Segmenting and Targeting Markets
What are Markets?
• Market: people or institutions with sufficient purchasing power, authority, and willingness to buy
• Types of Markets
Requirements of a Markets
Need
+
Ability
Willingness
Authority
Role of Market Segmentation
Market Segmentation: division of the
total market into smaller, relatively homogeneous groups
Why?
Levels – Mass, Segment, and Niche
Why segment?
Most
efficient
One Mass
Market
Most effective Many Groups of One
The Importance of Market
Segmentation
Markets have a variety of product
needs and preferences.
Marketers can better define
customer needs.
Decision makers can define objectives
and allocate resources more accurately. No Market Segmentation
Segmented by Gender
Segmented by Age
Segmentation Process
• Marketers follow two methods to determine the bases on which to identify markets:
– Segments are predefined by managers based on their observation of the behavioral and demographic characteristics of likely users
– Segments are defined by asking customers which attributes are important and then clustering the responses
Criteria for Effective
Segmentation
Responsiveness
Accessibility
Measurability /
Identifiability
Substantiality
Most important point
In relation to responsiveness to different
marketing mixes, segments must be:
Homogeneous within
Heterogeneous between
LO4
Bases for Segmenting Consumer
Markets
Characteristics of individuals, groups, or organizations used to divide a total market into segments.
(variables)
LO4
Bases for Segmentation
Geography
Geography
Demographics
Demographics
Psychographics
Psychographics
Benefits
Benefits Sought
Sought
Usage
Usage Rate
Rate
Segmenting Consumer
Markets
• Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locations
Metropolitan
MetropolitanStatistical
Statistical
Area
Area(MSA)
(MSA)
Segmenting Consumer
Markets
• Demographic segmentation: dividing consumer groups according to characteristics such as gender, age, income, occupation, education, ethnicity, household size, and stage in the family life cycle.
Family Life Cycle
Age
Marital
Status
Children
Psychographic Segmentation
• Psychographic Segmentation: dividing a population into groups that have similar psychological characteristics, and lifestyles.
• Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities
LO4
Geodemographic
Segmentation
Segmenting potential customers into neighborhood lifestyle categories.
Combines geographic, demographic, and psychographic segmentation.
LO4
Benefit Segmentation
The process of grouping customers into market segments according to the benefits they seek from the product. Usage Rate Segmentation
Dividing
Dividing aa market market by by the the amount amount of of product product bought bought or or consumed. consumed. Bases for Segmenting Business
Markets
Producers
Producers
Resellers
Resellers
Government
Government
Institutions
Institutions
Company
Company
Characteristics
Characteristics
Buying
Buying
Processes
Processes
LO6
Steps in Segmenting Markets
1
2
3
4
Select a market for study
Choose bases for segmentation Select descriptors Profile and analyze segments 5
Select
target markets 6
Design,
implement, maintain marketing mix Note that steps 5 and 6 are actually marketing activities that follow market segmentation (steps 1 through
4).
Targeting
Choosing one or more segments for which
to design your marketing operations
Identify the Appropriate Targeting Strategy
Undifferentiated Strategy
Undifferentiated Strategy
Single
Marketing
Mix
Organization
Target Market
Differentiated Strategy
Marketing Mix 1
Marketing Mix 2
Organization
Target Market
Concentrated Strategy
Single
Marketing
Mix
Organization
Target Market
Cannibalization
Cannibalization
Cannibalization
Situation that occurs when sales of a