Segmenting and targeting markets
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Segmenting and targeting markets. Module 3 Chapter 4. Lecture Overview. what is market segmentation? why do marketing organisations segment the market for their product? market segmentation process segmenting consumer markets positioning segmenting business markets. Milk?? .

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Segmenting and targeting markets

Segmenting and targeting markets

Module 3

Chapter 4

Lecture overview

Lecture Overview

  • what is market segmentation?

  • why do marketing organisations segment the market for their product?

  • market segmentation process

  • segmenting consumer markets

  • positioning

  • segmenting business markets

Segmenting and targeting markets


  • what type of milk do you drink?

    • do you drink more than one type?

  • why do you drink the type/(s) of milk that you do?

The milk story

The milk story…

  • Once upon a time ……….

    • there was full-fat cream milk that was sold in one pint glass milk bottles with silver foil tops, one inch of cream sat on the top

    • the milkman delivered the fresh milk to the door each morning and collected the empty bottles

    • but kiddies thought it was yucky and would not drink it, so they developed flavoured milk

    • but flavoured milk and full cream milk was considered to be fattening, so many women would not drink it, so they developed low fat milk

Milk story cont

Milk story cont…..

  • now there is a milk to meet the needs of just about everyone

    • cream top/froth top

    • extra creamy

    • lactose free

    • high calcium

    • goats milk

  • check out

  • so everybody drank milk and lived happily every after

What is market segmentation

What is market segmentation?

  • process of dividing a market into meaningful, relatively similar and identifiable segments or groups (Summers et al. 2005, p.111).

  • market segment

    • a sub-group of people or organisations that share one or more characteristics that cause them to have similar product needs (Summers et al. 2005, p.111).

Why do firms segment the market

Why do firms segment the market?

  • people have diverse needs, wants, buying behaviours & lifestyles

    • one firm cannot satisfy everyone’s needs

  • market segmentation allows:

    • marketing organisations to define their customers needs and wants more precisely

    • better estimation of market size and potential

    • development of more specific, focussed marketing objectives

    • better allocation of resources

  • performance can be better evaluated when marketing objectives are more precise

Why do firms segment the market cont

Why do firms segment the market? cont…

  • firm’s have different strengths

    • different areas of competitive advantage

    • firm should focus on who they can serve best

  • segmenting can be a more profitable strategy, ifsegments have unique needs and are prepared to pay for a differentiated offering

  • danger of over-segmentation

Steps in market segmentation exhibit 4 2 p 113

Steps in market segmentation(Exhibit 4.2, p. 113)

6. Develop marketing

mix for each target segment

Marketing mix

5. Select target markets

Target marketing

  • Profile and analyse

    • segments

Market segmentation

  • Select segmentation

  • descriptors (variables)

  • Choose bases for

  • segmenting the market

  • Select a market or

  • product category

Step 1 select a market or product category for study

Step 1: Select a market or product category for study

  • current market or existing product

  • related, but new market or product

  • totally new market or product

Step 2 choose your bases for segmentation

Step 2: Choose your bases for segmentation





Geographic segmentation

Geographic Segmentation

  • region or location

    • define the region

  • market size

  • market density

  • climate

  • what types of goods are segmented by geographic bases?

Demographic segmentation

Demographic Segmentation

  • age

  • gender

  • income

  • family life-cycle

    • age, marital status, children

    • refer to Exhibit 4.3, p.116

  • other demographic descriptors

    • occupation

    • education

    • religion, ethnicity, nationality

  • ABS data

Psychographic segmentation

Psychographic Segmentation

  • personality

    • traits, attitudes, habits

    • refer to Exhibit 4.4, p. 117 – Porsche buyers

  • motives

    • rational (functional) or emotional (psychological)

  • lifestyle

    • activities, opinions, interests

    • refer to Exhibit 4.5, p. 118 and Exhibit 4.6, p. 119

    • value segments

  • geo-demographics

    • neighbourhood lifestyle categories

    • Morgan target mapping

Behavioural bases

Behavioural bases

  • benefits sought

  • usage rate

  • other behavioural descriptors

Benefits sought

Benefits sought

  • what benefits are the market seeking?

  • example: cars

    • technical excellence – BMW – the ultimate driving machine

    • safety and excitement – Volvo – Volvo for life.

    • economy – Daewoo

    • prestige – Mercedes

    • speed – Mazda - zoom-zoom

Usage rate

Usage rate

  • usage rate

    • light

    • medium

    • heavy

  • user status

    • regular

    • non-users

    • ex-users

Other behavioural descriptors

Other behavioural descriptors

  • purchase occasion

  • loyalty status

  • buyer readiness stage

    • awareness, interest, liking, preference, conviction, purchase

  • attitude toward the product

  • brand loyalty

Example a teddy for every occasion

Example – a teddy for every occasion

Vermont Teddy Bears

Segmenting and targeting markets

Okay, we have arrived at a number of

potential segments.

Whish should be considered?

Step 3 selecting segmentation descriptors

Step 3: Selecting segmentation descriptors

  • refer to table 2.1, study guide

  • not every descriptor (variable) is relevant for every product

    • what descriptors (variables) actually create distinct and meaningful segments for this product category?

  • high cost and time of over-segmenting

  • Consumer Segmentation and Targeting - Nielsen Spectra

  • refer to Exhibit 4.7, p.120 for segmentation of snack-food market.

Useful segmentation

Useful segmentation

  • is the segment substantial?

    • large enough to be profitable

    • growing segment

  • is the segment identifiable and measurable?

    • can we easily identify members and thus measure the size of the segment?

    • can the purchasing power of the segment be estimated?

Useful segmentation cont

Useful segmentation cont….

  • is the segment accessible?

    • can the segment be reached with a specific marketing mix and through established media and marketing channels?

  • is the segment responsive?

    • will the segment respond differently than other segments to a specific marketing mix?

    • are the needs of the segment unique enough to warrant the development of a different marketing mix?

Who are your main target markets

Who are your main target markets?

  • a target market is

    • ‘a group of people or organisations for which an organisation designs, implements and maintains a marketing mix intended to meet the needs of that group..’ (Summers et al. 2005, p. 125).

Market coverage strategies

Market coverage strategies

  • should we mass-market (undifferentiated) or target market (differentiated)?

  • if target marketing, then how many target markets should we select?

  • what are the advantages and disadvantages of each strategy?

    • refer to Exhibit 4.8, p. 125

Market coverage strategies1





Company mix 1

Segment 1

Company mix 2

Segment 2

Undifferentiated targeting

Company mix 3

Segment 3

Segment 1

Segment 2




Multi-segment targeting

Segment 3

Concentrated targeting

Market coverage strategies

Undifferentiated targeting mass marketing


mass production, mass distribution and one promotional strategy yield economies of scale

lower costs

lower prices


sterile, unimaginative product offering that does not really meet anyone’s needs

susceptible to competitors who differentiate

Model T Ford

Undifferentiated targeting (mass marketing)

Concentrated targeting


focus on specific needs of niche market

allows small organisations to compete effectively in niche markets

strong position in an attractive market segment

e.g. Rolls Royce


risky strategy – narrow focus

‘all eggs in one basket’

stereotyping prevents growth into other segments

Concentrated targeting

Multi segment targeting target marketing


access more markets

closely meet the needs of each market

greater satisfaction leads to loyalty

can be very profitable if done well

e.g. Fosters


developing multiple marketing mixes is costly

cost of over-segmentation

product proliferation and cannibalisation

Multi-segment targeting(target marketing)



  • position is

    • the place a product occupies in consumers’ minds relative to competing offerings (Summers et al. 2005, p. 129).

  • positioning involves

    • developing a specific marketing mix to influence a potential customers’ overall perception of a brand, product line or organisation..’ (Summers et al. 2005, p.129).

      • bases of differentiation

      • repositioning

  • perceptual mapping

My perceptual map for chocolate

My perceptual map for chocolate

High price

I think……

High quality

Low quality

Generic brand

Low price

Positioning strategies may be based on




or benefits


Price and quality



Use or application


Product class

Positioning strategies may be based on

Positioning strategies

Positioning Strategies

  • product attributes or benefits

    • Volvo – Volvo for life

  • price/quality

    • Lindt Chocolate – connoisseur quality

  • application or use

    • baking soda – cooking, cleaning, bathing

  • product class

    • cork flooring

  • product user

    • Vegemite – folate for pregnant ladies

  • Competitor

    • Avis – we try harder

  • cultural symbols

    • i.e. Louie the Fly

In this lecture we covered

In this lecture, we covered……

  • why marketing organisations segment their market

  • market segmentation

    • bases for segmenting the consumer market

      • various descriptors for each base

    • four characteristics of useful segments

  • three targeting strategies

    • undifferentiated, multi-segment, concentrated

  • positioning

    • positioning strategies

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