estimate Size of Markets
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-33
FIGURE 9-5 Selecting a target market for
your Wendys fast-food restaurant next to an
urban university (target market is shaded)
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STEPS IN SEGMENTING AND
TARGETING MARKETS
Step 4: Select Target Markets
Criteria to Use in Picking the Target Segments
Market Size
Expected Growth
Cost of Reaching Segment
Compatibility with the
Organizations Objectives
and Resources
Competitive Position
Choose the Segments
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STEPS IN SEGMENTING AND
TARGETING MARKETS
Your Wendys Segmentation Strategy
Day Commuters
Between-Meal Snacks
Dinner to Night Students
Step 5: Take Marketing Actions to Reach
Target Markets
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Wendys
How can Wendys target different market
segments with different advertising programs?
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FIGURE 9-6 Advertising actions to reach
specific student segments
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STEPS IN SEGMENTING AND
TARGETING MARKETS
Apples Ever-Changing Segmentation
Strategy
Step 5: Take Marketing Actions to Reach
Target Markets
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Apple Computer (1977Today)
How have Apples product lines and market
segmentation strategies changed?
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STEPS IN SEGMENTING AND
TARGETING MARKETS
Marketing Synergies
Product Synergies
Market-Product Synergies: A Balancing
Act
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-41
FIGURE 9-E Benefits (+) and drawbacks (-)
of a firms market-product strategies
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-42

Concept Check
1. What are some criteria used to decide
which segments to choose for
targets?
A: These criteria include market size,
expected growth, competitive position,
cost of reaching the segment, and
compatibility with the organizations
objectives and resources.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-43

Concept Check
A: Each cell in the grid can show the
estimated market size of a given
product sold to a specific market
segment.
2. In a market-product grid, what factor
is estimated or measured for each of
the cells?
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-44

Concept Check
3. What is the difference between marketing
synergies and product synergies in a
market-product grid?
A: Marketing synergies run horizontally across a
market-product grid. Each row represents an
opportunity for efficiency in the marketing
efforts to a market segment. Product synergies
run vertically down the market-product grid.
Each column represents an opportunity for
efficiency in research and development (R&D)
and production.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-45
POSITIONING THE PRODUCT
Product Positioning Using Perceptual
Maps
Identify Important Attributes for a
Product Class
Judgments of Existing Brands on These
Important Attributes
Ratings of an Ideal Brands Attributes
Perceptual Map
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Chocolate Milk
How can dairies put more zip into sales?
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FIGURE 9-7 Your challenge as a marketing
manager: Try to position chocolate milk to
make it more appealing to adults
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-48
POSITIONING THE PRODUCT
Product Positioning Using Perceptual
Maps
Positioning Chocolate Milk for Adults
Packaging Adult Chocolate Milk
Finding a New Position for Chocolate Milk
in the Minds of Adults: Nutrition
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FIGURE 9-8 A perceptual map to suggest a
strategy for positioning chocolate milk to
reach adults
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-50

Concept Check
A: Product positioning refers to the
place an offering occupies in
consumers minds on important
attributes relative to competitive
offerings.
1. What is product positioning?
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Concept Check
A: Marketers use perceptual maps to
display in two dimensions the
location of their and competing
products or brands to see how
consumers perceive them and then
take marketing actions.
2. Why do marketers use perceptual
maps in product positioning
decisions?
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-52
APPLES LATEST
MARKET-PRODUCT
STRATEGIES
GOING ONLINE
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1. Access the Apple History website.
Identify the new and remaining
markets Apple has targeted with new
and existing products compared to
those described in the text and the
Marketing NewsNet.
Going Online
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-54
Going Online
2. Can Apple survive as a niche PC
marketer like BMW has with autos?
Why or why not?
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NOKIA: A PHONE
FOR EVERY SEGMENT
VIDEO CASE 9
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VIDEO CASE 9
Nokia
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1. Why has segmentation been a
successful marketing strategy for
Nokia?
VIDEO CASE 9
Nokia
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-58
2. What customer characteristics were
used by mobile phone marketers
during the industrys early stages of
growth? Which customer
characteristics and segmentation
variables does Nokia use?
VIDEO CASE 9
Nokia
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-59
3. Create a market-product grid for
Nokia today. What potential new
markets could you add to the grid?
VIDEO CASE 9
Nokia
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-60


MARKET SEGMENTATION IN
PRACTICE: WHAT KIND OF
PILLOW DO YOU NEED?
SUPPLEMENTAL
LECTURE NOTE 9-1
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-61
FIGURE 9-A Market-product grid showing
the size of markets for pillows for three
different segments of sleepers
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MARKET-PRODUCT
SYNERGIES
SUPPLEMENTAL
LECTURE NOTE 9-2
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FIGURE 9-F Market-product grid of
alternative strategies for a lawnmower
manufacturer
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INTERPRETING CENSUS DATA
IN-CLASS ACTIVITY 9-1
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U.S. Census 2000 Promotional Video
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Census 2000 Short Form
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American Community Survey Video
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American Community Survey Form
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PRODUCT CATEGORIZATION
TO IDENTIFY
PRODCUT GROUPS
IN-CLASS ACTIVITY 9-2
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PRODUCT POSITIONING FOR
CONSUMERS AND RETAILERS
IN-CLASS ACTIVITY 9-3
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3M Post-it

Notes TV ad
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3M Post-it

Flag Highlighter Invention

+ =
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3M Post-it

Flag Highlighter
Colors and Packages
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3M Post-it

Flag Highlighter
Front and Back of Package
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Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-80
Market Segmentation
Market segmentation involves
aggregating prospective buyers into
groups that (1) have common needs and
(2) will respond similarly to a marketing
action.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-81
Market Segments
Market segments are the relatively
homogeneous groups of prospective
buyers that result from the market
segmentation process.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-82
Product Differentiation
Product differentiation is a strategy that
involves a firms using different
marketing mix activities to help
consumers perceive the product as being
different and better than competing
products.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-83
Market-Product Grid
A market-product grid is a framework
to relate the market segments of potential
buyers to products offered or potential
marketing actions by the firm.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-84
Synergy
Synergy is the increased customer value
achieved through performing
organizational functions more efficiently.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-85
Usage Rate
Usage rate is the quantity consumed or
patronage (store visits) during a specific
period of time.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-86
80/20 Rule
The 80/20 rule is a concept that suggests
80 percent of a firms sales are obtained
from 20 percent of its customers.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-87
Product Positioning
Product positioning refers to the place
an offering occupies in consumers minds
on important attributes relative to
competitive products.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-88
Perceptual Map
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 relative to its own and
then take marketing actions.