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Identifying Market Segments

and Targets

Marketing Management, 13th ed

8

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-2

Chapter Questions

• What are the different levels of market segmentation?

• How can a company divide a market into segments?

• How should a company choose the most attractive target markets?

• What are the requirements for effective segmentation?


Baby Boomers: A Lucrative Market


Effective Targeting Requires…

• Identify and profile distinct groups of buyers who differ in their needs and preferences

• Select one or more market segments to enter

• Establish and communicate the distinctive benefits of the market offering


Ford’s Model T Followed a Mass Market Approach

Why identify?

• Companies cannot connect with all customers in large, broad, or divers markets.

• Mass marketing is no longer that effective • Splintering of market• advertising media• distribution channels.

The market can be segmented into 4 levels:

• Segment Marketing

• Niche Marketing

• Local Marketing

• Individual Marketing: Customerization


Four levels of Micromarketing

Segments

Local areas Individuals

Niches


What is a Market Segment?

A market segment consists of a group of customers who share a similar set of needs ad wants.

customers with similar set of needs and wants :

Segment Marketing

Marketer must identify the markets and decide which one to target

Kotler example: Siemens Electrical Apparatus

Division

Local Example: Cebu Pacific Airlines

Medical Application: The Medical City Breast Clinic

Concept 1


Gather.com: A Niche Social Networking Site


Flexible Marketing Offerings

• Naked solution: Product and service elements that all segment members value

• Basic Services

• Discretionary options: Some segment members value options but not all

• TCS Hazir• Cng Kit, AC in cars• Installation of AC’s


Preference Segments

• Homogeneous preferences exist when consumers want the same things

• Diffused preferences exist when consumers want very different things

• Clustered preferences reveal natural segments from groups with shared preferences

CHP: 8&10-14

Basic Market Preference Patterns


Preference Segments

• Homogenous Groups:

• Cluster Demand

• Price Conscious Customers compared to those who buy on company size and reputation. Or, a cluster may form around service and price offering

• Diffused Preferences:

Customized products

defined customer group looking for a distinct

mix of benefits: Niche Marketing

Has a distinct set of needs, willing to pay a premium, fairly small, gains economies through specialization

Kotler example:Hallmark

Local example:VMV Hypoallergenics

Medical application:Subspecializing in a certain field

Concept 2


Niche Marketers

Enterprise Rent-A-Cartargets the insurance-replacement market

Tailoring to needs and wants of local groups: Local marketing

Emphasis on local marketing initiatives

Kotler example:Citibank

Local example:McDonald’s

Medical application:Private practice of doctors in different areas

Concept 3


Baskin Robbins Focuses on Local Marketing

Empowers customers to design the product and

service: Customerization

Firm provides a platform and tools and “rents” out to the customers the means to design the products.

Kotler example:JackRabbit Custom Bikes

Local example:Specialty bakeshops making custom-

designed cakes, etc.

Medical application:Patient care is individualized

Concept 4


What is Customerization?

Customerization combines operationally driven mass customization with customized

marketing in a way that empowers consumers to design the product and service

offering of their choice.


Segmenting Consumer Markets

GeographicGeographic

DemographicDemographic

PsychographicPsychographic

BehavioralBehavioral

Segmenting Consumer Markets

Geographic

Region, City or MetroSize, Density, Climate

Demographic

Age, Gender, Family size and Fife cycle, Race, Occupation, or Income ...

Lifestyle or Personality

Psychographic

Occasions, Benefits, Uses, or Attitudes

Behavioral

GEOGRAPHIC SEGMENTATION

Divide the market into different group based on :• Region – South India , North , Western Region, East• City – metro cities, cities with population more than

1 million• World• Density• Climate• States

Ex.- Mcdonalds globally, sell burgers aimed at local markets, for example, burgers are made from lamb in India rather then beef because of religious issues. In Mexico more chilli sauce is added and so on.

Dividing market into geographical units:

Geographic Segmentation

Can be divided into nations, states, regions, countries, cities, or neighborhoods

Kotler example:Bed Bath and Beyond

Local example:Jollibee

Medical application:Local health units

Concept 5


Demographic Segmentation

Age and Life CycleAge and Life Cycle

Life StageLife Stage

GenderGender

IncomeIncome

GenerationGeneration

Social ClassSocial Class


Claritas’ Prizm(Potential Rating Index by Zip Markets

• Education and affluence

• Urbanization

• Race and ethnicity

• Mobility



• Education and affluence

trendy apartments and condos, fitness clubs and clothing boutiques, casual restaurants, and all types of bars-from juice to coffee to microbrew.

• Family life cycle

Kids Centered Life Style. Late Marriages.



• Urbanization

These immigrants and descendants ofmulitcultural backgrounds in multiracial, multilingual neighborhoods .Single parents and married couples with and without children are affluent from working hard at multiple trades and public service jobs. They have big families,.



• Mobility

Once-thriving mining and manufacturing towns have aged-as have the residents in Old Milltowns communities. Today, the majority of residents are retired singles and couples, living on downscale incomes in pre-1960 homes and apartments. For

leisure, they enjoy gardening, sewing, socializing at veterans clubs, or eating out at casual restaurants.

DEMOGRAPHIC SEGMENTATION

Market divided into groups based on variables:


Variables such as age, family size, family life cycle, gender, income, occupation, education, religion, etc.

Kotler example:Dove’s Campaign for Real Beauty

Local example:Pond’s Age Defying Serum

Medical application:Age-specific specialization (Pediatrics,

Geriatrics, etc.)Gender specific specialization (OB-Gyn, Urology, etc.)

Concept 6

Life Cycle

As people age their needs and wants change, some organisations develop specific products aimed at particular age groups for example nappies for babies, toys for children, clothes for teenagers and so on.

Gender segmentation is commonly used within the cosmetics, clothing and magazine industry.

In the UK we have also seen the introduction of Maxim, (www.maxim-magazine.co.uk) a male lifestyle magazine covering male fashion, films, cars, sports and technology. \


• • Income segmentation is another strategy used by

many organisations. Stores like Harrods, Harvey Nicohals are predominantly aimed at the affluent market. Daewoo aim their vehicles at price sensitive buyers who require a bundle of benefits for the price. In today's globally competitive environment brands are specifically developed and positioned within particular income segments inorder to maximise turnover.

• Products and services are also aimed at different lifecycle segments. Holidays are developed for families, the 18-30's singles, and for those in their 50's.


Toyota Scion Targets Gen Y Consumers


Dove Targets Women

PSYCHOGRAPHIC SEGMENTATION

Divided based on Psychographic Profiles: Psychographic Segmentation

Market is divided into different groups on the basis of psychological/personal traits, lifestyle, or values

Concept 7

Kotler example:Transport Canada

Local example:Philippine Airlines

Medical application:St. Luke’s Medical Center, Global City

BEHAVIOURAL SEGMENTATION


Figure 8.1 The VALS Segmentation System

Behavioral Segmentation

• Innovators-Successful, sophisticated, active, "take-charge" people with high selfesteem. Purchases often reflect cultivated tastes for relatively upscale, niche-oriented products and services.

• Thinkers-Mature, satisfied, and reflective people who are motivated by ideals and who value order, knowledge, and responsibility. They seek durability, functionality, and value in products. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-41


• Achievers-Successful, goal-oriented people who focus on career and family. They favor premium products that demonstrate success to their peers.

• 4. Experiencer-Young, enthusiastic, impulsive people who seek variety and excitement. They spend a comparatively high proportion of income on fashion, entertainment, and socializing.


• Believers-Conservative, conventional, and traditional people with concrete beliefs. They prefer familiar, U.S. products and are loyal to established brands.

• 2. Strivers-Trendy and fun-loving people who are resource constrained. They favor stylish products that emulate the purchases of those with greater material wealth. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-43


• Makers-Practical, down-to-earth, selfsufficient people who like to work with their hands. They seek U.S.-made products with a practical or functional purpose.

• Survivors-Elderly, passive people who are concerned about change. They are loyal to their favorite brands.


• Lifestyle groups Yuppie Associations• Mobile• High valued house/flat• Good Salary• Young branded car. Third Agers Associations.• 50's• Retired early from profession.• Time to spare• Adventure Seekers

Benifits

• Enthusiast (12% of the market). Skewing female, their average income is about $76,000 ayear. About 3% are "luxury enthusiasts" who skew more male with a higher income.

• • Image Seekers (20%). The only segment that skews male, with an average age of 35. They use wine basically as a badge to say who they are, and they're willing to pay more to make sure they're getting the right bottle.

• • • Ovenvhelmed


Benifits

• I Savvy Shoppers (15%). They love to shop and believe they don't have to spend a lot to get a good bottle of wine. Happy to use the bargain bin.

• I Traditionalist (16%). With very traditional values, they like to buy brands they've heard of and from wineries that have been around a long time. Their average age is 50 and they are 68% female.


Benifits

• Satisfied Sippers (14%). Not knowing much about wine, they tend to buy the same brands. About half of what they drink is white zinfandel.

• Oven helmed . confusing (23%). A potentially attractive target market, they find purchasing wine confusing.




Decision Roles

• Initiator

• Influencer

• Decider

• Buyer

• User

Behavioral Variables

• Occasions

• Benefits

• User Status

• Usage Rate

• Buyer-Readiness

• Loyalty Status

• Attitude


The Brand Funnel Illustrates Variations in the

Buyer-Readiness Stage

• Aware

• Ever tried

• Recent trial

• Occasional user

• Regular user

• Most often used


Loyalty Status

Switchers

Shifting loyals

Split loyals

Hard-core


Figure 8.3 Behavioral Segmentation Breakdown

Conversion Model


Conversion Model measures the strength of consumers'

psychological commitment to brands and their openness to

change.44 To determine how easily a consumer can be

converted to another choice, the model assesses commitment

based on factors such as consumer attitudes toward, and

satisfaction with, current brand choices in a category and the

importance of the decision to select a brand in the category.


The Conversion Model

Convertible Shallow Average Entrenched

Strongly

unavailableAmbivalent Available

Weakly

unavailable

Users Nonusers

Conversion Model

• Convertible (most likely to defect)

• Shallow (uncommitted to the brand and could switch-some are actively considering alternatives)

• Average (also committed to the brand they are using, but not as strongly-they are unlikely to switch brands in the short term)


Conversion Model

• Entrenched (strongly committed to the brand they are currently using-they are highly unlikely to switch brands in the foreseeable future)


Conversion Model

• The model also classifies nonusers of a brand into four other groups based on their "balance of disposition" and openness to trying the brand, from low to high, as follows:

• Strongly unavailable (unlikely to switch to the brand-their preference lies strongly with their current brands)


Conversion Model

• Weakly unavailable (not available to the brand because their preference lies with their current brand, although not strongly)

• Ambivalent (as attracted to the brand as they are to their current brands. Opposite and confused feeling)

• Available (most likely to be acquired in the short run)



Segmenting for Business Markets

DemographicDemographic

Operating VariableOperating Variable

Purchasing ApproachesPurchasing Approaches

Situational FactorsSituational Factors

PersonalCharacteristics

PersonalCharacteristics


Steps in Segmentation Process

Needs-based segmentation

Segment identification

Segment attractiveness

Segment profitability

Segment positioning

Segment acid test

Marketing-Mix

Strategy


Effective Segmentation Criteria

MeasurableMeasurable

SubstantialSubstantial

AccessibleAccessible

DifferentiableDifferentiable

ActionableActionable

Size, purchasing power, profiles of segments can be measured.

Segments can be effectively reached and served.

Segments are large or profitable enough to serve.

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

ActionableActionable

Segments must respond differently to different marketing mix elements & programs. Effective programs can be designed to attract and serve the segments.



• Measurable. The size, purchasing power, and characteristics of the segments can be measured.

• Substantial. The segments are large and profitable enough to serve. A segment should be the largest possible homogeneous group worth going after with a tailored marketing pro· gram. It would not pay, for example, for an automobile manufacturer to develop cars for people who are less than four feet tall.



• Actionable. Effective programs can be formulated for attracting and serving the segments.



• Accessible. The segments can be effectively reached and served.

• Differentiable. The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs. If married and unmarried women respond similarly to a sale on perfume, they do not constitute separate segments.

• Actionable. Effective programs can be formulated for attracting and serving the segments. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-65

Selecting a number of market segments: Selective SpecializationThere may be little or no synergy

among the segments, but each promises to be a moneymaker

Kotler example:Proctor and Gamble Crest White Strips

Local example:Swish Mouthwash

Medical application:Dermatology Clinic

Concept 9

Serve all customer groups: Full Market Coverage

Firm attempts to serve all customer groups with all the products they might need.

Kotler example:Coca-Cola

Local example:United Laboratories, Incorporated

Medical applicationBig hospitals (The Medical City, St. Luke’s Medical Center, Makati Medical Center)

Concept 10


Figure 8.4 Patterns of Target Market Selection


Crest Whitestrips Follows a Multisegment Strategy


Pepsi used Megamarketing in India


Figure 8.5 Segment-by-Segment Invasion Plan


Marketing Debate

Is mass marketing dead?

Take a position:1. Mass marketing is dead.

or

2. Mass marketing is still a viable way to build a profitable brand.


Marketing Discussion

Think of various product categories. How would you classify yourselfin terms of the various segmentationschemes? How would marketing be more or lesseffective for you depending upon the segment involved?

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