A Framework for Marketing Management

Chapter 7
Identifying Market Segments and Targets

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Chapter Questions

What are the different levels of market segmentation? How can a company identify the segments that make up a market? How should a company choose the most attractive target markets?

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Target Marketing Requires That Marketers

Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation). Select one or more segments to enter (market targeting). Establish and communicate the offerings distinctive benefit(s) to each target segment (marketing positioning).

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Levels of Market Segmentation

Segment marketing Niche marketing Local marketing Individual marketing

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Segment Marketing

Market segmenta group of customers who share a similar set of needs and wants. Flexible market offeringconsists of:

Naked solution containing the product and service elements that all segment members value. Discretionary options that some members value.

Homogeneous preferencesexist when all consumers have roughly the same preferences. Diffused preferencesconsumers vary greatly in their preferences.
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Niche Marketing

Nichea more narrowly defined customer group seeking a distinctive mix of benefits.

Attractive when:

Customers have a distinct set of needs Fairly small but has size, profit, and growth potential Customers will pay a premium Nicher gains certain economies through specialization

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Local Marketing

Marketing programs tailored to the needs and wants of local customer groups in particular trading areas, neighborhoods, even individual stores. Grassroots marketingconcentrating on getting as close and personally relevant to individual customers as possible.

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Individual Marketing

Leads to:

Segments of one Customized marketing One-to-one marketing

Customerizationcombines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice.
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Bases for Segmenting Consumer Markets

Geographic Demographic Psychographic Behavioral

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Geographic Segmentation

Dividing the market into different geographical units such as:

Nations States Regions Counties Cities Neighborhoods

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Demographic Segmentation

Divide the market into groups based on age and other variables:

Life-cycle stage Life stage Gender Income Generation Social class

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Psychographic Segmentation

Psychographicsthe science of using psychology and demographics to better understand consumers. Buyers divided into groups on the basis of:

Psychological/personality traits Lifestyle Values

VALS Framework
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Behavioral Segmentation

Divide consumers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product.

Behavioral variables: Occasions Benefits User status Buyer-readiness stage Loyalty status Attitude

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Bases for Segmenting Business Markets

Demographic Operating variables Purchasing approaches Situational factors Personal characteristics

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Effective Segmentation Criteria

Measurable Substantial Accessible Differentiable Actionable

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Evaluating and Selecting Market Segments

Must look at two factors:

Segments overall attractiveness Companys objectives and resources

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Patterns of Target Market Selections

Single-segment concentration

Focus on one segment

Select a number of segments

Selective specialization

Product specialization

Specialize in making a certain product for several segments.

Serve many needs of a particular customer group. Serve all customer groups with all the products they might need.
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Market specialization

Full market coverage

Full Market Coverage

Undifferentiated marketingfirm goes after the whole market with one market offering. Differentiated marketingoperate in several market segments and design different programs for each segment.

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Additional Considerations

Segment-by-segment invasions

Enter one segment at a time and avoid letting rivals know what segment(s) will be next. Megamarketingthe strategic coordination of economic, psychological, political, and public relations skills to gain the cooperation of a number of parties in order to enter or operate in a given market.
Concerns over targeting vulnerable or disadvantaged groups with potentially harmful products.

Ethical choice of market targets

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

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