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Chapter Six
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Market Segmentation
Chapter Objectives
• Identify the rationale for using a target marketing
strategy.
• Identify the bases for consumer segmentation.
• Identify the requirements necessary for effective
market segmentation.
• Describe the three targeting strategies used by
companies.
• Describe the six positioning strategies.
The Market
Segmentation
Targeting
Positioning
Market
Segmentation
Why Market
Segmentation?
Consumers are
numerous and
their needs and
wants are too
diverse.
Market Segmentation
• Market segmentation involves identifying consumers who
are similar with regard to key traits, such as product-related
needs and wants, and who would respond well to a similar
marketing mix.
The company can then produce products that meet
the precise needs and wants of target consumers.
Important:
• Segment has to be large enough and stable over time
• Segment has to be “homogenous within, heterogeneous
between”
• Most companies use more than one type of segmentation
Firms categorize potential consumers into segments.
• The three levels of segmentation are Mass marketing,
Segment marketing and Micromarketing.
Bases for Segmentation
- Benefit
- Usage rate
- User status
- Behavioral
- Loyalty status
- Buyer readiness
- Geographic
- Occasion
Consumers
- Psychographic
- Age
- Gender
- Ethnicity
- Income
- Education
- Occupation
- Demographic
Geographic Segmentation
• Segmentation is based on geographic location,
such as region, state, or city.
• Small companies normally focus on markets in
close proximity.
• Often used by retailers
• Often used by small businesses
• Oldest segmentation base*
Demographic Segmentation
• Based on statistics that describe the population,
e.g., age, gender, life-cycle stage, etc.
Reasoning:
– Segments respond differently to different combinations
of the 4 P’s. Therefore, in order to target segments
more efficiently, marketers need to know their
characteristics.
Example:
– Clothing, cosmetics, and hair products are tailored
based on gender and age, as well as income.
• Most popular segmentation base*
Psychographic Segmentation
• Demographics are closely linked to psychographics, which
include lifestyle, values, attitudes, interests, and opinions.
• The VALS2 typology provided by SRI Consulting Business
Intelligence segments consumers psychographically.
Innovators
Thinkers
Achievers
Experiencers
Believers
Strivers
Makers
Survivors
Successful, sophisticated, receptive to new technologies, their purchases reflect
cultivated tastes for upscale products
Educated, conservative, practical consumers who value knowledge and
responsibility, they look for durability, functionality, and value
Goal-oriented, conservative, committed to career and family, they favor
established, prestige products that demonstrate success to peers
Young, enthusiastic, and impulsive, they seek variety and excitement, and spend
substantially on fashion, entertainment, and socializing
Conservative, conventional, and focusing on tradition, family, religion, and
community, they prefer established brands, favoring American products
Trendy, fun loving, they are concerned about others’ opinions and approval
Self-sufficient, they have skill and energy to carry out projects, respect authority,
and are unimpressed by material possessions
Concerned with safety and security, they focus on meeting needs rather than
fulfilling desires, are brand loyal, and purchase discounted products
Behavioral Segmentation
• Benefit segmentation
Based on important differences between the
benefits sought
You need to understand the
consumers’ motivation to send the right signals!
• Usage rate segmentation
Based on the extent to which consumers are
nonusers, occasional users, medium users, and
heavy users
Allocate resources for new
products primarily to heavy users (prime target)
Behavioral Segmentation (cont.)
• User status segmentation
Users of competitors’ products, ex-users, potential users,
first- time users, and regular users
Don’t focus marketing efforts on regular
users only . . . new users can offer great potential.
• Loyalty status segmentation
Degree of brand preference, commitment, retention,
allegiance, and the extent to which consumers engage in
repeat purchase
By consistently providing high quality, a
company can gain valuable customers.
• Buyer-readiness stage segmentation
Based on individuals’ stage of readiness to buy the product
Some consumers might not even be aware of product, some
can’t afford it, others don’t need it, etc.
Behavioral Segmentation (cont.)
• Occasion segmentation
Based on the time or the occasion when the product should be
purchased or consumed
Examples:
– On Halloween, candy is sold in large packages that include
small portions.
– On Valentine’s Day, candy is presented in red and heart
shaped packages.
*Note segmentation for services
Business markets can also be segmented according to
geographic location, behavioral dimensions, buyer
readiness stage, degree of loyalty, and other dimensions.
Requirements for Successful Segmentation
• Measurability:
– The ability to identify segment and to estimate its size
• Substantiality:
– The segment should be large enough that investment will yield a profit.
• Stability:
– The stability of consumer segment preferences over time
• Accessibility:
– The ability of the company to communicate with the target market
• Actionability:
– The ability of the company to design effective programs that can
effectively serve the market
• Differential response:
– The segment should respond differently to strategies than other segments.
Target Marketing Decisions
Differentiated
Concentrated
Undifferentiated
Positioning the Brand
• Positioning entails placing the brand in the consumer’s
mind in relation to other competing products.
• Positioning entails:
– Identifying competitors
– Determining how the competitors are perceived and evaluated by target
consumers
– Determining the competitors’
positions in the consumers’ mind
– Analyzing the customers
– Selecting the position
– Monitoring position
Attribute/Benefit Positioning
• Attribute/Benefit Positioning
Benefit 1
Attribute 1
Consumers’ perceived
position of product relative
to competitors’ product
Positioning by Perceptions and Preferences
Positioning the Brand (cont.)
Additional Positioning Strategies
• Price/Quality Positioning
• Use or Application
Positioning
• Product User Positioning
• Product Class Positioning
• Competitor Positioning
Source: Courtesy of Bozell Worldwide, Inc. as agent
for the National Fluid Milk Processor Promotion Board.