KEY CONCEPTS

Identifying Market Segments and Targets

Segmentation-Targeting-Positioning (STP)

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 offering’s distinctive benefit(s) to each target segment (marketing positioning).

Levels of Market Segmentation

Segment marketingNiche marketingLocal marketingIndividual marketing

Segment Marketing

Market segment—a group of customers who share a similar set of needs and wants.

Homogeneous preferences—exist when all consumers have roughly the same preferences.

Diffused preferences—consumers vary greatly in their preferences.

Niche Marketing

Niche—a 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

Local Marketing

Marketing programs tailored to the needs and wants of local customer groups in particular trading areas, neighborhoods, even individual stores.

Grassroots marketing—concentrating on getting as close and personally relevant to individual customers as possible.

Individual Marketing

Leads to: “Segments of one” “Customized marketing” “One-to-one marketing”

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.

Bases for Segmenting Consumer Markets

Geographic

Demographic

Psychographic

Behavioral

Geographic Segmentation

Dividing the market into different geographical units such as:

Nations States Regions Counties Cities Neighborhoods

Demographic Segmentation

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

Life-cycle stage Life stage Gender Income Generation Social class

Psychographic Segmentation

Psychographics—the science of using psychology and demographics to better understand consumers.

Buyers divided into groups on the basis of: Psychological/personality traits Lifestyle Values

Behavioral Segmentation

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

Behavioral variables:OccasionsBenefitsUser statusBuyer-readiness stage

Loyalty statusAttitude

DEMOGRAPHIC

OPERATING VARIABLES

PURCHASING APPROACHES

SITUATIONAL FACTORSPERSONAL CHARACTERISTICS

Bases for Segmenting Business Markets

Effective Segmentation Criteria

Measurable

Substantial

Accessible

Differentiable

Actionable

Evaluating and Selecting Market Segments

Must look at two factors:

Segment’s overall attractiveness

Company’s objectives and resources

Patterns of Target Market Selections

Single-segment concentration Focus on one segment

Selective specialization Select a number of segments

Product specialization Specialize in making a certain product for several segments.

Market specialization Serve many needs of a particular customer group.

Full market coverage Serve all customer groups with all the products they might

Full Market Coverage

Undifferentiated marketing—firm goes after the whole market with one market offering.

Differentiated marketing—operate in several market segments and design different programs for each segment.