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CHAPTER
IDENTIFYING
MARKET
SEGMENTS
AND TARGETS
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-2
SNEAKERS MARKETING WARS:
HIP-HOP, YAO MING, AND
THREE BILLION TRILLION CHOICES
• New Segments
and Strategies
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-5
SNEAKERS MARKETING WARS:
HIP-HOP, YAO MING, AND
THREE BILLION TRILLION CHOICES
• Competitive Trends
 Age Segments
 Gender Segments
 Price Segments
 Sport Segments
 Lifestyle Segments
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-6
WHY SEGMENT MARKETS?
• What Market Segmentation Means
 Market Segments
 Product Differentiation
 Segmentation: Linking Needs to Actions
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-7
FIGURE 9-1 Market segmentation—linking
market needs to an organization’s marketing
program
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-8
WHY SEGMENT MARKETS?
• What Market Segmentation Means
 How Reebok’s Segmentation Strategy
Developed
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-9
FIGURE 9-2 Market-product grid showing
how different Reebok shoes reach segments
of customers with different needs
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-10
FIGURE 9-A Benefits (+) and drawbacks (-)
of a firm’s market-product strategies
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-12
WHY SEGMENT MARKETS?
• When to Segment Markets
 One Product and Multiple Market Segments
 Multiple Product and Multiple Market
Segments
 Segments of One: Mass Customization
• Build-to-Order (BTO)
• Synergy
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-14
FIGURE 9-3 The five key steps in
segmenting and targeting markets link
market needs of customers to the
organization’s marketing program
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-20
STEPS IN SEGMENTING AND
TARGETING MARKETS
• Step 1: Group Potential Buyers into
Segments
 Criteria to Use in Forming the Segments
• Potential for Increased Profit
• Similarity of Needs of Buyers within a Segment
• Difference of Needs of Buyers Among Segments
• Potential of a Marketing Action to Reach a Segment
• Simplicity and Cost of Assigning Buyers to Segments
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-21
STEPS IN SEGMENTING AND
TARGETING MARKETS
• Step 1: Group Potential Buyers into
Segments
 Ways to Segment Consumer Markets
• Customer Characteristics
 Geographic: Region
 Demographic: Household
 Psychographic: Lifestyle
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-22
STEPS IN SEGMENTING AND
TARGETING MARKETS
• Step 1: Group Potential Buyers into
Segments
 Ways to Segment Consumer Markets
• Buying Situations
 Benefits Sought: Product Features
 Patronage: Usage Rate
• Frequency Marketing
• 80/20 Rule
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-23
FIGURE 9-4 Segmentation variables and
breakdowns for U.S. consumer markets
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-24
FIGURE 9-5 Patronage of fast-food
restaurants by adults 18 years and older:
Simmons Market Research Bureau
NCS/NHCS Spring 2004 Adult Full-Year
Choices System Crosstabulation Report
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-26
FIGURE 9-6 Comparison of various kinds
of users and nonusers for Wendy’s,
Burger King, and McDonald’s fast-food
restaurants
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-27
STEPS IN SEGMENTING AND
TARGETING MARKETS
• Step 1: Group Potential Buyers into
Segments
 Variables to use in Forming Segments
for Wendy’s
• Students in Dorms
• Faculty/Staff
• Students in Apartments
• People Living in Area
• Day Commuters
• People Working in Area
• Night Commuters
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-28
STEPS IN SEGMENTING AND
TARGETING MARKETS
• Step 1: Group Potential Buyers into
Segments
 Ways to Segment Organizational Markets
• Customer Characteristics
 Geographic: Statistical Area
 Demographic: NAICS Code
 Demographic: Number of Employees
 Benefits Sought: Product Features
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-29
FIGURE 9-7 Segmentation variables and
breakdowns for U.S. organizational markets
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-30
Xerox Phaser 8400 Printer
What variables are used to
segment organizational markets?
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-31
Concept Check
1. The process of segmenting and
targeting markets is a bridge between
what two marketing activities?
A: identifying market needs and taking
marketing actions
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-32
Concept Check
2. What are two main ways to segment
consumer and organizational
markets?
A: customer characteristics and buying
situations
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-33
STEPS IN SEGMENTING AND
TARGETING MARKETS
• Step 2: Group Products to be Sold into
Categories
• Step 3: Develop a Market-Product Grid
and Estimate Size of Markets
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-34
STEPS IN SEGMENTING AND
TARGETING MARKETS
• Step 4: Select Target Markets
 Criteria to Use in Picking the Target Segments
• Market Size
• Cost of Reaching Segment
• Compatibility with the
Organization’s Objectives
• Competitive Position
and Resources
• Expected Growth
 Choose the Segments
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-35
FIGURE 9-8 Selecting a target market for
your Wendy’s fast-food restaurant next to an
urban university (target market is shaded)
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-36
STEPS IN SEGMENTING AND
TARGETING MARKETS
• Step 5: Take Marketing Actions to Reach
Target Markets
 Your Wendy’s Segmentation Strategy
• Day Commuters
• Between-Meal Snacks
• Dinner to Night Students
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-37
FIGURE 9-9 Advertising actions to reach
specific student segments
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-39
STEPS IN SEGMENTING AND
TARGETING MARKETS
• Step 5: Take Marketing Actions to Reach
Target Markets
 Apple’s Ever-Changing Segmentation
Strategy
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-40
MARKETING NEWSNET
Apple’s Segmentation Strategy—
Camp Runamok No Longer
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-43
STEPS IN SEGMENTING AND
TARGETING MARKETS
• Market-Product Synergies: A Balancing
Act
 Marketing Synergies
 Product Synergies
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-44
POSITIONING THE PRODUCT
• Product Positioning
• Product Repositioning
• Two Approaches to Product Positioning
 Head-to-Head Positioning
 Differentiation Positioning
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-48
POSITIONING THE PRODUCT
• Product Positioning Using Perceptual
Maps
 Identify Important Attributes for a
Product Class
 Judgments of Existing Brands on These
Important Attributes
 Ratings of an “Ideal” Brand’s Attributes
 Perceptual Map
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-49
FIGURE 9-10 Using positioning and
perceptual maps to increase milk sales to
children and adults
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-51
POSITIONING THE PRODUCT
• Product Positioning Using Perceptual
Maps
 Positioning Milk Drinks for Children
• Finding a Position for Milk Drinks
• Developing the Product and Flavors
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-52
POSITIONING THE PRODUCT
• Product Positioning Using Perceptual
Maps
 Repositioning Chocolate Milk for Adults
• Finding a New Position for Chocolate Milk
in the Minds of Adults
• Packaging “Adult” Chocolate Milk
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-53
FIGURE 9-11 Strategies for positioning dairy
drinks for kids and repositioning chocolate
milk to reach adults
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-54
SALES FORECASTING TECHNIQUES
• Market Potential or Industry Potential
• Sales Forecast or Company Forecast
• Judgments of the Decision Maker
 Direct Forecast
 Lost-Horse Forecast
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-55
SALES FORECASTING TECHNIQUES
• Surveys of Knowledgeable Groups
 Survey of Buyers’ Intentions Forecast
 Salesforce Survey Forecast
• Statistical Methods
 Trend Extrapolation
 Linear Trend Extrapolation
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-57
FIGURE 9-12 Linear trend extrapolation of
sales revenues of Xerox, made at the start of
2000
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-58
Product Differentiation
Product differentiation is a strategy
that involves a firm’s using different
marketing mix activities to help
consumers perceive the product as
being different and better than
competing products.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-91
Market-Product Grid
A market-product grid is a framework
to relate the market segments of potential
buyers to products offered or potential
marketing actions by the firm.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-92
Synergy
Synergy is the increased customer value
achieved through performing
organizational functions more efficiently.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-93
Usage Rate
Usage rate is the quantity consumed or
patronage (store visits) during a specific
period of time.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-94
80/20 Rule
The 80/20 rule is a concept that suggests
80 percent of a firm’s sales are obtained
from 20 percent of its customers.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-95
Product Positioning
Product positioning refers to the place
an offering occupies in consumers’ minds
on important attributes relative to
competitive products.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-96
Product Repositioning
Product repositioning involves
changing the place an offering
occupies in a consumer’s mind
relative to competitive products.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-97
Perceptual Map
A perceptual map is a means of
displaying or graphing in two dimensions
the location of products or brands in the
minds of consumers to enable a manager
to see how consumers perceive competing
products or brands relative to its own and
then take marketing actions.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-98
Market Potential
Market potential is the maximum total
sales of a product by all firms to a
segment during a specified time period
under specified environmental conditions
and marketing efforts of the firm. Also
called industry potential.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-99
Industry Potential
Industry potential is the maximum total
sales of a product by all firms to a
segment during a specified time period
under specified environmental conditions
and marketing efforts of the firm. Also
called market potential.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-100
Sales Forecast
A sales forecast refers to the total sales of
a product that a firm expects to sell during
a specified time period under specified
environmental conditions and its own
marketing efforts. Also called company
forecast.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-101
Company Forecast
A company forecast refers to the total
sales of a product that a firm expects to
sell during a specified time period under
specified environmental conditions and its
own marketing efforts. Also called sales
forecast.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-102
Direct Forecast
A direct forecast involves estimating the
value to be forecast without any
intervening steps.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-103
Lost-Horse Forecast
A lost-horse forecast involves making a
forecast using the last known value and
modifying it according to positive or
negative factors expected in the future.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-104
Survey of
Buyers’ Intentions Forecast
A survey of buyers’ intentions forecast
involves asking prospective customers if
they are likely to buy the product during
some future time period.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-105
Salesforce Survey Forecast
A salesforce survey forecast involves
asking the firm’s salespeople to estimate
sales during a coming period.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-106
Trend Extrapolation
Trend extrapolation involves extending
a pattern observed in past data into the
future.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-107
Linear Trend Extrapolation
Linear trend extrapolation involves
using a straight line to extend a pattern
observed in past data into the future.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Slide 9-108