copyright © 2003 prentice-hall, inc. 10-1 chapter 10 identifying market segments and selecting...

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Copyright © 2003 Prentice-Hall, Inc.

Chapter 10 Chapter 10 Identifying Market Identifying Market Segments and Selecting Segments and Selecting Target MarketsTarget Marketsbyby

PowerPoint byPowerPoint byMilton M. PressleyMilton M. Pressley

University of New OrleansUniversity of New Orleans

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Target Marketing Target marketing requires marketers to Target marketing requires marketers to

take three major steps:take three major steps: Identify and profile distinct groups of buyers Identify and profile distinct groups of buyers

who differ in their needs and preferences who differ in their needs and preferences (market segmentation).(market segmentation).

Select one or more market segments to enter Select one or more market segments to enter (market targeting).(market targeting).

For each target segment, establish and For each target segment, establish and communicate the key distinctive benefit(s) of communicate the key distinctive benefit(s) of the company’s market offering (market the company’s market offering (market positioning).positioning).

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Why Market Segmentation?

Consumer profile?Consumer profile? Did you see the Silence of Lambs?Did you see the Silence of Lambs?

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Levels and Patterns of Market Segmentation

Levels of Market SegmentationLevels of Market Segmentation Mass marketingMass marketing MicromarketingMicromarketing

Segment marketingSegment marketing Market segmentMarket segment SectorSector Flexible market offeringFlexible market offering

Naked solutionNaked solution Discretionary optionsDiscretionary options

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Niche MarketingNiche Marketing NicheNiche

Local MarketingLocal Marketing Individual Customer MarketingIndividual Customer Marketing

Mass-customizationMass-customization ChoiceboardChoiceboard CustomerizationCustomerization

SegmentsSegments IndividualsIndividuals

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Patterns for Market SegmentationPatterns for Market Segmentation Preference segmentsPreference segments

Homogeneous preferencesHomogeneous preferences Diffused preferencesDiffused preferences Clustered preferencesClustered preferences

Natural market segmentsNatural market segments Concentrated marketingConcentrated marketing

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Figure 10-1: Basic Market-Preference Patterns

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Market Segmentation ProcedureMarket Segmentation Procedure Needs-based market Needs-based market

segmentation approachsegmentation approach Market partitioningMarket partitioning

Brand-dominant Brand-dominant hierarchyhierarchy

Nation-dominant Nation-dominant hierarchyhierarchy

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Table 10-1: Steps in Segmentation ProcessDescriptionDescription

1. Needs-Based 1. Needs-Based SegmentationSegmentation

Group customers into segments based on similar Group customers into segments based on similar needs and benefits sought by customer in solving needs and benefits sought by customer in solving a particular consumption problem.a particular consumption problem.

2. Segment 2. Segment IdentificationIdentification

For each needs-based segment, determine which For each needs-based segment, determine which demographics, lifestyles, and usage behaviors demographics, lifestyles, and usage behaviors make the segment distinct and identifiable make the segment distinct and identifiable (actionable).(actionable).

3. Segment 3. Segment AttractivenessAttractiveness

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

4. Segment Profitability4. Segment Profitability Determine segment profitability.Determine segment profitability.

5. Segment Positioning5. Segment Positioning For each segment, create a “value proposition” For each segment, create a “value proposition” and product-price positioning strategy based on and product-price positioning strategy based on that segment’s unique customer needs and that segment’s unique customer needs and characteristics.characteristics.

See text for complete table

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Effective SegmentationEffective Segmentation MeasurableMeasurable SubstantialSubstantial AccessibleAccessible DifferentiableDifferentiable ActionableActionable

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Table 10-2: Major Segmentation Variables for Consumer Markets

GeographicGeographicRegionRegion Pacific, Mountain, West North Central, West South Pacific, Mountain, West North Central, West South

Central, East North Central, East South Central, Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New EnglandSouth Atlantic, Middle Atlantic, New England

City or metro sizeCity or metro size Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-100,000; 100,000-250,000; 250,000-500,000; 100,000; 100,000-250,000; 250,000-500,000; 500,000-1,000,000; 1,000,000-4,000,000; 4,000,000 500,000-1,000,000; 1,000,000-4,000,000; 4,000,000 or overor over

DensityDensity Urban, suburban, ruralUrban, suburban, rural

ClimateClimate Northern southernNorthern southern

DemographicDemographicAgeAge Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+

Family sizeFamily size 1-2, 3-4, 5+1-2, 3-4, 5+


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Segmenting Consumer and Business Markets

Bases for Segmenting Consumer MarketsBases for Segmenting Consumer Markets Geographic SegmentationGeographic Segmentation Demographic SegmentationDemographic Segmentation

Age and Life-Cycle Age and Life-Cycle StageStage

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An easily identifiable demographic group An easily identifiable demographic group which is often targeted by marketers is which is often targeted by marketers is college students. Can you describe the college students. Can you describe the segment of the Gen-X consumers? segment of the Gen-X consumers?

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Life StageLife Stage GenderGender IncomeIncome GenerationGeneration

The Depression CohortThe Depression Cohort The World War II CohortThe World War II Cohort The Post-War CohortThe Post-War Cohort Leading-Edge Leading-Edge

Baby Boomer CohortBaby Boomer Cohort Trailing-Edge Trailing-Edge

Baby Boomer CohortBaby Boomer Cohort Generation X CohortGeneration X Cohort The Generation Y CohortThe Generation Y Cohort

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Lifestage Analytic MatrixLifestage Analytic Matrix LifestagesLifestages PhysiographicsPhysiographics Emotional effectsEmotional effects SocioeconomicsSocioeconomics

Social ClassSocial Class

Psychographic SegmentationPsychographic Segmentation LifestyleLifestyle

Time-constrainedTime-constrained multitaskingmultitasking

Money-constrainedMoney-constrained

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PersonalityPersonality ““Brand personality” examples:Brand personality” examples:

SincereSincere ExcitingExciting CompetentCompetent SophisticatedSophisticated RuggedRugged

ValuesValues Core valuesCore values

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Behavioral SegmentationBehavioral Segmentation OccasionsOccasions

Critical life events or transitionsCritical life events or transitions

BenefitsBenefits Mobil has identified five Mobil has identified five

segments and their sizessegments and their sizes Road Warriors 16%Road Warriors 16% Generation F 27%Generation F 27% True Blues 16%True Blues 16% Home Bodies 21%Home Bodies 21% Price Shoppers 20%Price Shoppers 20%

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User StatusUser Status Usage RateUsage Rate Loyalty StatusLoyalty Status

Hard-core loyalsHard-core loyals Split loyalsSplit loyals Shifting loyalsShifting loyals SwitchersSwitchers

Buyer-Readiness StageBuyer-Readiness Stage AttitudeAttitude

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Multi-Attribute Segmentation Multi-Attribute Segmentation (Geoclustering)(Geoclustering) Four PRIZM clustersFour PRIZM clusters

American DreamsAmerican Dreams Rural IndustriaRural Industria Gray PowerGray Power Country SquiresCountry Squires

Targeting MultipleTargeting MultipleSegmentsSegments

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Table 10-3: Major Segmentation Variables for Business Markets

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?


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Rangan, Moriarty, and Swartz studied a Rangan, Moriarty, and Swartz studied a mature commodity market, steel stamping, mature commodity market, steel stamping, and found four business segmentsand found four business segments

1.1. Program buyersProgram buyers

2.2. Relationship buyersRelationship buyers

3.3. Transaction buyersTransaction buyers

4.4. Bargain huntersBargain hunters

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Rackman and Vincentis proposed a Rackman and Vincentis proposed a segmentation scheme that classifies segmentation scheme that classifies business buyers into three groupsbusiness buyers into three groups Price-oriented customers Price-oriented customers

(transactional selling)(transactional selling) Solution-oriented customers Solution-oriented customers

(consultative selling)(consultative selling) Strategic-value customers Strategic-value customers

(enterprise selling)(enterprise selling)

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Market Targeting Evaluating and Selecting the Market SegmentsEvaluating and Selecting the Market Segments

Single-Segment ConcentrationSingle-Segment Concentration Selective SpecializationSelective Specialization Product SpecializationProduct Specialization Market SpecializationMarket Specialization Full Market CoverageFull Market Coverage

Undifferentiated marketingUndifferentiated marketing Differentiated marketingDifferentiated marketing

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Market Targeting

Higher costs using differentiated Higher costs using differentiated marketing include:marketing include:

Product modification costProduct modification cost Manufacturing costManufacturing cost Administrative costAdministrative cost Inventory costInventory cost Promotion costPromotion cost

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Market Targeting

Additional ConsiderationsAdditional Considerations Ethical Choice of Market TargetsEthical Choice of Market Targets

SupersegmentSupersegment ChildrenChildren Women – face mask?Women – face mask?

Segment-By-Segment Invasion PlansSegment-By-Segment Invasion Plans

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