Chapter 7 Segmenting and Chapter 7 Segmenting and Targeting MarketsTargeting Markets

The Importance of The Importance of Market SegmentationMarket 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

Criteria for SegmentationCriteria for Segmentation

SubstantialitySubstantialitySubstantialitySubstantiality

IdentifiabilityIdentifiabilityMeasurabilityMeasurabilityIdentifiabilityIdentifiabilityMeasurabilityMeasurability

AccessibilityAccessibilityAccessibilityAccessibility

ResponsivenessResponsivenessResponsivenessResponsiveness

Segment must be large enough to warrant a special

marketing mix.

Segment must be large enough to warrant a special

marketing mix.

Segments must be identifiable and their size measurable.

Segments must be identifiable and their size measurable.

Members of targeted segments must be reachable with

marketing mix.

Members of targeted segments must be reachable with

marketing mix.Unless segment responds to a marketing mix differently, no separate treatment is needed.

Unless segment responds to a marketing mix differently, no separate treatment is needed.

Bases for SegmentationBases for Segmentation

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

Bases Bases Used toUsed toSegmentSegment

ConsumerConsumerMarketsMarkets

Bases Bases Used toUsed toSegmentSegment

ConsumerConsumerMarketsMarkets

Geographic SegmentationGeographic Segmentation

• Region of the country or world

• Market size

• Market density

• Climate

Bases for Bases for Demographic SegmentationDemographic Segmentation

• Age

• Gender

• Income

• Ethnic background

• Family Life Cycle

Ethnic BackgroundEthnic Background

• Largest ethnic markets are:African-American

Hispanic-American

Asian-American

• Will comprise 1/3 of U.S. population by 2010 with buying power of a trillion dollars

Family Life CycleFamily Life Cycle

AgeAge

MaritalMaritalStatusStatus

ChildrenChildren

Bases for Bases for Psychographic SegmentationPsychographic Segmentation

PsychographicPsychographicSegmentationSegmentation

PsychographicPsychographicSegmentationSegmentation

PersonalityPersonality

MotivesMotives

LifestylesLifestyles

GeodemographicsGeodemographics

Lifestyle SegmentationLifestyle Segmentation

• How time is spent

• Beliefs

• Socioeconomic characteristics

Geodemographic SegmentationGeodemographic Segmentation

Segmenting potential customers

into neighborhood lifestyle

categories.

Combines geographic,

demographic, and lifestyle

segmentation.

Quartiles of County Residents of Asian Descent

CLARTAS’ PRIZM 62 American clusters

Each cluster is a member of 15 social groups arranged by Each cluster is a member of 15 social groups arranged by urbanization density and socio-economic standing.urbanization density and socio-economic standing.

County City

High

$ $

Low

RURAL TOWN 2nd CITY SUBURB URBAN

CLARTAS’ PRIZM 62 American clusters

Each cluster is a member of 15 social groups arranged by Each cluster is a member of 15 social groups arranged by urbanization density and socio-economic standing.urbanization density and socio-economic standing.

01: BLUE BLOOD ESTATES 05: KIDS & CUL-DE-SACS

07: MONEY & BRAINS 09: AMERICAN DREAMS

12: UPWARD BOUND 14: COUNTRY SQUIRES

18: YOUNG INFLUENCIALS 28: BIG CITY BLEND

31: LATINO AMERICA 40: MILITARY QUARTERS

41: SHOTGUNS & PICKUPS 62: HARD SCRABBLE

01: BLUE BLOOD ESTATES 05: KIDS & CUL-DE-SACS

07: MONEY & BRAINS 09: AMERICAN DREAMS

12: UPWARD BOUND 14: COUNTRY SQUIRES

18: YOUNG INFLUENCIALS 28: BIG CITY BLEND

31: LATINO AMERICA 40: MILITARY QUARTERS

41: SHOTGUNS & PICKUPS 62: HARD SCRABBLE

For definitions of each cluster, see http://www.qmsoft.com/solutions/prizm.htm for complete descriptions

To look up a ZIP code use http://www.velocity.claritas.com/YAWYL/Default.wjsp?System=WL

VALS 2 DimensionsVALS 2 Dimensions

Principle-Principle-orientedoriented

Status-Status-orientedoriented

Action-Action-orientedoriented

Fulfillers

Believers

Actualizers

Achievers

Strivers

Strugglers

Experi-encers

Makers

Minimal Resources

Abundant Resources

Benefit SegmentationBenefit Segmentation

The process of grouping

customers into market segments

according to

the benefits they seek

from the product .

Usage-Rate SegmentationUsage-Rate Segmentation

Dividing a market by the amount

of product

bought or consumed.

The 80/20 PrincipleThe 80/20 Principle

A principle holding that

20 percent of all customers

generate 80 percent

of the demand.

Steps in Segmenting a MarketSteps in Segmenting a Market

Select a

market for

study

Choosebases

for segmen-

tation

Selectdescrip-

tors

Profileand

analyzesegments

Selecttarget

markets

Design,imple-ment,

maintainmkting

mix

Strategies for SelectingStrategies for SelectingTarget MarketsTarget Markets

ConcentratedConcentratedStrategyStrategy

UndifferentiatedUndifferentiatedStrategyStrategy

MultisegmentMultisegmentStrategyStrategy

Undifferentiated Undifferentiated Targeting StrategyTargeting Strategy

AdvantagesAdvantages: Potential savings on

production and marketing costs

DisadvantagesDisadvantages: Unimaginative product

offerings Company more

susceptible to competition

Concentrated Concentrated Targeting StrategyTargeting StrategyAdvantagesAdvantages:

Concentration of resources Meets narrowly defined

segment Small firms can compete Strong positioning

DisadvantagesDisadvantages: Segments too small, or

changing Large competitors may market

to niche segment

AdvantagesAdvantages: Greater financial success Economies of scale

DisadvantagesDisadvantages: High costs Cannibalization

Multisegment Multisegment Targeting StrategyTargeting Strategy

Costs of Multisegment TargetingCosts of Multisegment Targeting

$ Product design costs

$ Production costs

$ Promotion costs

$ Inventory costs

$ Marketing research costs

$ Management costs

$ Cannibalization

CannibalizationCannibalization

Situation that occurs when sales

of a new product

cut into sales of a

firm’s existing products.

PositioningPositioning

Developing a specific marketing

mix to influence potential

customers’ overall perception of

a brand, product line, or

organization in general.

Effective PositioningEffective Positioning

• Assess the positions of competing products

• Determine the dimensions of these positions

• Choose an effective market position

Perceptual Mapping--Levi’sPerceptual Mapping--Levi’s

High PriceHigh PriceHigh PriceHigh Price

Low PriceLow PriceLow PriceLow Price

Cla

ssic

Cla

ssic

Cla

ssic

Cla

ssic

Desig

ner

Desig

ner

Desig

ner

Desig

ner

Old product

New product

Vintage

Red Line

Silver Tab

Slates

DockersPremium

DockersClassics

501

Red TabBasics

Red TabDry Goods

L2

Red TabElesco

Positioning BasesPositioning Bases

AttributeAttribute

Price and QualityPrice and Quality

Use or ApplicationUse or Application

Product UserProduct User

Product ClassProduct Class

CompetitorCompetitor

Positioning Positioning BasesBases

Positioning Positioning BasesBases

RepositioningRepositioning

Changing consumers’ perceptions

of a brand

in relation to

competing brands.

Guess Who Owns Theses Brands?Guess Who Owns Theses Brands?What are the segments that each is What are the segments that each is

directed toward?directed toward?

See http://www.gloss.com/interim_flash.html

HighHighHighHighP

RIC

EP

RIC

E

LowLowLowLow

LowLowLowLow HighHighHighHighRichnessRichness

Product Positioning Product Positioning

Why Do Consumers Purchase Technology?Why Do Consumers Purchase Technology?

Neo-hearthminders

MousePotatoes

GadgetGrabbers

Cyber-snobs

X-techs

FastForwards

Techno-strivers

Traditionalists HandshakersMedia

JunkiesCountryClubbers

Sidelined Citizens

Primary MotivationPrimary Motivation

Family Career Entertainment Status

Te

chn

olo

gy

Te

chn

olo

gy p

essi

mis

tsp

essi

mis

ts

Te

chn

olo

gy

T

ech

nol

ogy

opt

imis

tso

ptim

ists

D

isp

osa

ble

Inco

me

Dis

posa

ble

Inco

me

Dis

po

sab

le In

com

e

D

ispo

sab

le In

com

e

L

ow

H

igh

L

ow

H

igh

Source: Forrester Research, Inc.