CHAPTER 4

SEGMENTING AND TARGETING

MARKET

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 LEARNING OUTCOMES
LO 1 Describe the characteristics of markets
and market segments
LO 2 Discuss criteria for successful market segmentation
LO 3 Describe the bases commonly used to segment
consumer markets
LO 4 List the steps involved in segmenting markets
LO 5 Discuss alternative strategies for selecting target
markets
LO 6 Explain how and why firms implement positioning
strategies and how product differentiation plays a role

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 LO 1

A MARKET IS...

(1) people or organizations with

(2) needs or wants, and with

(3) the ability and

(4) the willingness to buy.

A group of people that lacks any one of these

characteristics is not a market.

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 LO 1

MARKET SEGMENTATION

People or organizations with

Market needs or wants and the ability
and willingness to buy.

A subgroup of people or
Market organizations sharing one or more
Segment characteristics that cause them
to have similar product needs.

Market The process of dividing a market

into meaningful, relatively similar,
Segmentation identifiable segments or groups.

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 LO 1
THE CONCEPT OF MARKET
SEGMENTATION

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 LO 1
THE IMPORTANCE OF MARKET
SEGMENTATION

u Markets have a variety of product

needs and preferences.

u Marketers can better define

customer needs.

u Decision makers can define objectives

and allocate resources more
accurately.

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The Importance of Market Segmentation

More precise
More accurate
Market definition of
marketing
segmentation customers needs
objectives
and wants

Improved
resource
allocation

Better marketing
results

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 LO 2
CRITERIA FOR SUCCESSFUL
SEGMENTATION
Segment must be large
Substantiality enough to warrant a special
marketing mix.

Identifiability
Segments must be identifiable and
and
their size measurable.
Measurability

Members of targeted segments must

Accessibility be reachable with
marketing mix.

Unless segment responds to a

Responsiveness marketing mix differently, no separate
treatment is needed.
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Successful Market Segmentation

Useful
segment?

þ Substantial
þ Identifiable and measurable
þ Accessible
þ Responsive

Then, yes: Useful segmentation scheme

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 LO 3
BASES FOR SEGMENTING
CONSUMER MARKETS

Segmentation Characteristics of individuals,

Bases groups, or organizations used
to divide a total market into
segments.
(variables)

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 LO 3

Bases for Segmentation

Geography

Demographics

Psychographics

Benefits Sought

Usage Rate

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 LO 3

Geographic Segmentation
• Region of the country or world
• Market size
• Market density
• Climate

Different brand for

different countries è

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 LO 3

Geographic Segmentation

Benefits of Regional Segmentation

• New ways to generate sales in sluggish and
competitive markets
• Scanner data allow assessment of best selling
brands in region
• Regional brands appeal to local preferences
• Quicker reaction to competition

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 LO 3

DEMOGRAPHIC SEGMENTATION

Age

Gender

Income

Ethnic background

Family life cycle

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 LO 3
DEMOGRAPHIC SEGMENTATION
Gender Segmentation
• Women, nowadays …
– handle 75% of family finances
– Influence 80% of consumer purchases
– Make purchase decisions about variety
of goods and services
• New cars, hardware stores,
electronics, etc.
• Other brands that have targeted men are
trying to target women
– Gillette razors, Rogaine baldness
remedy, Nike, Reebok, etc.

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DEMOGRAPHIC SEGMENTATION
Income Segmentation

• Income – popular demographic variable

for segmenting markets
• Lexus, Porsche, BMW catering to
wealthy customers
• Price-sensitive consumers
– Tesco brand
– Econsave
– Perodua Kancil

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 LO 3
DEMOGRAPHIC SEGMENTATION
Ethnic Segmentation

• Largest ethnic markets are:

– Malays
– Chinese
– Indian

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 LO 3
DEMOGRAPHIC SEGMENTATION
Family Life Cycle

Age

Marital
Status Children

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DEMOGRAPHIC SEGMENTATION
Family Life Cycle

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 LO 3

PSYCHOGRAPHIC SEGMENTATION

Psychographic Market segmentation on

Segmentation the basis of personality,
motives, lifestyles, and
geodemographics.

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 LO 3
BASES FOR PSYCHOGRAPHIC
SEGMENTATION

Personality

Motives

Lifestyles

Geodemographics

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PSYCHOGRAPHIC SEGMENTATION
Lifestyle Segmentation
• How time is spent
• Importance of things around them
• Beliefs
• Socioeconomic characteristics

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 LO 3
PSYCHOGRAPHIC SEGMENTATION
Geodemographic Segmentation

Geodemographic Segmenting potential customers

Segmentation into neighborhood lifestyle
categories.

Combines geographic,
demographic, and lifestyle
segmentation.

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 LO 3

BENEFIT SEGMENTATION

Benefit The process of grouping

Segmentation customers into market
segments according to the
benefits they seek from the
product.

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BENEFIT SEGMENTATION

Dividing a market by the

Usage-Rate
amount of product bought
Segmentation
or consumed.

A principle holding that

80/20 20 percent of all customers
Principle generate 80 percent of
the demand.

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Bases for Segmenting Consumer Markets

Geography Demographics Psychographics Benefits Usage Rate

• Region • Age • Personality • Benefits • Former

• Market size • Gender • Motives sought • Potential
• Market • Income • Lifestyle • 1st time
density • Race/ethnicity • Geodemo- • Light or
• Climate • Family life graphics irregular
cycle • Medium
• Heavy

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 LO 4

STEPS IN SEGMENTING MARKETS

Select Choose Select Profile Select Design,

a market bases descriptors and target implement,
for for analyze markets maintain
study segmen- segments marketing
tation mix

1 2 3 4 5 6

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 STRATEGIES FOR SELECTING LO 5

TARGET MARKETS

A group of people or
Target organizations for which an
Market
organization designs,
implements, and maintains a
marketing mix intended to
meet the needs of that group,
resulting in mutually
satisfying exchanges.

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 LO 5
STRATEGIES FOR SELECTING
TARGET MARKETS

Undifferentiated Concentrated Multisegment

Strategy Strategy Strategy
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UNDIFFERENTIATED TARGETING
STRATEGY

Undifferentiated A marketing approach that

Targeting views the market as one big
Strategy market with no individual
segments and thus
requires a single
marketing mix.

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UNDIFFERENTIATED TARGETING
STRATEGY
Advantage:

§ Potential savings on production

and marketing costs

Disadvantages:

§ Unimaginative product offerings

Undifferentiated § Company more susceptible to

Strategy competition

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CONCENTRATED TARGETING
STRATEGY

Concentrated A strategy used to select

Targeting Strategy one segment of a market
for targeting marketing
efforts.

Niche
One segment of a
market.

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CONCENTRATED TARGETING
STRATEGY
Advantages:
§ Concentration of resources
§ Meets narrowly defined
segment
§ Small firms can compete
§ Strong positioning

Disadvantages:
§ Segments too small, or
Concentrated changing
§ Large competitors may
Strategy
market to niche segment

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MULTISEGMENT TARGETING
STRATEGY

Multisegment A strategy that chooses two or

Targeting more well-defined market
Strategy segments and develops a
distinct marketing
mix for each.

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MULTISEGMENT TARGETING
STRATEGY

Advantages:
§ Greater financial success
§ Economies of scale

Disadvantages:
§ High costs
§ Cannibalization
Multisegment
Strategy

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 COSTS OF MULTISEGMENT LO 5

TARGETING

u Product design costs

u Production costs
u Promotion costs
u Inventory costs
u Marketing research costs
u Management costs
u Cannibalization

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 LO 5

CANNIBALIZATION

Situation that occurs when sales

Cannibalization of a new product cut into sales of
a firm’s existing products.

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Alternatives for Selecting Target Markets

Undifferentiated Multisegment Concentrated

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 LO 5

ONE-TO-ONE MARKETING

One-to-One An individualized marketing

Marketing method that utilizes
customer information to
build long-term,
personalized, and profitable
relationships with each
customer.

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 LO 5

One-to-One Marketing

One-to-One
Has a Goal of…
Marketing is...

Individualized Cost Reduction

Information-Intensive Customer Retention

Long-Term Increased Revenue

Personalized Customer Loyalty

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 LO 5

ONE-TO-ONE MARKETING
Trends
1. One-size-fits all marketing no longer
effective
2. Direct and personal marketing will grow to
meet needs of busy consumers.
3. Consumers will be loyal to companies that
have earned—and reinforced—their loyalty.
4. Mass-media approaches will decline as
technology allows better customer
tracking.

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 LO 6

POSITIONING

Positioning
Developing a specific
marketing mix to influence
potential customers’ overall
perception of a brand,
product line, or organization
in general.

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Positioning of Procter & Gamble
Detergents
Brand Positioning Market
Share
Tide Tough, powerful cleaning 31.1%
Cheer Tough cleaning, color protection 8.2%
Bold Detergent plus fabric softener 2.9%
Gain Sunshine scent and odor-removing formula 2.6%
Era Stain treatment and stain removal 2.2%
Dash Value brand 1.8%
Oxydol Bleach-boosted formula, whitening 1.4%
Solo Detergent and fabric softener in liquid form 1.2%
Dreft Outstanding cleaning for baby clothes, safe 1.0%
Ivory Snow Fabric & skin safety on baby clothes 0.7%
Ariel
SUHAILYMR Tough cleaner, aimed at Hispanic market 0.1%
43
 LO 6

EFFECTIVE POSITIONING
1. Assess the positions occupied by
competing products

2. Determine the dimensions underlying

these positions

3. Choose a market position where

marketing efforts will have the greatest
impact

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 LO 6

PRODUCT DIFFERENTIATION

Product A positioning strategy that some

Differentiation firms use to distinguish their
products from those of
competitors.

Distinctions can be real or

perceived.

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PERCEPTUAL MAPPING

Perceptual
Mapping A means of displaying or
graphing, in two or more
dimensions, the location
of products, brands, or
groups of products in
customers’ minds.

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PERCEPTUAL MAPPING

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POSITIONING BASES
Attribute

Price and Quality

Use or Application

Product User

Product Class

Competitor

Emotion

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REPOSITIONING

Repositioning Changing consumers’

perceptions of a brand
in relation to competing
brands.

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Positioning and Product Differentiation

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