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Segmentation and Targeting. Professor Chip Besio Cox School of Business Southern Methodist University. What Are Markets?. Aggregates of people, With the ability to buy, The willingness to buy, The authority to buy. Two Types of Markets. Consumer Markets

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segmentation and targeting

Segmentation and Targeting

Professor Chip Besio

Cox School of Business

Southern Methodist University

what are markets
What Are Markets?
  • Aggregates of people,
  • With the ability to buy,
  • The willingness to buy,
  • The authority to buy.
two types of markets
Two Types of Markets
  • Consumer Markets
    • Individuals or households who benefit directly by consumption, rather than to make a profit or to achieve Industrial Markets
  • Industrial Markets
    • Companies or organizations who purchase for resale, use in production, or use in operations, including both profit-oriented and not-for-profit organizations.
what is market segmentation
What Is Market Segmentation?

Market segmentation is the subdividing of a market into distinct subsets, where any subset may conceivably be selected as a marketing target to be reached with a distinct marketing mix

segmentation dilemma
Segmentation Dilemma


Economies of Scale


Everyone Wants Something Different

segmentation criteria
Segmentation Criteria

I. Customer Characteristics

II. Benefits Sought

III. Customer Behaviors

customer characteristics demographics
Customer CharacteristicsDEMOGRAPHICS
  • Consumer Markets:
    • Gender
    • Age
    • Income
    • Dual income family
  • Industrial Markets:
    • SIC code
    • Size of company
customer characteristics psychographics
Customer Characteristics PSYCHOGRAPHICS
  • Consumer Markets:
    • Environmentally-conscious
    • Value and lifestyles
      • VALS (1978); VALS 2 (1989)
      • Distinct patterns based on attitudes and values
  • Industrial Markets:
    • Corporate culture
    • Purchasing orientation
customer characteristics geography
Customer Characteristics GEOGRAPHY
  • Regional Segmentation
  • Zip Clustering
    • Distinct marketing strategies created for similar types of neighborhoods stretched across the nation
    • Examples include PRIZM, Market Metrics
benefit segmentation what benefit do you want
Benefit SegmentationWHAT BENEFIT DO YOU WANT?
  • Rationale - The benefits people are seeking in consuming a given product are the true reasons for the existence of segments
  • Example - Toothpaste
    • Cavity prevention (e.g., Crest)
    • Fresh breath (e.g., Aquafresh)
    • White teeth (e.g., Rembrandt)
behavior segmentation usage behaviors
Behavior Segmentation USAGE BEHAVIORS
  • Volume of usage
    • Heavy users, moderate users, light users and nonusers
    • 80/20 rule
  • Brand usage
    • Increase usage among users
    • Get users of competing brand to switch
    • Get nonusers to start
  • Usage occasion
what is targeting a market segment
What Is “Targeting” a Market Segment?

“You can’t be all things to all people”

  • Therefore, companies typically focus on one or more segments and orient their marketing activities to those (potential) customers
which are the good segments to target
Which Are the “Good” Segments to Target?

The most attractive market segments are:

  • Large
  • Growing

and have:

  • High purchase volume
  • High margins
  • High customer value
which are the good segments to target14
Which Are the “Good” Segments to Target?
  • However, the most attractive segments are frequently already well-served and so are highly competitive

… so you must also consider:

  • Number and strength of competitors
  • Ease of entry into the segment
  • Company’s current positioning
targeting dilemma segment attractiveness
Targeting Dilemma - Segment Attractiveness


More Opportunity


More Companies Compete for Valuable Segments

which are the good segments to target16
Which Are the “Good” Segments to Target?

Additional considerations for targeting:

  • Customers are addressable - you can reach them
  • The company is capable of building a marketing program to target them
  • Examples of successful targeting:
    • Wal-Mart - Value-conscious shoppers that do not want to worry about short-term sales
    • Lexus - People with high disposable income who value reliability and service, as well as prestige and luxury
    • Cray - Price insensitive computer users that require maximum computing power
    • Dupont - Less price-sensitive innovators in the use of plastics (skim pricing)