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Segmenting & Targeting Markets. Strategic Marketing Chapter 7 210 - 234. Characteristics of Markets & Market Segments. A Market is Comprised of people or organizations (Consumer or Business) Have needs, abilities, and willingness to buy Markets have market segments

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Segmenting targeting markets

Segmenting & Targeting Markets

Strategic Marketing

Chapter 7

210 - 234

Characteristics of markets market segments
Characteristics of Markets & Market Segments

  • A Market is

    • Comprised of people or organizations (Consumer or Business)

    • Have needs, abilities, and willingness to buy

  • Markets have market segments

  • A Market Segment consists of a subgroup of people who share one or more common characteristic that causes them to have similar product needs

    • Theoretically anything can be grouped together

    • Market segmentation is only valuable if the group is meaningful to the marketer

      • The marketing mix is tailored to the market segment defined

Market segmentation
Market Segmentation

  • Market Segmentation helps marketers define customer needs and wants more precisely

  • Segments differ in size & potential so companies look at particular segments and determine more accurate marketing objectives

  • Accurate marketing objectives lead to:

    • Improved allocation of resources

    • Better marketing results

Market segmentation review
Market Segmentation Review

  • Market Segmentation accomplishes the following:

    • Identify specific groups that you can analyze characteristics & buying behavior of

    • Design marketing mixes specific to segmented groups

    • Allows you to meet customer needs & wants while meeting company objectives

Market segmentation1
Market Segmentation

  • To be useful, a segmentation scheme must produce segments that meet four basic criteria:

    • Sustainability

      • Needs to be large enough to matter. Not enough potential; it wont last.

    • Identifiability & Measurability

      • Need to be able to identify the group being targeted & its size

      • Easy to determine amount of people in certain subgroups; not easy to determine willingness or interest

    • Accessibility

      • Important to devise marketing mixes that allow your segments to access your product

      • Seniors citizens, Disabled, Language deficient, etc…don’t access information or products as easily as everyone else

    • Responsiveness

      • If the majority of customers respond positively to a marketing mix; then creating a separate marketing mix strategy for “unresponsive” group may not be necessary

Market segmentation bases
Market Segmentation Bases

  • Segmentation Bases (Variables)

    • Characteristics of individuals, groups, or organizations used to divide a total market into segments

    • Marketers choose “bases” that are

      • Substantial

      • Identifiable

      • Measurable

      • Accessible

      • Responsive

Market segmentation2
Market Segmentation

  • One Base or Variable is not as precise but is simple and easy

  • Multiple variables allows for precision but

    • Is Harder to use

    • Usable secondary resources are less likely

    • The size of group gets smaller

  • Current trend is to use more variables then less variables

Market segmentation examples
Market Segmentation Examples

  • One Variable

    • Segment a population based on gender

  • Multiple Variable

    • Gender

    • Age

    • Race

    • Education

    • Marital status

    • Geographics

    • Interests

Market segmentation3
Market Segmentation

  • Most Common Variables used to segment markets

    • Geography

    • Demographics

    • Psychographics

    • Benefits Sought

    • Usage Rate(s)


  • Segment by:

    • Region

    • Country

    • World

    • Market size

    • Market density

      • # of people within a unit of land

    • Climate

      • Important because purchasing needs vary based on weather conditions

Why segment with geographics
Why Segment with Geographics?

  • 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

Examples of geogrpahic marketing
Examples of Geogrpahic Marketing

  • Restaurants offering menu items that reflect local taste interest

    • Cracker Barrel & McDonald’s alters menu to reflect local tastes

      • Menu in south is different than menu in Northeast

  • Miller Lite developed a True to Texas Marketing Campaign

  • Magazines like Midwest or Southwest Living

  • Pepsi packaging products based on NFL Cities

Examples of geogrpahics local retailers
Examples of Geogrpahics: Local Retailers

Demographic segmentation
Demographic Segmentation

  • Demographic Segmentation

    • Easy to obtain demographic information

    • Correlates to consumer buying

      • Age

      • Gender

      • Income

      • Ethnic Background

      • Family Life Cycle

Gender segmentation
Gender Segmentation

  • Facts About Female Consumers

    • 75% of Family Finances

    • 51% of new electronics sold

    • 75% over-the-counter drugs

    • 65% of new cars

  • Companies are realizing that women buy more than packaged goods

  • Ace Hardware:

    • 42% of customers are female who spend 30% - 40% more than men per visit

    • Wider, well-lit aisles, clear signage, instructions on product use.

Income segmentation
Income Segmentation

  • Income segmentation tells marketers what consumers can afford

  • Segment by wants & buying power

  • Examples:

    • Housing

    • Clothing

    • Automobiles

    • Food

Ethnic segmentation
Ethnic Segmentation

  • In the past marketers would present ads as anglo-centric

    • White all-American family

    • Mass marketing approach

  • In large part this occurred because the majority of the population fit this mold

  • 1970’s a shift in culture started

    • Ethnic Foods started to be introduced into stores

    • Roles in music, movies, & politics became more prominent

  • As population of minorities increases so does marketing efforts towards them

    • A lot of marketers are choosing to target urban areas versus specific ethnic groups

La raza hispanic rights organization
LaRaza:Hispanic Rights Organization

Ethnic segmentation ads
Ethnic Segmentation Ads

Geely Automobile Holdings Ltd

Pantene Pro-V

Family life cycle segmentation
Family Life-Cycle Segmentation

  • Family Life Cycle is a series of stages determined by a combination of age, marital status, & presence or absence of children

  • 46% of households are maintained by unmarried men or women

  • 102 unmarried Americans over the age of 18

    • 240.144 million people living in the United States over the age of 18

  • A families needs, income, resources, & expenditures differ at each stage of the life cycle

Targeting age marital status children factor
Targeting Age, Marital Status & Children Factor

Psychographic segmentation
Psychographic Segmentation

  • Psychographics is segmenting based on

    • Personality

    • Motives

      • Emotional: Caring for others

      • Rational: Appeals to economy, Reliability, & Dependability

      • Status-Related: Customers want to look a certain way

    • Lifestyle:

      • Way consumers spend their time

      • Importance of things around them

      • Beliefs

      • Socioeconomic Factors: Income & Education

        • Explorers, Achievers, Builders, & Masters

    • Geodemographics: Combines geographic, demographic, & lifestyle segments

Claritas PRIZM Lifestyle Software

Benefit segmentation
Benefit Segmentation

  • Benefit Segmentation:

    • Process of grouping customers into market segments according to the benefits they seek from a product

    • Segmentation typically connects variables to needs

      • If you are this age, living in this city, & you like to do….then this is the product you want

    • Benefit segmentation is different because it is based on their needs and wants

      • Advertises the benefit of a product

      • Start with a product and break it down into the benefits it offers

        • Healthy product, Better tasting, Low price, etc….

Usage rate segmentation
Usage-Rate Segmentation

  • Usage-Rate Segmentation:

    • Dividing a market by the amount of product bought or consumed.

    • Examples of markets:

      • Former users

      • Potential users

      • First-time users

      • Light or irregular users

      • Medium users

      • Heavy users

    • Heavy users are the group most commonly marketed towards

Useage rate segmentation
Useage Rate Segmentation

  • 80/20 Principle

    • A principle holding that 20 percent of all customers generate 80 percent of the demand.

      Time Warner Cable Example

  • Fewer than 10% of its subscribers consume 75% of its bandwidth

  • The goal is to turn customers into heavy users

    • Frequency & customer loyalty programs are designed around this concept

Useage rate ads
Useage Rate Ads

Cell phone use useage rate ads
Cell Phone Use Useage Rate Ads

Business markets
Business Markets

  • Business Market consists of four broad segments:

    • Producers

      • Profit-oriented individuals & organizations that use purchased goods to produce other products

      • Examples: Construction, Manufacturing, Transportation, Finance, Real Estate, & Food Services

    • Resellers

      • Wholesalers & Retailers

      • Buy & resell products

    • Government

      • Selling to Federal, Municipal, & Local officials.

      • Most lucrative industry. Usually requires bids

    • Institutions

      • Schools, churches, civic clubs, hospitals, unions, colleges, nonbusiness organizations, etc..

Business market segmentation
Business Market Segmentation

  • The four types of business segments that are marketed towards are broken down by Company Characteristics & Buying Process

  • Company Characteristics

    • Geographic location

      • Vendors close by may have advantage because it is usually cheaper

    • Type of company

      • Target companies specifically based on a company's particular need

    • Company size

      • Larger companies may get different opportunities because they buy more

    • Volume of purchase

      • Heavy, Moderate, or light users of a product

    • Product use

      • Targeting a company based on what they are producing, purchasing & using

Business buyer characterisitcs
Business Buyer Characterisitcs

  • Buying Process deals with how a company purchases products

  • Two main purchasing profiles that have been identified are:

    • Satisficers:

      Choosing what company to place an order with based on their ability to satisfy product & delivery requirements

    • Optimizers:

      Consider numerous suppliers (both familiar and unfamiliar), solicit bids, & study all proposals carefully before selecting one.

Buyer characteristics
Buyer Characteristics

  • Buyer characteristics can also be determined by

    • Demographic Characteristics

    • Decision-Style

    • Tolerance for risk

    • Confidence Level

    • Job responsibilities

Steps in segmenting a market1
Steps in Segmenting a Market

  • Select a market or product category for study

    • Can be a market they are currently in or a product category they are interested in joining

    • Anheuser-Busch looked at market closely before introducing Light Beers

    • Anheuser-Busch looked at snack food market closely prior to introducing Eagle Brand

  • Choose a “base” for segmenting the market

    • Choosing between demographics, geographics, psychographics, usuage-rate, & benefits sought

    • Whatever segmentation is chosen must meet be sustainable, identifiable, measurable, accessible & responsive

Steps in segmenting a market2
Steps in Segmenting a Market

  • Select Segmentation Descriptors

    • After choosing segmentation bases; the marketer must choose a descriptor

    • Descriptors identify the specific segmentation variables being used

    • Example:

      Company selects demographics as its base; Descriptors could be

      • Age

      • Gender

      • Occupation

      • Education

      • Income

Steps in segmenting a market3
Steps in Segmenting a Market

  • Profile & Analyze Segments

    • Profile includes the segments size, expected growth, purchase frequency, current brand usage, brand loyalty, & long-term sales and potential profit.

    • Allows firm to look at information and rank them according to potential

      • Profit

      • Opportunity

      • Risk

      • Consistency with organizational goals

Steps in segmenting a market4
Steps in Segmenting a Market

  • Select Target Markets

    • Natural outcome of segmentation process

    • Determines companies Marketing Mix

  • Design, Implement, & Maintain Appropriate Marketing Mixes

    • Strategies created for:

      • Product

      • Place

      • Price

      • Promotional

Market segmentation4
Market Segmentation

  • Markets are dynamic

    • Dynamic = Changing

  • Classification is static

    • Static = Consistent. No Change

  • Consumers will move in and out of the classifications so marketers have to make adjustments and proactively monitor their segmentation strategies

    • People in classification will not always stay there

    • If you target 21-35 year-olds a person can only be in that group at most for 15 years

Strategies for selecting target markets
Strategies for Selecting Target Markets

  • A target market is a group of people for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.

  • Most markets will include customers with different buying characterisitcs, lifestyles, backgrounds, & income levels; it is unlikely that a single marketing mix will attract all segments of the market

  • Example:

    • Chevy sells cars that sell for $13,000 & for $60,000

Strategies for selecting target markets1
Strategies for Selecting Target Markets

  • The three general strategies for selecting target markets are:

    • Undifferentiated

    • Concentrated

    • Multi-segment Targeting

Strategies for selecting target markets2
Strategies for Selecting Target Markets

Undifferentiated Targeting

A marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix.

Requires a product that has little competition & no substitutes.

Examples of Product Segmented this way:



Strategies for selecting target markets3
Strategies for Selecting Target Markets

Concentrated Targeting

A strategy used to select one segment of a market for targeting marketing efforts.

Companies select a marketing niche to target and they focus on the needs, motives, & satisfactions of that group


Starbucks – Gourmet coffee

Rolex – High priced watch

OshKoshB’Gosh – Kids clothes

Strategies for selecting target markets4
Strategies for Selecting Target Markets

Multisegment Targeting

A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.


A College offering a variety of programs

Day Programs

MBA Degrees

Evening programs

Weekend programs

Multi segment target strategies
Multi-Segment Target Strategies

  • A Business can choose to create a product that meets these specific customer bases & descriptors

  • Different product for each classification

  • Businesses can also create promotional strategies geared towards each base

    • Similar to consumer market

    • Anheuser-Busch sells beer to different ethnic groups. Ad changes; product doesn’t

Multisegment targeting
Multisegment Targeting

  • Product Design Costs

  • Production Costs

  • Promotion Costs

  • Inventory Costs

  • Marketing Research Costs

  • Management Costs

  • Cannibalization

    Situation that occurs when sales of a new product cut into sales of a firm’s existing products.

    Example: Code Red Mountain Dew took away 25% of Mountain Dew Drinkers

Review learning outcome alternatives for selecting target markets




REVIEW LEARNING OUTCOMEAlternatives for Selecting Target Markets

One to one marketing
One-to-One Marketing

  • One-to-One Marketing is an individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer.

  • Goal is to sell multiple products to one customer

    • Reduces customer retention costs

    • Increases customer loyalty and revenue

    • Provides a more focused marketing approach

    • Personalized marketing that encourages communication between company & consumer

    • Allows for customized products to be made

One to one marketing1
One-to-One Marketing

  • Four Trends Leading Towards One-to-One Marketing

    • One Size fits all approach to marketing no longer works.

      • Customers want to be treated as individuals not as part of a large group

    • Direct and personal marketing will grow to meet needs of busy consumers.

      • Takes less time for a consumer to make a purchasing decision

    • Consumers will be loyal to companies that have earned—and reinforced—their loyalty.

      • One-to-One marketing focuses on pleasing the firms best customers so they are happy

    • Mass-media approaches will decline as technology allows better customer tracking.

      • One-to-One marketing is more personalized and cost-effective with improved technology



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


The place a product, brand, or group of products occupies in consumers’ minds relative to company offerings

Companies assume that consumers compare products on the basis of important features. If features being emphasized are unimportant then consumer will not buy and brand will take a hit.

Consumer Goods marketers are extremely concerned with positioning.

Effective positioning
Effective Positioning

Effective Positioning Requires Companies to:

  • Assess the positions occupied by competing products

  • Determine the dimensions underlying these positions

  • Choose a market position where marketing efforts will have the greatest impact


    Campbell’s Select Soup is targeted towards upscale adults who are willing to try something new.

Positioning strategy
Positioning Strategy

  • Product Differentiation is a positioning strategy that some firms use to distinguish their products from those of competitors.

    • Distinction can either be real or perceived

    • Most consumer goods are very similar therefore their distinction is more perceived than real

    • Companies will try to make consumer believe that they really need the product being advertised

    • Occurs also when companies try to emulate other products

Perceptual mapping
Perceptual Mapping

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

  • Example is of Levi’s Jeans

    • Sell to teens

    • Sell to high-end consumers

Positioning methods
Positioning Methods

  • Firms use a variety of variables to determining positioning approach:

    • Attribute: Product features & benefits

    • Price & Quality: High Price = Quality; Low Price = Value

    • Use or Application: Emphasize how a product can be used

    • Product User: Personality or type of user is focused on.

    • Product Class: Positioned in accordance to other products.

      Can be done to compare or prove difference

    • Competitor: Comparing products to their competitors.

      In reality all companies do this on some level

    • Emotion: Positioned based on how it makes the customer feel.

Multiple positioning methods
Multiple Positioning Methods

Each Product Positioning Approach is Used in the Got Milk Ad on right

  • Product Attribute

  • Use or Application

  • Product User

  • Product Class

  • Competitor

  • Emotion


  • Repositioning involves changing consumers’ perceptions of a brand in relation to competing brands.

    Grocery Stores v. Walmart

  • Every time a Walmart opens; two grocery stores close in that community

  • Harris Teeter does not position itself directly against Walmart