chapter 7

Market Segmentation
and Target Markets
Harcourt, Inc.
Dr. Rosenbloom
Objectives
Understand the concepts: market,
segmentation, and target markets
Learn the advantages and
disadvantages of target marketing
Explain the steps in target market
selection
Dr. Rosenbloom
Discuss segmentation criteria,
strategies, bases, and information
sources
Understand market profiling and
positioning strategies
Discuss differences for business
and international marketing
Objectives
Dr. Rosenbloom
What is a market?
Individuals or organizations
who:
Are willing, able, and capable of
purchasing a firms product
Segmentation is critical because
demand is often heterogeneous
Dr. Rosenbloom
What is market segmentation?
Market Segmentation
Process of dividing a large
market into smaller target
markets, or customer groups
with similar needs and/or
desires
Dr. Rosenbloom
Market Segmentation
Mass
Market
Niche
Micro-
marketing
The
Individual
Personal-
ization
Micro-
marketing
Niche
Standardized
Marketing
Mix
Dr. Rosenbloom
Target Marketing
Advantages
Easier analysis of potential and actual
consumers
Tailoring of products to market
Assessment of demand potential
Identify competing products
Increased sales effectiveness and cost
efficiencies
Product positioning and easy identification
of opportunities
Dr. Rosenbloom
Target Marketing
Disadvantages
Increased marketing costs
Personalization can become
burdensome to manage
Faux segmentation may be viewed
cynically
Narrow segmentation can impact
brand loyalty
Ethics and stereotyping issues
Dr. Rosenbloom
Target Market Selection
Identify Total Market
Determine Need for
Segmentation
Determine Bases for
Segmentation
Profile Each Selected
Segment
Assess Potential
Profitability of Segment
and Select Target Segment
Select Positioning
Strategy
Develop and Implement
Appropriate Marketing Mix
Monitor, Evaluate and
Control
Dr. Rosenbloom
Market Criteria
Segmentable markets are:
Heterogeneous
Measurable
Substantial
Actionable
Companies must be able to respond to
preferences with an appropriate marketing mix
Accessible
Market must be efficiently reachable
Dr. Rosenbloom
External Factors
Stage in product life cycle
Competition
Product specific issues
Market for the product
Dr. Rosenbloom
Segmentation Variables
Situation
Segmentation
Psychographic
Segmentation
Geographic
Segmentation
Behavior/Usage
Segmentation
Demographic
Segmentation
Benefits-Sought
Segmentation
Dr. Rosenbloom
Family
Income Level
Ethnicity
Education
Age
Demographic Segmentation
Dr. Rosenbloom
Demographic Segmentation
Age
Some products are
marketed to
specific age
groups
Dr. Rosenbloom
Demographic Segmentation
Age
Some products are
marketed to
specific age
groups
Dr. Rosenbloom
Demographic Segmentation
Income Level
Some products are
marketed to
consumers with
different income
levels
Dr. Rosenbloom
Demographic Segmentation
Income Level
Some products are
marketed to
consumers with
different income
levels
Dr. Rosenbloom
Demographic Segmentation
Hal Riney and
Partners
Bartles and James
Dr. Rosenbloom
Demographic Segmentation
Family
Some products are
marketed to
consumers with
special family
consideration
Family Life Cycle
Bachelor, marriage,
married with children,
retired, etc.
Dr. Rosenbloom
Functions Of Advertising
The Martin Agency
KinderCare
Dr. Rosenbloom
Demographic Segmentation
Family
Some products are
marketed to
consumers with
special family
consideration
Family Life Cycle
Bachelor, marriage,
married with children,
retired, etc.
Dr. Rosenbloom
Demographic Segmentation
Education
Some products are
marketed to
consumers with
certain educational
levels
Dr. Rosenbloom
Demographic Segmentation
Ethnicity
Some products are
marketed to
consumers from
specific ethnic
backgrounds
Dr. Rosenbloom
Demographic Segmentation
Ethnicity
Some products are
marketed to
consumers from
specific ethnic
backgrounds
Dr. Rosenbloom
Segmentation Variables
Situation
Segmentation
Psychographic
Segmentation
Geographic
Segmentation
Behavior/Usage
Segmentation
Demographic
Segmentation
Benefits-Sought
Segmentation
Dr. Rosenbloom
Geographic Segmentation
When an organization localizes its
marketing efforts to accommodate the
unique needs of specific geographic
regions
Dr. Rosenbloom
Geographic Segmentation
When an organization localizes its
marketing efforts to accommodate the
unique needs of specific geographic
regions
Dr. Rosenbloom
Geographic Segmentation
Metropolitan Statistical Areas
An urbanized area of 50,000 and a total
metropolitan area population of at least
100,000
Charlottesville, Virginia
Dr. Rosenbloom
Geographic Segmentation
Primary Metropolitan Statistical
Areas
An urbanized county or cluster of
counties with a population of more
than 1 million
Gary/Hammond, Indiana
Dr. Rosenbloom
Geographic Segmentation
Consolidated Metropolitan
Statistical Area
A metropolitan area that includes at
least two PMSAs
Baltimore, Maryland and Washington,
D.C.
Dr. Rosenbloom
Segmenting Consumer Markets
Situation
Segmentation
Psychographic
Segmentation
Geographic
Segmentation
Behavior/Usage
Segmentation
Demographic
Segmentation
Benefits-Sought
Segmentation
Dr. Rosenbloom
Psychographic Segmentation
Grouping customers together
based on social class,
lifestyles and psychological
characteristics (attitudes,
interests and opinions)
PRIZM analysis from Claritas
Dr. Rosenbloom
Segmenting Consumer Markets
Situation
Segmentation
Psychographic
Segmentation
Geographic
Segmentation
Behavior/Usage
Segmentation
Demographic
Segmentation
Benefits-Sought
Segmentation
Dr. Rosenbloom
Benefits-Sought Segmentation
Markets can be
segmented based
on the benefits that
consumers desire
from using a
specific product
Dr. Rosenbloom
Benefits-Sought Segmentation
Bozell, Incorporated
American Pork
Council
Dr. Rosenbloom
Segmenting Consumer Markets
Situation
Segmentation
Psychographic
Segmentation
Geographic
Segmentation
Behavior/Usage
Segmentation
Demographic
Segmentation
Benefits-Sought
Segmentation
Dr. Rosenbloom
Situation Segmentation
Purchase situation or occasion
Physical surroundings
Social surroundings
Temporal perspective
How much time to make a purchase?
Task definition
Pre-purchase attitude
Dr. Rosenbloom
Segmenting Consumer Markets
Situation
Segmentation
Psychographic
Segmentation
Geographic
Segmentation
Behavior/Usage
Segmentation
Demographic
Segmentation
Benefits-Sought
Segmentation
Dr. Rosenbloom
Light Users
80%
Heavy Users
20%
Behavior/Usage Segmentation
Markets can be segmented by how often or how
heavily consumers use a specific product
80/20 Principle - 80% of revenue generated by 20%
of customers
Dr. Rosenbloom
Segmentation Data
Internal sources
In-house customer and marketing databases
Data mine to explore patterns and
relationships in collected data
External sources
Lists of catalog/magazine subscribers
U.S. Census information
Mediamark, CACI Marketing Systems, etc.
Dr. Rosenbloom
Positioning Strategy
Differentiation
through:
Price/quality -
emphasize value
in terms of
quality, price, or
both
Dr. Rosenbloom
Positioning Strategy
Differentiation
through:
Product attributes -
characteristics as a
positioning base
Product usage -
positioning based
on a products
typical use
Differentiation
through:
Symbol - use of a
symbol or icon to
position a product
in the consumer
consciousness
Dr. Rosenbloom
Positioning Strategy
Differentiation
through:
Product user - the
typical user of a
product
Dr. Rosenbloom
Positioning Strategy
Differentiation
through:
Product class -
positioning against
another type of
product or product
class
Dr. Rosenbloom
Positioning Strategy
Differentiation
through:
Competition -
comparisons to a
products
competition
(directly or
indirectly)
Dr. Rosenbloom
Segmenting Business Markets
Demographics
Industry size, growth potential, etc.
Operating Characteristics
Technology, brand-user status, etc.
Purchasing Approaches
Purchasing policies, size of orders,
etc.
Dr. Rosenbloom
Segmenting Business Markets
Product Use or Usage Situation
The way the product will be used
and customer service levels
required
Situational Factors
Urgency, special product uses
Buyers Personal Characteristics
Dr. Rosenbloom
Segmenting Global Markets
Economic
Stage of development in a host
country
Political/Legal
Regulations and laws
Cultural
Language barriers, differences in
consumer customs
Dr. Rosenbloom
Segmenting Global Markets
Some segments transcend
national borders
Rich around the world
Older and comfortable
Indulged kids
Emerging middle class
Women employed outside the
house
Dr. Rosenbloom
Market Segmentation
Differentiated
Concentrated
Undifferentiated
Dr. Rosenbloom
Differentiated Marketing
Differentiated
Marketing
An organization
targets multiple
market
segments and
develops
segment
specific mixes
Dr. Rosenbloom
Concentrated Marketing
Concentrated
Marketing
When an
organization
concentrates its
marketing
efforts on a
smaller segment
of a larger
market
Dr. Rosenbloom
Undifferentiated Marketing
Undifferentiated
Marketing
An organization
develops one
strategy
appropriate for
all members of
the total market