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Chapter 9
Market
Segmentation,
Targeting, and
Positioning
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Chapter Objectives
1. Identify the essential components of a market.
2. Outline the role of market segmentation in developing a
marketing strategy.
3. Describe the criteria necessary for effective
segmentation.
4. Explain each of the four bases for segmenting consumer
markets.
5. Identify the steps in the market segmentation process.
6. Discuss four basic strategies for reaching target
markets.
7. Summarize the types of positioning strategies.
8. Explain the reasons for positioning and repositioning
products.
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
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Selecting a Target Market
 Before a marketing mix strategy can be
implemented, the marketer must identify,
evaluate, and select a target market.
Market: people or institutions with
sufficient purchasing power, authority,
and willingness to buy
Target market: specific segment of
consumers most likely to purchase a
particular product
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Types of Markets
 Consumer products: goods or services
purchased by an ultimate consumer for
personal use
 Business products: goods or services
purchased for use either directly or
indirectly in the production of other goods
and services for resale
 The key to classification is to identify the
purchaser and the reasons for buying the
goods.
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The Role of Market Segmentation
 Market Segmentation
Division of the total market into smaller,
relatively homogeneous groups
 No single marketing mix can satisfy
everyone. Therefore, separate marketing
mixes should be used for different
market segments.
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Criteria for Effective Segmentation
 The market segments must be
measurable in terms of both purchasing
power and size.
 Marketers must be able to effectively
promote to and serve a market segment.
 Market segments must be sufficiently
large to be potentially profitable.
 The number of segments must match the
firm’s capabilities.
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Segmenting Consumer Markets
 Geographic Segmentation: Dividing
an overall market into homogeneous
groups on the basis of their locations
Urban Data Classified
Core Based Statistical Area (CBSA)
Metropolitan Statistical Area (MSA)
Micropolitan Statistical Area
Consolidated Metropolitan
Statistical Area (CMSA)
Primary Metropolitan Statistical
Area (PMSA)
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 Using Geographic Segmentation
Demand for some goods and services can
vary according to the geographic region
Most major brands get 40-80 percent of
their sales from what are called core
regions
Climate is another important factor
 Geographic Information Service (GIS):
computer technology that records several
layers of data on a single map
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9-8
 Demographic Segmentation:
dividing consumer groups according
to characteristics such as sex, age,
income, occupation, education,
household size, and stage in the
family life cycle
U.S. Census Bureau
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 Segmenting by Gender
Marketers must ensure that
traditional assumptions are not
false
Recently, the lines have
increasingly blurred
Some companies market
successfully to both genders
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 Segmenting by Age
Identify market segments on the
basis of age
Products designed to meet the
specific needs of certain age
groups
 Tweens and Teens
Rapidly growing market
Significant purchasing power
Cohert Effect
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 Baby Boomers
Born from 1946 until 1965.
Nearly 42 percent of U.S. adults
Values influenced both by the Vietnam War
and the career-driven era
Huge disposable income
 Seniors
By 2025, 1 in 5 over age 65
Life expectancy: 74 for men; 79 for women
Heads of households aged 55-plus control
about three-quarters of the country’s total
financial assets.
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 Segmenting by Ethnic Group
By 2050, nearly half of the population
of the US will belong to nonwhite
minority groups
Hispanic
African Americans
Asian Americans
Native Americans
People of Mixed Race
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 Family Life Cycle Stages Segmentation
The process of family formation and
dissolution
Life stage, not age per se, is the primary
determinant of many consumer purchases
 Segmenting by Household Type
Today’s U.S. households are very diverse
Married couples and their children
Blended by divorce or loss of spouse
Headed by single parent, same-sex
parents, grandparents
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 Segmenting by Income and Expenditure
Patterns
Engel’s Laws, as family income increases:
A smaller percentage of expenditures go
for food
The percentage spent on housing and
household operations and clothing
remains constant
The percentage spent on other items
(such as recreation and education)
increases
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 Demographic Segmentation Abroad
 Obtaining the data necessary for
global demographic segmentation
is often difficult
 Many countries do not operate
regularly scheduled census
programs
 Daily life cycle data is difficult to
apply in global demographic
segmentation efforts
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 Psychographic Segmentation
Divides a population into groups
that have similar psychological
characteristics, values, and
lifestyles
Lifestyle: people’s decisions about
how to live their daily lives,
including family, job, social, and
consumer activities
AIO statements
VALS and VALS 2
“Values and Lifestyles”
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 Psychographic Segmentation of
Global Markets
Roper Starch found six psychographic
consumer segments that are common
to 35 nations
Strivers
Devouts
Altruists
Intimates
Fun seekers
Creatives
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 Using Psychographic Segmentation
Produce rich descriptions of potential
target markets
Aids in matching company’s image
and its offerings with the types of
consumers who are likely purchasers
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 Product-Related Segmentation
Dividing a consumer population into
homogeneous groups based on
characteristics of their relationships to the
product
Can take the form of segmenting based on:
Benefits that people seek when they buy
Usage rates for a product
Consumers’ brand loyalty toward a
product
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 Using Multiple Segmentation Bases
Increase accuracy in reaching the right
markets
Combine multiple bases
Geographic and Demographic
Product-related with income and
expenditure patterns
Others
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The Market Segmentation Process
 Develop a profile for each segment
 Forecast market potential
 Forecast probable market share
 Select specific market segments
Strategies for Reaching Target Markets
 Undifferentiated Marketing
 Differentiated Marketing
 Concentrated Marketing (niche)
 Micromarketing
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 Selecting and Executing a Strategy
Determinants:
Company resources
Product homogeneity
Stage in the product life-cycle
Competitors’ strategy
Positioning
Attributes
Price/quality, Competitors,
Application, Product user,
Product class
Reposition
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