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Market Segmentation and Strategic Targeting

CHAPTERTHREE

Copyright 2010 Pearson Education, Inc.

Learning Objectives

1. To Understand Why Market Segmentation Is Essential.

2. To Understand the Criteria for Targeting Selected Segments Effectively.

3. To Understand the Bases for Segmenting Consumers.

4. To Understand How Segmentation and Strategic Targeting Are Carried Out.

2Chapter Three  Slide

What Kind ofConsumer Does This Ad Target?

3Chapter Three  Slide

This Ad Targets Runners Who Are Physically Active People , serious about running and Also Relish the Outdoors.

4Chapter Three  Slide

Why Segmentation is Necessary

• Consumer needs differs

• Differentiation helps products compete

• Segmentation helps identify media– OOH/print/TVC/web etc

5Chapter Three  Slide

Positioning

The value proposition, expressed through promotion, stating the product’s or 

service’s capacity to deliver specific 

benefits.

6Chapter Three  Slide

Criteria for Effective Targeting

7Chapter Three  Slide

find the characteristic they have chosen for segmentation

large enough to be profitable to the marketer

consumers are not “fickle” and likely to change very quickly

to reach that market in an affordable way

Which Distinct Benefit Does Each of the Two Brands Shown in This Figure Deliver?

8Chapter Three  Slide

The Dentyne Ad’s Benefit is Fresh Breath and the Nicorette Ad is Whitening and Smoking Cessation

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Bases for Segmentation

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Discussion Questions

• Considering the largest bank in your city or town:– How might consumers’ needs differ?

– What types of products might meet their needs?

– What advertising media makes sense for the different segments of consumers?

11Chapter Three  Slide

Consumer‐Rooted Segmentation Bases

12Chapter Three  Slide

Bases for segmenting consumer markets

Occasions, benefits, uses, or attitudes

Behavioral

Geographic

Region, city size, density, climate

Demographic

Age, gender, family size and life cycle, race, occupation, or income ...

Lifestyle, personality, values

Psychographic

Examples of segmentation bases ‐ they may be used singly or in combination

• Geographic

– climate for woollen clothes

• Demographics

– Age group for designer clothing 

• Psychographics

– personality for political choices and brands eg Nike

– Personal values 

• Behavioural

– occasions for drinking eg tea to relax and juice to refresh

– attitudes for a beer ‐ ‘mateship’

Demographic Segmentation

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Discussion Questions

• What types of marketers might segment according to social class?

• What ethical issues might marketers have when marketing to different social classes?

Copyright 2010 Pearson Education, Inc. 16Chapter Three  Slide

Geodemographic Segmentation

• Based on geography and demographics

• People who live close to one another are similar

• “Birds of a feather flock together”

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One PRIZM Segment ‐ Table 3.4 (excerpt)

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Personality Traits

• People often do not identify these traits because they are guarded or not consciously recognized

• Consumer innovators (WOM/exemplary)– Open minded

– Perceive less risk in trying new things

19Chapter Three  Slide

Lifestyles

• Psychographics

• Includes activities, interests, and opinions

• They explain buyer’s purchase decisions and choices

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Discussion Questions

• How might you differ from a person with similar demographics to yourself?

• How would this be important for marketers?

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Two Views of Post‐Retirement LifestyleTable 3.6 (excerpt)

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VALS – Figure 3.4

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VALS is the most popular segmentation system that combines lifestyles and values

Maslow’s hierarchy of needs and the concept of social

character

Socio‐Cultural Values and Beliefs

• Sociological = group

• Anthropological = cultural

• Include segments based on– Cultural values (Broad perspective ‐ US, China, Japan etc..)

– Sub‐cultural membership (mixes in race in a single broad cultural platform)

– Cross‐cultural affiliations (Singapore, Hongkong etc)

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Consumption‐Specific Segmentation Bases

26Chapter Three  Slide

Consumption‐Specific SegmentationUsage‐Behavior 

• Usage rate ‐ group of consumers are heavy, medium, light, or nonusers of a product

– Awareness status • target the other usage segments to fuel their growth in the marketplace

– Level of involvement

27Chapter Three  Slide

Consumption‐Specific SegmentationUsage‐Behavior 

• Usage‐situation segmentation– Segmenting on the basis of special occasions or situations

– Example :  When I’m away on business, I try to stay at a suites hotel.

– Valentine’s Day.. Like to order bouquet of flowers for loved ones

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Which Consumption‐Related Segmentation Is Featured in This Ad?

Copyright 2010 Pearson Education, Inc. 29Chapter Three  Slide

This is an Example of a Situational Special Usage Segmentation.

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Benefits Segmentation

• Benefits sought represent consumer needs

• Important for positioning

• Benefits of media

Chapter Three  Slide   28

Benefits Visiting Tourists Seek in National Park – Table 3.13 (excerpt)

Segment Description

Environmentalists Interested in an unpolluted, un‐spoilt natural environmentand in conservation. Not interested in socializing, entertainment, or sports.  Desire authenticityand less man‐made structures and vehiclesin the park.

Want‐it‐all Tourists Value socializing and entertainment more thanconservation. Interested in more activities andopportunities for meeting other tourists.  Do notmind the “urbanization” of some park sections.

Independent Tourists Looking for calm and unpolluted environment,exploring the park by themselves, and staying ata comfortable place to relax. Influenced by wordof mouth in choosing travel destinations.

32Chapter Three  Slide

Brand Loyalty and Relationships

• Brand loyalty includes:– Behavior– Attitude

• Frequency award programs are popular

• Customer relationships can be active or passive

• Retail customers seek:– Personal connections vs. functional features

• Banking customers seek:– Special treatment– Confidence benefits– Social benefits

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Implementing Segmentation Strategies

• Micro‐ and behavioral targeting– Personalized advertising messages

– Narrowcasting

• Email

• Mobile

– Use of many data sources

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Sample Acxiom Clusters ‐ Table 3.16 (excerpt)

35Chapter Three  Slide

This table shows three sample clusters, including shooting stars, tots & toys

Basic Market Preference Patterns for Ice Cream Buyers

Exercise on cars Exercise on cars egeg. Mercedes, BMW, Toyota, SUVs, . Mercedes, BMW, Toyota, SUVs, MPVsMPVs, Sports,, Sports,

Implementing Segmentation Strategies

• Concentrated Marketing– One segment

• Differentiated– Several segments with individual marketing mixes

• Counter segmentation– combining existing segments for a company to become more efficient and profitable

37Chapter Three  Slide