Segmentation

Market
Segmentation,
Targeting, and
Positioning
Copyright 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Selecting a Target Market

Before a marketing mix strategy can be
implemented, the marketer must identify,
evaluate, and select a target market.
Market: people or institutions with
sufficient purchasing power, authority,
and willingness to buy
Target market: specific segment of
consumers most likely to purchase a
particular product
Types of Markets
Consumer products: goods or
services purchased by an
ultimate consumer for personal
use
Business products: goods or
services purchased for use either
directly or indirectly in the
production of other goods and
services for resale
The key to classification is to
identify the purchaser and the
reasons for buying the goods.
The Role of Market Segmentation

Market Segmentation: division of the total
market into smaller, relatively homogeneous
groups
No single marketing mix can satisfy everyone.
Therefore, separate marketing mixes should
be used for different market segments.
Criteria for Effective Segmentation

Market segmentation cannot be used in all
cases. To be effective, segmentation must
meet the following basic requirements.
The market segments must be measurable
in terms of both purchasing power and
size.
Marketers must be able to effectively
promote to and serve a market segment.
Market segments must be sufficiently large
to be potentially profitable.
The number of segments must match the
firms capabilities.
Segmenting Consumer Markets

Geographic Segmentation: Dividing an
overall market into homogeneous groups on
the basis of their locations
Does not ensure that all consumers in a
location will make the same buying
decision.
Help in identifying some general patterns.
Pampers
This ad is an
example of
geographic
segmentation.
When visiting the
web site look for
the different
countries Pampers
markets to.
Using Geographic Segmentation

Demand for some goods and services can
vary according to the geographic region
Most major brands get 40-80 percent of their
sales from what are called core regions
Climate is another important segmentation
factor
Segmenting Consumer Markets

Demographic segmentation:
dividing consumer groups
according to characteristics
such as sex, age, income,
occupation, education,
household size, and stage in
the family life cycle
A primary source for
demographic data is the
Census.
Segmenting by gender
Some firms start by targeting one gender
and then switch to both
Some companies market successfully to
both genders
Segmenting by age
Many firms identify
market segments
on the basis of age
Products are often
designed to meet
the specific needs
of certain age
groups
Examples: baby
food and denture
cream. Dole:
Developing a
Product Specifically
for Children
Segmenting by age
Sociologists attribute different
consumer needs and wants among
various age groups to the cohort effect
Cohort effect is a tendency among
members of a generation to be
influenced and drawn together by
significant events occurring during their
key formative years, roughly 17 to 22
years of age
BoomersPeople
born
Boomers
from 1946 until 1965.
Nearly 42 percent of
U.S. adults were born in
this period. Values of
this age group were
influenced both by the
Vietnam War and the
career-driven era. Baby
boomers over the age of
50 will have a total
disposable income of $1
trillion.
Segmentation by Income
Buying pattern depends on income levels.
Consumers with higher incomes demand
branded and high quality products while lower
income consumers look for Value-for-money
products.
Jaguar
Segmentation
based on income
Psychographic Segmentation
Divides a population into groups that have
similar psychological characteristics,
values, and lifestyles
Lifestyle: peoples decisions about how to
live their daily lives, including family, job,
social, and consumer activities
Personality: Characteristics like leadership,
masculine, impulsive, aggressive etc
influence buying behaviour.
Behavioural segmentation: dividing a

consumer population into homogeneous
groups based on characteristics of their
relationships to the product
Can take the form of segmenting based on:
Usage rates for a product
User status
User readiness
Buying motives
Benefits
Focuses on the
attributes that
people seek in a
good or service
and the benefits
that they expect
to receive from
that good or
service
Groups
consumers into
segments based
on what they
want a product to
do for them
Eclipse
Segmenting by
Benefits Sought
Usage Rates
Segmenting by grouping people according
to the amounts of a product that they buy
and use
Markets often divided into heavy-user,
moderate-user, and light-user segments
The 80/20 principle (Praedos Law) holds
that a big percentage of a products
revenues (roughly 80%) comes from a
relative small, loyal percentage (around
20%) of total customers
Brand Loyalty
Segmenting consumers grouped according
to the strength of brand loyalty felt toward a
product
A practical example of this would be the
frequent flyer programs of airlines and
many hotels
Sociographic segmentation
Social and cultural influences affect

consumers.
Segmentation on the basis of culture, social
class and reference groups.

Segmentation

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Segmentation

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Market

Selecting a Target Market

The Role of Market Segmentation

Criteria for Effective Segmentation

Segmenting Consumer Markets

Using Geographic Segmentation

Segmenting Consumer Markets

Behavioural segmentation: dividing a

Social and cultural influences affect

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