Identifying Market Segments and Targets

Segmentation, targeting, and positioning

To compete more effectively, many companies are now
embracing target marketing. Instead of scattering their
marketing efforts, theyre focusing on those consumers they
have the greatest chance of satisfying.
Effective target marketing requires that marketers:
1. Identify and profile distinct groups of buyers who differ in
their needs and wants (market segmentation).
2. Select one or more market segments to enter (market
targeting).
3. For each target segment, establish and communicate the
distinctive benefit(s) of the companys market offering (market
positioning).

Steps in Market Segmentation, Targeting,and Positioning

Market
Segmentation
1. Identify
segmentation
variables and
segment the
market
2. Develop
profiles of
resulting
segments

Market
Targeting
3. Evaluate
attractiveness
of each
segment
4. Select the
target
segment(s)

Market
Positioning
5. Identify
possible
positioning
concepts for
each target
segment
6. Select,
develop, and
communicate
the chosen
positioning
concept

Levels of Market Segmentation

Mass
Mass Marketing
Marketing

Same
Same product
product to
to all
all consumers
consumers One
One size
size fits
fits all
all Mass
Mass Marketing
Marketing Lower
Lower cost
cost
(No
segmentation)
(No segmentation)

Segment
Segment Marketing
Marketing

Different
Different products
products to
to one/more
one/more segments
segments Isolate
Isolate broad
broad segments
segments && adapt
adapt offers
offers
Fine-tuned
products
Fewer
competitors
Fine-tuned products Fewer competitors
(Some
(Somesegmentation)
segmentation)

Different
Different products
products to
to subgroups
subgroups within
within segments
segments
((More
segmentation)
More segmentation)

Fewer
Fewer or
or no
no competitors
competitors

Niche
Niche Marketing
Marketing

Micromarketing
Micromarketing

(Local,
(Local,Individual,
Individual,Self)
Self)
Products
to
suit
the
tastes
of
individuals
or
locations
High
cost
Logistical
Products to suit the tastes of individuals or locations High cost Logistical problem
problem
(Complete
segmentation)
(Complete segmentation)

Basic Market-Preference Patterns

Sweetness

(c) Clustered
preferences

Creaminess

(b) Diffused
preferences

Creaminess

Creaminess

(a) Homogeneous
preferences

Sweetness

Sweetness

Steps in Segmentation Process

Description
1. Needs-Based
Segmentation

Group customers into segments based on similar needs

and benefits sought by customer in solving a particular
consumption problem.

2. Segment
Identification

For each needs-based segment, determine which

demographics, lifestyles, and usage behaviors make the
segment distinct and identifiable (actionable).

3. Segment
Attractiveness

Using predetermined segment attractiveness criteria

(such as market growth, competitive intensity, and
market access), determine the overall attractiveness of
each segment.

4. Segment Profitability

Determine segment profitability.

5. Segment Positioning

For each segment, create a value proposition and

product-price positioning strategy based on that
segments unique customer needs and characteristics.

Effective Segmentation Criteria

Measurable
Measurable

Size, purchasing power, profiles of

segments can be measured.

Substantial
Substantial

Segments must be large or

profitable enough to serve.

Accessible
Accessible

Differential
Differential

Segments can be effectively

reached and served.

Segments must respond

differently to different marketing
mix elements & actions.

Bases for Segmenting Consumer Markets

Geographic
Geographic

Demographic
Demographic

Psychographic
Psychographic

Behavioral
Behavioral

Geographic Segmentation

World
World Region
Region or
or Country
Country

City
City or
or Metro
Metro

Rural
Rural and
and Semi-Urban
Semi-Urban Areas
Areas

Demographic Segmentation

Dividing the market into groups based

on variables such as:

Age
Gender
Family size or life cycle
Income
Occupation
Education
Religion
Race
Generation
Nationality

Psychographic Segmentation
Lifestyle is a persons pattern of living as expressed in his or
her psychographics.
It involves measuring consumers major AIO dimensions
activities (work, hobbies, shopping, sports, social events)
interests (food, fashion, family, recreation), and
opinions (about themselves, social issues, business, products).
Personality refers to the unique psychological characteristics
that distinguish a person or group.
Personality is usually described in terms of traits such as selfconfidence, dominance, sociability, autonomy, defensiveness,
adaptability, and aggressiveness.

The VALS Segmentation System

The VALS Segmentation System

The main dimensions of the VALS segmentation framework are
consumer motivation (the horizontal dimension) and consumer
resources (the vertical dimension). Consumers are inspired by one of
three primary motivations: ideals, achievement, and self-expression
The four groups with higher resources are:
1. InnovatorsSuccessful, sophisticated, active, take-charge people
with high self-esteem. Purchases often reflect cultivated tastes for
relatively upscale, niche-oriented products and services.
2. ThinkersMature, satisfied, and reflective people motivated by ideals
and who value order, knowledge, and responsibility. They seek
durability, functionality, and value in products.
3. AchieversSuccessful, goal-oriented people who focus on career and
family. They favor premium products that demonstrate success to
their peers.
4. ExperiencersYoung, enthusiastic, impulsive people who seek variety
and excitement. They spend a comparatively high proportion of income
on fashion, entertainment, and socializing.

The VALS Segmentation System

The four groups with lower resources are:

1.BelieversConservative, conventional, and traditional people

with concrete beliefs. They prefer familiar, U.S.-made products
and are loyal to established brands.

2. StriversTrendy and fun-loving people who are resourceconstrained. They favor stylish products that emulate the
purchases of those with greater material wealth.

3. MakersPractical, down-to-earth, self-sufficient people who

like to work with their hands. They seek U.S.-made products with a
practical or functional purpose.

4. SurvivorsElderly, passive people concerned about change and

loyal to their favorite brands.

Behavioral Segmentation

Occasions

Regular occasion, special

occasion

Benefits

Quality, service, economy,

convenience, speed

User
status

Nonuser, ex-user,
potential user, first-time
user, regular user

Usage rate

Light user, medium user,

heavy user

Loyalty
status
Buyers
Readiness
stage

Hard-core loyals, Split

loyals, Shifting loyals,
Switchers
Unaware, aware, informed,
interested, desirous,
intending to buy

Attitude
toward
product

Enthusiastic, positive,
indifferent, negative,
hostile

Segmenting Business Markets

Demographics
Demographics
Business Marketers Use
Many of the Same
Consumer Variables,
Plus:

Operating
OperatingVariables
Variables

Purchasing
PurchasingApproaches
Approaches
Situational
SituationalFactors
Factors
Personal
PersonalCharacteristics
Characteristics

Major Segmentation Variables for Business Market

Demographic

1.Industry: Which industries should we serve?

2.Company size: What size companies should we serve?

3.Location: What geographical areas should we serve?

Operating Variables

4.Technology: What customer technologies should we focus on?

5.User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers?

6.Customer capabilities: Should we serve customers needing many or few services?

Purchasing Approaches

7.Purchasingfunction organization: Should we serve companies with highly centralized or

decentralized purchasing organizations?

8.Power structure: Should we serve companies that are engineering dominated, financially
dominated, and so on?[

9. Nature of existing relationships: Should we serve companies with which we have strong
relationships or simply go after the most desirable companies?

10. General purchase policies: Should we serve companies that prefer leasing? Service
contracts? Systems purchases? Sealed bidding?

11. Purchasing criteria: Should we serve companies that are seeking quality? Service? Price?

Major Segmentation Variables for Business Market

Situational Factors

12.Urgency: Should we serve companies that need quick and sudden delivery or service?

13.Specific application: Should we focus on certain applications of our product rather than
all applications?

14.Size of order: Should we focus on large or small orders?

Personal Characteristics

15.Buyerseller similarity: Should we serve companies whose people and values are similar
to ours?

16.Attitudes toward risk: Should we serve risktaking or riskavoiding customers?

17.Loyalty: Should we serve companies that show high loyalty to their suppliers?

Segmenting International Markets

Bases for segmentation

Geographic Segmentation: Assumes that nations close to one

another will have many common traits and behaviors although there are
some exceptions
Economic factors: GDP, Interest rate, Inflation rate, Unemployment
levels, Devaluation/revaluation, Disposable and discretionary income,
Currency markets, Global financial system

Political & Legal factors: Type and stability of Govt. receptivity of

foreign firms, monetary regulations and the amount of bureaucracy.

Cultural factors: Common languages, religions, values & attitudes,

customs & behavior

Market Targeting
Once the firm has identified its market-segment opportunities, it must
decide how many and which ones to target. Marketers are increasingly
combining several variables in an effort to identify smaller, betterdefined target groups
How many and which segments to target?
Segment Size and Growth
Analyze sales, growth rates and expected profitability
Select right size and right growth
Segment Structural Attractiveness
Competitors
Availability of Substitute Products
Power of Buyers & Suppliers.
Company Objectives and Resources
Company objectives
Company skills & resources relative to the segment(s).
Look for Competitive Advantages.

Market Targeting: Market Coverage Strategies

Undifferentiated Marketing
Firm relies on mass production, distribution and advertising
Cuts down costs
Intense competition & under satisfaction of customers
Differentiated Marketing
Firm operates in several market segments with different Mixes
More total sales
More costs: Product modification Manufacturing
Administrative Inventory Promotion
Concentrated Marketing
Appealing when company resources are limited.
Firm achieves a strong market position in niches & enjoys
operating economies

Market Coverage Strategies

Marketing
MarketingMix
Mix

Market
Market

A. Undifferentiated Marketing

Marketing
MarketingMix
Mix11

Segment
Segment11

Marketing
MarketingMix
Mix22

Segment
Segment22

Marketing
MarketingMix
Mix33

Segment
Segment33

B. Differentiated Marketing

Marketing
MarketingMix
Mix
C. Concentrated Marketing

Segment
Segment11
Segment
Segment22

Segment
Segment33

Market Targeting: Selecting market segments

Market Targeting: Selecting market segments

Single-Segment Concentration
Many companies concentrate on a single segment.Through concentrated
marketing, the firm gains a thorough understanding of the segments
needs and achieves a strong market presence.
Selective Specialization
Here the firm selects a number of segments, each objectively
attractive and appropriate. There may be little or no synergy among the
segments, but each segment promises to be a moneymaker.
Product Specialization
Another approach is to specialize in making a certain product for several
segments.Through a product specialization strategy, the firm builds a
strong reputation in the specific product area.
Market Specialization
With market specialization, the firm concentrates on serving many
needs of a particular customer group.
Full Market Coverage
Here a firm attempts to serve all customer groups with all of the
products they might need. Only very large firms can undertake a full
market coverage strategy.