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
1. Identify
segmentation
variables and
segment the
market

2. Develop
profiles of
resulting
segments
Market
Segmentation
3. Evaluate
attractiveness
of each
segment

4. Select the
target
segment(s)
Market
Targeting
5. Identify
possible
positioning
concepts for
each target
segment

6. Select,
develop, and
communicate
the chosen
positioning
concept
Market
Positioning
Levels of Market Segmentation
Mass Marketing
Same product to all consumers One size fits all Mass Marketing Lower cost
(No segmentation)
Segment Marketing
Different products to one/more segments Isolate broad segments & adapt offers
Fine-tuned products Fewer competitors
(Some segmentation)
Micromarketing (Local, Individual, Self)
Products to suit the tastes of individuals or locations High cost Logistical problem
(Complete segmentation)
Niche Marketing
Different products to subgroups within segments Fewer or no competitors
( More segmentation)
Basic Market-Preference Patterns
(a) Homogeneous
preferences
Sweetness
C
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m
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s

(c) Clustered
preferences
C
r
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a
m
i
n
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s
s

Sweetness
(b) Diffused
preferences
C
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a
m
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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
Accessible
Substantial
Differential
Segments must be large or
profitable enough to serve.
Segments can be effectively
reached and served.
Size, purchasing power, profiles of
segments can be measured.
Segments must respond
differently to different marketing
mix elements & actions.
Bases for Segmenting Consumer Markets
Geographic
Demographic
Psychographic
Behavioral
Geographic Segmentation
World Region or Country
City or Metro
Rural and Semi-Urban 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 self-
confidence, 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 resource-
constrained. 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
Hard-core loyals, Split
loyals, Shifting loyals,
Switchers
Buyers
Readiness
stage


Unaware, aware, informed,
interested, desirous,
intending to buy


Attitude
toward
product

Enthusiastic, positive,
indifferent, negative,
hostile


Segmenting Business Markets
Demographics
Operating Variables
Purchasing Approaches
Situational Factors
Personal Characteristics
Business Marketers Use
Many of the Same
Consumer Variables,
Plus:


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.Purchasing-function 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.Buyer-seller similarity: Should we serve companies whose people and values are similar
to ours?

16.Attitudes toward risk: Should we serve risk-taking or risk-avoiding 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, better-
defined 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
Segment 1
Segment 2
Segment 3
Segment 1
Segment 2
Segment 3
Marketing Mix
Marketing Mix
Marketing Mix 1
Marketing Mix 2
Marketing Mix 3
Market
A. Undifferentiated Marketing
B. Differentiated Marketing
C. Concentrated Marketing
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.