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8
Identifying
Market Segments
and Targets

Chapter Questions

What are the different levels of market

segmentation?
How can a company divide a market into
segments?
What are the requirements for effective
segmentation?
How should business markets be segmented?
How should a company choose the most
attractive target markets?

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8-2

Effective Targeting Requires

Identify and profile distinct groups of buyers

who differ in their needs and preferences
Select one or more market segments to enter
Establish and communicate the distinctive
benefits of the market offering

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8-3

What is a Market Segment?

A market segment consists of a group
of customers who share a similar set of
needs and wants.

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8-4

Segmentation
Market segmentation is the
process by which a market is
divided into distinct subsets of
customers with similar needs
and characteristics that lead
them to respond in similar ways
to
product
offerings
and
marketing programs

6-5

Copyright 2009 McGraw-Hill Australia Pty Ltd

PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker
Prepared by Anton Kriz, The University of Newcastle

Most Markets are Heterogeneous

6-6

Variation among market segments in

Product preferences

Size and growth in demand

Media habits

Competitor activities
Hence markets are:

Complex entities that can be defined

(segmented) in a variety of ways
The critical issue is to find an
appropriate segmentation method that
will facilitate target marketing

Copyright 2009 McGraw-Hill Australia Pty Ltd

PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker
Prepared by Anton Kriz, The University of Newcastle

Market Realities Making

Segmentation Imperative
Key reasons:
Firstly, population growth has slowed and
many markets are maturing
Secondly, social and economic forces
such as expanding disposable incomes,
employment patterns, education levels,
changing lifestyles
Thirdly, a shift toward microsegmentation
Finally, firms are implementing sharply
focused marketing programs and
targeting of their services
6-7

Copyright 2009 McGraw-Hill Australia Pty Ltd

PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker
Prepared by Anton Kriz, The University of Newcastle

Objectives of Market Segmentation

6-8

There are three important objectives

concerning the market
segmentation process
1.
Identify a homogeneous segment
that differs from other segments
2.
Specify characteristics that define
the segment
3.
Determine segment size and
potential

Copyright 2009 McGraw-Hill Australia Pty Ltd

PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker
Prepared by Anton Kriz, The University of Newcastle

How are Market Segments Best

Defined?

6-9

Segmentation decisions are based on:

Who the customers are?
Where they are?
How they behave?
Marketers divide segmentation descriptors
into four major categories:
Demographic
Geographic
Behavioral
Psychographic

Copyright 2009 McGraw-Hill Australia Pty Ltd

PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker
Prepared by Anton Kriz, The University of Newcastle

How are Market Segments Best

Defined?

6-10

Segmentation decisions are based on:

Who the customers are?
Where they are?
How they behave?
Marketers divide segmentation descriptors
into four major categories:
Demographic
Geographic
Behavioral
Psychographic

Copyright 2009 McGraw-Hill Australia Pty Ltd

PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker
Prepared by Anton Kriz, The University of Newcastle

Segmenting Consumer Markets

Geographic
Demographic
Psychographic
Behavioral

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8-11

Geographic Segmentation

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8-12

Geographic Segmentation

Finding out: Where they are

Where consumers live, work and shop
makes a big difference to their buying
characteristics
Trade area
Area within a geographically defined
region
Geo-demographic Segmentation

Involves both demographic and

geographic factors (wealthy people in a certain area,
poor people in other area)

6-13

Copyright 2009 McGraw-Hill Australia Pty Ltd

PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker
Prepared by Anton Kriz, The University of Newcastle

Demographic Segmentation

Finding out: Who they are and what they do

Common attributes:

Age
Gender
Income
Occupation
Education
Religious, cultural and ethnic background

Industrial market segmentation:

Macrosegmentation (such as age of firms, size)

Microsegmentation (characteristics of the individuals who
influence the purchasing decision, ex: age, sex, position within the
organization)

6-14

Copyright 2009 McGraw-Hill Australia Pty Ltd

PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker
Prepared by Anton Kriz, The University of Newcastle

Demographic Segmentation

Age and life cycle

Life stage
Gender
Income
Generation
Social class
Race and Culture

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8-15

Age and Lifecycle Stage

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8-16

Gender and Income

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8-17

Generational Influences

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8-18

Race and Culture

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8-19

Psychographic Segmentation
and The VALS Framework

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8-20

Behavioral Segmentation

Finding out: How they behave

There is a number of insightful ways in

which marketers have segmented
markets in behavioral terms
Behavior descriptors include:
Consumer needs (benefit sought)

Product-related (product usage, loyalty, purchase

influence)

6-21

Psychographic and lifestyle

Social class
Organizational or firm behavioral
attributes

Copyright 2009 McGraw-Hill Australia Pty Ltd

PowerPoint Slides t/a Marketing Strategy: A Decision-Focused Approach by Walker
Prepared by Anton Kriz, The University of Newcastle

Behavioral Segmentation Based

on Needs and Benefits

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

8-22

Behavioral Segmentation:
Decision Roles
Initiator
Influencer
Decider
Buyer
User
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8-23

Behavioral Segmentation:
Behavioral Variables

Occasions
Benefits
User Status
Usage Rate

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Buyer-Readiness
Loyalty Status
Attitude

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Figure 8.2 Example of a Brand Funnel

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8-25

Loyalty Status

Hard-core
Split loyals
Shifting loyals
Switchers

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Figure 8.3 Behavioral

Segmentation Breakdown

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8-27

Segmenting for Business Markets

Demographic
Operating variable
Purchasing approaches
Situational factors
Personal characteristics

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8-28

Steps in Segmentation Process

Need-based segmentation
Segment identification
Segment attractiveness
Segment profitability
Segment positioning
Segment acid test
Market mix strategy

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8-29

Effective Segmentation Criteria

Measurable
Substantial
Accessible
Differentiable
Actionable

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8-30

Porters 5 Forces Model

Threat of Rivalry

Threat of Buyer
Bargaining Power

Threat of Supplier
Bargaining Power

Threat of
Substitutes

Threat of
New Entrants

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8-31

Figure 8.4 Possible Levels

of Segmentation

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8-32

For Review

What are the different levels of market

segmentation?
How can a company divide a market into
segments?
What are the requirements for effective
segmentation?
How should business markets be segmented?
How should a company choose the most
attractive target markets?

Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

8-33