Chapter 7
Segmenting and Targeting Markets

What are Markets?
• Market: people or institutions with sufficient purchasing power, authority, and willingness to buy
• Types of Markets

Requirements of a Markets

 Need

+

 Ability
 Willingness
 Authority

Role of Market Segmentation
Market Segmentation: division of the

total market into smaller, relatively homogeneous groups
Why?
Levels – Mass, Segment, and Niche

Why segment?
Most
efficient

One Mass
Market

Most effective Many Groups of One

The Importance of Market
Segmentation
 Markets have a variety of product

needs and preferences.
 Marketers can better define

customer needs.
 Decision makers can define objectives

and allocate resources more accurately. No Market Segmentation

Segmented by Gender

Segmented by Age

Segmentation Process
• Marketers follow two methods to determine the bases on which to identify markets:
– Segments are predefined by managers based on their observation of the behavioral and demographic characteristics of likely users
– Segments are defined by asking customers which attributes are important and then clustering the responses

Criteria for Effective
Segmentation
Responsiveness
Accessibility
Measurability /
Identifiability
Substantiality

Most important point
In relation to responsiveness to different

marketing mixes, segments must be:
Homogeneous within

Heterogeneous between

LO4

Bases for Segmenting Consumer
Markets
Characteristics of individuals, groups, or organizations used to divide a total market into segments.
(variables)

LO4

Bases for Segmentation
Geography
Geography
Demographics
Demographics
Psychographics
Psychographics
Benefits
Benefits Sought
Sought
Usage
Usage Rate
Rate

Segmenting Consumer
Markets
• Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locations

Metropolitan
MetropolitanStatistical
Statistical
Area
Area(MSA)
(MSA)

Segmenting Consumer
Markets
• Demographic segmentation: dividing consumer groups according to characteristics such as gender, age, income, occupation, education, ethnicity, household size, and stage in the family life cycle.

Family Life Cycle
Age

Marital
Status

Children

Psychographic Segmentation
• Psychographic Segmentation: dividing a population into groups that have similar psychological characteristics, and lifestyles.

• Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities

LO4

Geodemographic
Segmentation
Segmenting potential customers into neighborhood lifestyle categories.
Combines geographic, demographic, and psychographic segmentation.

LO4

Benefit Segmentation

The process of grouping customers into market segments according to the benefits they seek from the product. Usage Rate Segmentation

Dividing
Dividing aa market market by by the the amount amount of of product product bought bought or or consumed. consumed. Bases for Segmenting Business
Markets
Producers
Producers
Resellers
Resellers
Government
Government
Institutions
Institutions
Company
Company
Characteristics
Characteristics

Buying
Buying
Processes
Processes

LO6
Steps in Segmenting Markets

1

2

3

4

Select a market for study

Choose bases for segmentation Select descriptors Profile and analyze segments 5
Select
target markets 6
Design,
implement, maintain marketing mix Note that steps 5 and 6 are actually marketing activities that follow market segmentation (steps 1 through
4).

Targeting

Choosing one or more segments for which

to design your marketing operations

Identify the Appropriate Targeting Strategy

Undifferentiated Strategy

Undifferentiated Strategy

Single
Marketing
Mix

Organization
Target Market

Differentiated Strategy
Marketing Mix 1

Marketing Mix 2
Organization
Target Market

Concentrated Strategy

Single
Marketing
Mix

Organization
Target Market

Cannibalization

Cannibalization
Cannibalization
Situation that occurs when sales of a