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Market Segments and Targets
CH07
Copyright © 2003 Prentice-Hall, Inc.
Copyright © 2003 Prentice-Hall, Inc.
Target Marketing
 Target marketing requires marketers to take three major steps:
 Identify and profile distinct groups of buyers who differ in their needs
and preferences (market segmentation)
 Select one or more market segments to enter (market targeting)
 For each target segment, establish and communicate the key
distinctive benefit(s) of the company’s market offering (market
positioning)
Copyright © 2003 Prentice-Hall, Inc.
Market Segmentation
Market segmentation is the
division of a market into distinct
groups of buyers who have distinct
needs, characteristics, or behaviour
and who might require separate
products or marketing mixes
Market segment is a group of
consumers who respond in a similar
way to a given set of marketing
efforts
Geographic
segmentation
Demographic
segmentation
Psychographic
segmentation
Behavioral
segmentation
Copyright © 2003 Prentice-Hall, Inc.
Market Segmentation
 Geographic segmentation divides the market into different
geographical units such as nations, regions, states, counties, or cities
 Demographic segmentation divides the market into groups based on
variables such as age, gender, family size, family life cycle, income,
occupation, education, religion, race, generation, and nationality
 Psychographic segmentation divides buyers into different groups
based on social class, lifestyle, or personality traits
 Behavioral segmentation divides buyers into groups based on their
knowledge, attitudes, uses, or responses to a product
Copyright © 2003 Prentice-Hall, Inc.
Steps in Segmentation Process
Description
1. Needs-Based
Segmentation
Group customers into segments based on similar
needs and benefits sought by customer in solving a
particular consumption problem.
2. Segment Identification
For each needs-based segment, determine which
demographics, lifestyles, and usage behaviors make
the segment distinct and identifiable (actionable).
3. Segment
Attractiveness
Using predetermined segment attractiveness criteria
(such as market growth, competitive intensity, and
market access), determine the overall attractiveness
of each segment.
4. Segment Profitability
Determine segment profitability.
5. Segment Positioning
For each segment, create a “value proposition” and
product-price positioning strategy based on that
segment’s unique customer needs and
characteristics.
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Market Segmentation
Requirements for Effective Segmentation
 To be useful, market segments must be:
Measurable
Accessible
Differentiable
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Substantial
Actionable
Major Segmentation Variables
for Business Markets
Demographic
1. Industry: Which industries should we serve?
2.
Company size: What size companies should we serve?
3.
Location: What geographical areas should we serve?
Operating Variables
4.
Technology: What customer technologies should we focus on?
5. User or nonuser status: Should we serve heavy users, medium users, light
users, or nonusers?
6.
Customer capabilities: Should we serve customers needing many or few
services?
Purchasing Approaches
7. Purchasing-function organization: Should we serve companies with highly
centralized or decentralized purchasing organizations?
8.
Power structure: Should we serve companies that are engineering
dominated, financially dominated, and so on?
Copyright © 2003 Prentice-Hall, Inc.
Market Targeting
Copyright © 2003 Prentice-Hall, Inc.
Market Targeting
Market targeting is the process of evaluating each market segment’s
attractiveness and selecting one or more segments to enter
• Undifferentiated marketing targets the whole market with one offer
• Differentiated marketing targets several different market segments and
designs separate offers for each
• Concentrated marketing targets a small share of a large market
• Micromarketing is the practice of tailoring products and marketing
programs to suit the tastes of specific individuals and locations
Copyright © 2003 Prentice-Hall, Inc.
Differentiation and Positioning
Product position is the way the
product is defined by consumers on
important attributes —the place the
product occupies in consumers’
minds relative to competing products

Perceptions

Impressions

Feelings
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Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy
 Identifying a set of possible competitive advantages to build a position
 Choosing the right competitive advantages
 Selecting an overall positioning strategy
 Developing a positioning statement
 Build on Points-of-Difference and Points-of- Parity
Copyright © 2003 Prentice-Hall, Inc.
Differentiation and Positioning
• There are two important concepts when it comes to positioning: points
of parity and points of difference.
• When a brand establishes a frame of reference, or competitive set,
there are obvious points of parity. These are features and benefits
offered by basically everyone. They do not differentiate, but a brand
that falls short on these dimensions will surely be hurt. For example, all
small cars have four wheels, a steering wheel, lights and pretty good
gas mileage. These are all points of parity.
• Points of difference are the things that help a brand stand out. These
are the factors that drive purchase. Small cars are all pretty similar but
the Mini Cooper is uniquely sporty and fun to drive.
Copyright © 2003 Prentice-Hall, Inc.
Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy
Identifying a set of possible competitive
advantages to build a position by providing
superior value from:
Product differentiation
Service differentiation
Channel differentiation
People differentiation
Image differentiation
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Adding Further Differentiation

Exceed customer expectations with a three-step process
1.
2.
3.
Defining the customer value model
Building the customer value hierarchy
Deciding on the customer value package
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Marketing Mix & an Integrated
Marketing Program
The marketing mix is the set of tools
(four Ps) the firm uses to implement its
marketing strategy. It includes product,
price, promotion, and place.
Integrated marketing program is a
comprehensive plan that communicates
and delivers the intended value to
chosen customers.
Copyright © 2003 Prentice-Hall, Inc.