Segmenting and Targeting

Markets

A Market is...
(1)

people or organizations with

(2)

needs or wants, and with

(3)

the ability and

(4)

the willingness to buy.

A group of people that lacks any one of

these characteristics is not a market.
2

What is Market
Segmentation?
The breaking down or building up
of potential buyers into groups
called
Market Segments

4-3

Benefits of
Market Segmentation
1. Identifies opportunities for
new product development
2. Helps design marketing
programs most effective for
reaching homogenous groups
of buyers
3. Improves allocation of
marketing resources
4-4

Market Segmentation
Variables
Socioeconomic

Behavioral

Market
Segmentation
Variables
Psychographic

Benefits Sought

Fundamental-Buyer
Related Questions
Who are they?
What do they want to buy?
How do they want to buy?
When do they want to buy?
Where do they want to buy?
Why do they want to buy?
4-6

Market Segmentation
Market
Market

People
People or
or organizations
organizations with
with
needs
needs or
or wants
wants and
and the
the ability
ability and
and
willingness
willingness to
to buy
buy

Market
Market
Segment
Segment

A
A subgroup
subgroup of
of people
people or
or
organizations
organizations sharing
sharing one
one or
or more
more
characteristics
characteristics that
that cause
cause them
them to
to
have
have similar
similar product
product needs.
needs.

Market
Market
Segmentation
Segmentation

The
The process
process of
of dividing
dividing aa market
market
into
into meaningful,
meaningful, relatively
relatively similar,
similar,
identifiable
identifiable segments
segments or
or groups.
groups.
7

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
8

Criteria for Successful

Segmentation
Substantiality
Substantiality

Identifiability
Identifiability

Criteria
Criteria
for
for
Market
Market
Segments
Segments

Accessibility
Accessibility

Responsiveness
Responsiveness

Criteria for Segmentation

Substantiality
Substantiality

Segment
Segment must
must be
be large
large
enough
enough to
to warrant
warrant aa special
special
marketing
marketing mix.
mix.

Identifiability
Identifiability
Measurability
Measurability

Segments
Segments must
must be
be identifiable
identifiable
and
and their
their size
size measurable.
measurable.

Members
Members of
of targeted
targeted segments
segments
Accessibility
must
Accessibility
must be
be reachable
reachable with
with
marketing
marketing mix.
mix.
Unless
Unless segment
segment responds
responds to
to aa
Responsiveness
Responsiveness marketing
marketing mix
mix differently,
differently, no
no
separate
separate treatment
treatment is
is needed.
needed.
10

EPBM X-MM- Session 4

11

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

12

Bases for Segmentation

Geography
Geography

Bases
Bases
Used
Used to
to
Segment
Segment
Consumer
Consumer
Markets
Markets

Demographics
Demographics
Psychographics
Psychographics
Benefits
Benefits Sought
Sought
Usage
Usage Rate
Rate
13

Geographic Segmentation
Region of the country or world
Market size
Market density
Climate

14

Bases for Segmentation

Geography
Geography

Bases
Bases
Used
Used to
to
Segment
Segment
Consumer
Consumer
Markets
Markets

Demographics
Demographics
Psychographics
Psychographics
Benefits
Benefits Sought
Sought
Usage
Usage Rate
Rate
15

Bases for
Demographic Segmentation
Age
Gender
Income
Ethnic background
Family Life Cycle
16

Bases for Segmentation

Geography
Geography

Bases
Bases
Used
Used to
to
Segment
Segment
Consumer
Consumer
Markets
Markets

Demographics
Demographics
Psychographics
Psychographics
Benefits
Benefits Sought
Sought
Usage
Usage Rate
Rate
17

Bases for
Psychographic Segmentation
Personality
Personality
Motives
Motives
Lifestyles
Lifestyles
Psychographic
Psychographic
Segmentation
Segmentation

Geodemographics
Geodemographics
18

Psychographic Segmentation
Divides Buyers Into Different Groups
Based on:

19

Behavioral Segmentation
Dividing the market into groups
based on variables such as:
Occasions
Benefits
User status
Usage rate
Loyalty status
Readiness stage
Attitude toward product
Marketing for Hospitality and Tourism, 3e
Philip Kotler, John Bowen, James Makens

2003 Pearson Education, Inc.

Upper Saddle River, NJ 07458

20

Geodemographic
Segmentation
Segmenting potential
customers into
neighborhood lifestyle
categories.
Combines geographic,
demographic, and lifestyle
segmentation.
21

VALS 2 Dimensions
Abundant Resources

Principleoriented

Statusoriented

Actionoriented

Actualizers

Minimal Resources

Fulfillers

Achievers

Experiencers

Believers

Strivers

Makers

Strugglers
22

Bases for Segmentation

Geography
Geography

Bases
Bases
Used
Used to
to
Segment
Segment
Consumer
Consumer
Markets
Markets

Demographics
Demographics
Psychographics
Psychographics
Benefits
Benefits Sought
Sought
Usage
Usage Rate
Rate
23

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

24

Benefit Segmentation of the

Toothpaste Market (an example)
Benefit
Demographics Behavioristics Favored brands
segments
Economy
(Low Price)

Men

Heavy users

Babool,
ColgateTooth-powder

Medicinal
(Decay
Prevention)

Large families

Heavy users

Promise,
Colgate Total/ Flouriguard

Taste

Children

Spearmint lovers

Colgate Regular,
Promise - Just for kids

Cosmetic
(Bright teeth)

Teens,
Young adults

Smokers

EPBM X-MM- Session 4

Close up,
Colgate-Gel
25

Bases for Segmentation

Geography
Geography

Bases
Bases
Used
Used to
to
Segment
Segment
Consumer
Consumer
Markets
Markets

Demographics
Demographics
Psychographics
Psychographics
Benefits
Benefits Sought
Sought
Usage
Usage Rate
Rate
26

Usage-Rate Segmentation

Dividing a market by the

amount of product
bought or consumed.

27

Segmentation
Rest of
India

Age

Occasi
onal

Sex

Regula
r

West
>3
South
5
2535

Consum
ption

15-25

Geograp
hical

Female

Ma
le

The Auto Industry

Current Scenario
India represents one of the largest two-wheeler
markets in the world, with an estimated size of
5.4 million units a year.
India is the two-wheeler capital of Asia with an
average of 27 two-wheelers per thousand people,
compared to China's 8 two-wheelers per thousand
people.
India became the fastest growing car market in
the world in 2004, growth rate of 20%.

Segmentation by price
Under Rs. 3 Lakhs

Maruti 800, Alto, Omni

Reva

Rs. 3-5 Lakhs

Ambassador
Fiat Palio
Hyundai Santro, Getz
Chevrolet Opel Corsa
Maruti Zen, Wagon R, Versa, Esteem, Gypsy
Ford Icon & Fiesta
Tata Indica, Indigo
Mahindra Bolero

Rs. 5-10 Lakhs

Chevrolet Swing, Optra, Tavera

Hyundai Accent, Elantra
Mahindra Scorpio
Maruti Baleno
Toyota Corolla, Innova
Tata Safari
Mitsubishi Lancer, Lancer Cedia
Honda City

Rs. 10-15 Lakhs

Ford Mondeo & Endeavour

Chevrolet Forester
Skoda Octavia Classic & Combi
Honda Civic & CR-V
Chapter 7 Version 6e

30

Segmentation by price

Rs. 15-30 Lakh

Maruti Suzuki Grand Vitara

Hyundai Sonata Embera, Terracan & Tucson
Mitsubishi Pajero
Audi A4
Opel Vectra
Honda Accord
Mercedes C Class
Toyota Camry

Rs. 30-90 Lakhs

Audi A6, A8 & TT

BMW X5, 5 Series & 7 Series
Mercedes E Class, S Class, SLK, SL & CLS-Class
Porsche Boxster, Cayenne, 911 Carrera & Cayman S
Toyota Prado

Above Rs. 1 Crore

Bentley Arnage, Continental GT & Flying Spur

Rolls Royce Phantom
Maybach

Chapter 7 Version 6e

31

Chapter 7 Version 6e

32

The product market

segmentation

Chapter 7 Version 6e

33

The 80/20 Principle

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

38

Business Marketing
Segmentation
Geographic

MacroMacrosegmentation
segmentation

Customer Type
Customer Size
Product Use

Business
Business
Markets
Markets

Purchasing Criteria

MicroMicrosegmentation
segmentation

Purchasing Strategy
Importance
Personal
Characteristics

39

Steps in Segmenting a
Market
Select
a
market
for
study

Choose
bases
for
segmentation

Select
descriptors

Profile
and
analyze
segments

Select
target
markets

Design,
implement,
maintain
mkting
mix

40

Target Market
A group of people or
organizations for which an
organization designs,
implements, and maintains
a marketing mix intended to
meet the needs of that
group, resulting in mutually
satisfying exchanges.
41

Strategies for Selecting

Target Markets

Undifferentiated Concentrated
Strategy
Strategy

Multisegment
Strategy
42

Undifferentiated
Targeting Strategy
Advantages:

Potential savings on
production and marketing
costs

Disadvantages:
Disadvantages

Unimaginative product
offerings
Company more
susceptible to competition

43

Concentrated
Targeting Strategy
Advantages:
Advantages

Concentration of resources
Meets narrowly defined
segment
Small firms can compete
Strong positioning

Disadvantages:
Disadvantages

Segments too small, or

changing
Large competitors may market
to niche segment
44

Multisegment
Targeting Strategy
Advantages:
Advantages

Greater financial success

Economies of scale

Disadvantages:
Disadvantages

High costs
Cannibalization

45

Costs of Multisegment
Targeting
$
$
$
$
$
$
$

Product design costs

Production costs
Promotion costs
Inventory costs
Marketing research costs
Management costs
Cannibalization
46

Cannibalization
Situation that occurs when
sales of a new product
cut into sales of a
firms existing products.

47

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

48

Position
The place a product, brand,
or group of products
occupies in consumers
minds relative to competing
offerings.

49

Effective Positioning
Assess the positions of
competing products
Determine the dimensions of
these positions
Choose an effective market
position
50

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

51

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

52

Perceptual Mapping--Levis
High Price

Vintage
Red Line

Slates

Classic

Red Tab
Dry Goods

501
Dockers
Classics

Red Tab
Basics

L2

Designer

Dockers
Premium

Red Tab
Elesco
Silver Tab

Old product

Low Price

New product
53

Positioning Bases
Attribute
Attribute
Price
Price and
and Quality
Quality
Use
Use or
or Application
Application
Product
Product User
User

Positioning
Positioning
Bases
Bases

Product
Product Class
Class
Competitor
Competitor
54

Repositioning
Changing consumers
perceptions of a brand
in relation to
competing brands.

55