Identifying Market Segments

and Targets

Marketing Quality Circle

8

LEARNING OBJECTIVES

After reading this chapter, students should:

1. Know what are the different levels of market segmentation

2. Know how a company can divide a market into segments

3. Know how a company should choose the most attractive target markets

4. Know what are the requirements for effective segmentation

What is Segmentation

Why Segmentation?

© Malcolm McDonald

Market Segmentation

Mass Market

Niche Micro-marketing The

Individual

Personalizatio

n

Micro-marketingNiche

Standardized

Marketing Mix

Continuum of Market Segmentation Size

Segment Marketin

g

Segmentation

Flexible Marketing Offerings

Naked solution: Product and service elements that all segment members value

Discretionary options: Some segment members value options but not all

Preference Segments

Homogeneous preferences exist when consumers want the same things

Diffused preferences exist when consumers want very different things

Clustered preferences reveal natural segments from groups with shared preferences

The Long Tail Chris Anderson explains the long

tail equation: The lower the cost of distribution, the

more you can economically offer without having to predict demand;

The more you can offer, the greater the chance that you will be able to tap latent demand for minority tastes; and

Aggregate enough minority taste, and you may find a new market.

What is Customerization?

Customerization combines operationally driven mass

customization with customized marketing in a way that empowers

consumers to design the product and service offering of their choice.

Segmenting Consumer Markets

Geographic Demographic Psychographic Behavioral

Geographic Segmentation

Demographic Segmentation

Age and life cycle Life stage Gender Income Generation Social class

Psychographic Segmentation

Behavioral SegmentationDecision Roles Initiator Influencer Decider Buyer User

Behavioral Variables

Occasions Benefits User Status Usage Rate Buyer-Readiness Loyalty Status Attitude

Conversion Model

Users

Non Users

Entrenched

Average

Shallow

Convertible

Available

Ambivalent

Weakly Unavailable

Strongly Unavailable

Low

High

Low

High

Str

ength

of

com

mit

ment

Bala

nce

of

Dis

posi

tion

Segmenting for Business Markets

Demographic Operating variable Purchasing approaches Situational factors Personal characteristics

Steps in Segmentation Process Need-based segmentation Segment identification Segment attractiveness Segment profitability Segment positioning Segment acid test Market mix strategy

Effective Segmentation Criteria

Measurable Substantial Accessible Differentiable Actionable

What is Targeting?

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

Evaluating and Selecting the Marketing Segments

Single Segment Concentration Selective Specialization Product Specialization Market Specialization Full Market Coverage

Additional Considerations

Segment by Segment Invasion Plans

What is Positioning?

NichesAdam SmithSegments

•Naked Solutions•Discretionary options

•Distinct set of needs•Willingness to pay premium.•Less likely to attract competitors

Micro marketing

Why Segmentation?

BASES FOR SEGMENTING

Buyer Readiness •Aware•Ever tried•Recent trial•Occasional user•Regular user•Most often used

Identifies the target market

Competition related

Demographic

Enduse

Operating Variable

Situational Factors

Purchasing Approaches

PersonalCharacteristics

Segmenting Industrial

Business Markets

LocationSize

Effective Segmentation

Criteria

Local areas Individuals

Scientific ManagementCustomer based

•Geographic location •Demographics of Customers•Psychographic Variables•Buyer Readiness

Product related

•Product Use situations•Benefits Segmentation•Quantity consumed

• Hard core• Split• Shifting• Switchers

Behavioral

Scientific ManagementDecision Roles

•Initiator•Influencer•Decider•Buyer•UserBehavioural Variables•Occasions•Benefits•User Status•Usage Rate•Buyer-Readiness•Loyalty Status•Attitude

SESSION 5CHAPTER 8