Market Segmentation

Jeremy Kees, Ph.D.

Segmentation, Targeting, and Positioning

• Market Segmentation– Market segment—a group of customers who

share a similar set of needs and wants

• NOT to be confused with targeting and positioning

Our overall intent is to…

1. Identify groups of similar customers and potential customers

2. Prioritize the groups

3. Understand their behavior

4. Respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment

Segmentation, Targeting, and Positioning

• The idea is that (typically) we can’t be all things to all people

• There is not one product/service that is ideal for all consumers

• Gladwell Talk….

We can segment a market by…

Geography• Dividing the market into

different geographical units such as…– Region of the world or country

– City or country size

– Climate

We can segment a market by…

Demographics• Dividing the market based on…

– age – gender – sexual orientation – family size – family life cycle– household type – income/expenditure patterns – occupation – education – socioeconomic status – religion– nationality/race/ethnic group

We can segment a market by…

Psychographics• Divide market based on…

– Psychological traits

– personality

– lifestyles

– values

– attitudes

• Tom’s of MaineTom’s of Maine– Targeting a Specific

Marketing Segment

– Which segment?

Psychographic Segmentation

We can segment a market by…

Product Characteristics / Behavior• Divide market based on knowledge of,

attitude toward, use of, or response to a product– benefit sought

– product usage rate

– brand loyalty

– product end use

– readiness-to-buy stage

How are these organizations segmenting the market??• Oxygen.com• Kellogg'sKellogg's• MabelleneMabellene• Budweiser

Segmenting based on one variable ….

Claritas Example…

Ok, we’ve segmented the market…. Now what?

General Strategy Options (as they relate to target marketing)

• Undifferentiated Marketing• Differentiated Marketing• Concentrated Marketing• Micromarketing

Patterns of Target Market Selection

Undifferentiated Marketing

• Ignore segment differences and go after the whole market with one market offer– 1 Pricing strategy

– 1 Promotional program aimed at everybody

– 1 Type of product with little/no variation

– 1 Distribution system aimed at entire market

• What kinds of products can we use this strategy with?

Differentiated Marketing

• Operate in several market segments and design different programs for each segment

P&G

Multi-Segment Strategy

• Perhaps the most effective segmentation strategy

• Marriott.com

Product Differentiation Results In…

• Reduced Price Sensitivity• Fewer Direct Competitors• Drawbacks / Risks / Ethical Issues??

– Mini Cooper

– Norelco

Concentrated Marketing

• It allows a firm to specialize because it can focus all energies on satisfying one group's needs

• A firm with limited resources can compete with larger organizations

• Can you think of when a concentration strategy is appropriate?– example

Micromarketing

• Most extreme form of segmentation• Also called one-to-one marketing or mass

customization• Examples?

Determinants of Targeting Strategy

• Company Resources• Product Homogeneity• Stage in PLC• Competition

Positioning

A marketing strategy that emphasizes serving a specific market segment by achieving a certain position in buyers’ minds relative to the competition

• Attributes

• Price/quality

• Competitors

• Application

• Product user

• Product class

Positioning

• Oftentimes, positioning focuses on Points-of-difference (PODs)– The act of designing the company’s offering

and image to occupy a distinctive place in the minds of the target market

• Energizer

• Duracell