Identifying Market Segments
and Targets
Marketing Management, 13th ed
8
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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?
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Baby Boomers: A Lucrative Market
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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
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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
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Four levels of Micromarketing
Segments
Local areas Individuals
Niches
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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
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Gather.com: A Niche Social Networking Site
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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
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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
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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
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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
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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
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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.
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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
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Demographic Segmentation
Age and Life CycleAge and Life Cycle
Life StageLife Stage
GenderGender
IncomeIncome
GenerationGeneration
Social ClassSocial Class
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Claritas’ Prizm(Potential Rating Index by Zip Markets
• Education and affluence
• Urbanization
• Race and ethnicity
• Mobility
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Claritas’ Prizm(Potential Rating Index by Zip Markets
• 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.
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Claritas’ Prizm(Potential Rating Index by Zip Markets
• 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,.
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Claritas’ Prizm(Potential Rating Index by Zip Markets
• 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:
Demographic Segmentation
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. \
Demographic Segmentation
• • 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.
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Toyota Scion Targets Gen Y Consumers
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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
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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
Behavioral Segmentation
• 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.
Behavioral Segmentation
• 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
Behavioral Segmentation
• 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.
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• 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
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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.
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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.
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Behavioral Segmentation
Decision Roles
• Initiator
• Influencer
• Decider
• Buyer
• User
Behavioral Variables
• Occasions
• Benefits
• User Status
• Usage Rate
• Buyer-Readiness
• Loyalty Status
• Attitude
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The Brand Funnel Illustrates Variations in the
Buyer-Readiness Stage
• Aware
• Ever tried
• Recent trial
• Occasional user
• Regular user
• Most often used
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Loyalty Status
Switchers
Shifting loyals
Split loyals
Hard-core
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Figure 8.3 Behavioral Segmentation Breakdown
Conversion Model
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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.
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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)
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Conversion Model
• Entrenched (strongly committed to the brand they are currently using-they are highly unlikely to switch brands in the foreseeable future)
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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)
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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)
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Segmenting for Business Markets
DemographicDemographic
Operating VariableOperating Variable
Purchasing ApproachesPurchasing Approaches
Situational FactorsSituational Factors
PersonalCharacteristics
PersonalCharacteristics
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Steps in Segmentation Process
Needs-based segmentation
Segment identification
Segment attractiveness
Segment profitability
Segment positioning
Segment acid test
Marketing-Mix
Strategy
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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.
Effective Segmentation Criteria
Effective Segmentation Criteria
• 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.
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Effective Segmentation Criteria
• Actionable. Effective programs can be formulated for attracting and serving the segments.
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Effective Segmentation Criteria
• 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
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Figure 8.4 Patterns of Target Market Selection
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Figure 8.4 Patterns of Target Market Selection
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Crest Whitestrips Follows a Multisegment Strategy
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Pepsi used Megamarketing in India
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Figure 8.4 Patterns of Target Market Selection
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Figure 8.5 Segment-by-Segment Invasion Plan
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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.
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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?