Module 2: Segmentation and

Targeting

August 20, 2021

 Chapter Questions
1. What are the different levels of market
segmentation?
2. In what ways can a company divide a market
into segments?
3. What are the requirements for effective
segmentation?
4. How should business markets be segmented?
5. How should a company choose the most
attractive target markets?
 Market Segmentation
Market segmentation consists of a
group of customers who share a
similar set of needs and wants.
The Marketing Management Process
 Market Penetration
1. Market Penetration- Growth by having
existing products in an existing market.
 Product Development
Product development- Growth by having new
product in an existing market.
 Opportunities for long term growth
• Entrepreneurs must be alert about new
products or new business opportunities
looming in the horizon.
 Market Development
Market Development- Growth by having an
existing product, which may or may not need
some modification to enter a new market.
 Other ways to grow
• Merger and acquisition

• Diversification
 Market Segmentation
• A market segment consists of a group of
customers who share a similar set of needs
and wants. The marketer’s task is to identify
the appropriate number and nature of market
segments and decide which one to target.
 3 Step Process of Segmentation (STP)
Core Strategy What is it? Key Questions

Market Segmentation The partitioning of a How many partitions are

market with fairly there in the market?
homogenous needs.

Target Market The set of fairly Which customer segment

homogenous customers has the biggest potential
the company desires to for us to compete in?
serve. Who should we target to
win market shares?

Product positioning Communication the What overall relevance

relevance and and differentiation do we
differentiation of a brand offer our target market?
and product to the target
market.
Examples of Market Segmentation
• Greenwich targeted single independent
professionals in their 20s- “yindies”.
• ACS Manufacturing concentrated on their
“Pride” detergent in the washing machine
segment instead of competing head-on
multinational players.
• GO Negosyo, one of the advocacies of RFM,
focused on helping the micro, small and
medium enterprises to grow.
4 Major Segmentation Variables
 Basis for Market Segmentation for
Consumer Products
1. By needs and wants (benefit)
2. By socio-demographics
3. By consumer behavior
4. By psychographics
 Needs and Wants Segmentation
A major way to segment a market is by identifying
customer needs and wants.
Example: multi-million peso market for Vitamins
and Minerals, which segments based on
“component”
1. Cetrin, which contains Vit C. is a single
component need segment.
2. Enervon, which contains Vit C and b complex is
2-3 component need segment
3. Pharmaton with royal ginseng and many other
segment is a multi component segment.
• Most needs and wants segmentation
are based on consumers functional
needs.
–Expressive (how one looks)
–Gratification (how one feels)
–Combination (how one looks and
feels)
It doesn’t mean that when a firm
succeeds in serving the needs of one
market segment, automatically mean
success in another.
–Burger Machine
–Jollibee used to own Mary’s Chicken,
Donut Magic, Ice Cream Copenhagen
 Market Segmentation and Product
Segmentation
Market Segmentation is not the same as product
segmentation.
For example:
An orange drink should not be defined in terms of
product form such as bottled, can, powdered or tetra
pack. They can be defined as follows:
- Health conscious segment
- Youth segment
- Breakfast drinks segment
- Price conscious segment
- Alcoholic mix segment
Socio Demographic Segmentation
Market segmentation most often starts with
demographics but demographics cannot be used
alone and must be used in conjunction with
other segmentation types.
– Who are you?
– How much do you earn?
– Where do you live? Etc.
 Behavioral Segmentation
Another method of market segmentation is by
consumer behavior
• Customers who tend to be loyal to a brand will
most likely not respond to a competitor’s price
cut at least not, immediately.
• Place or distribution, display and packaging
can be critical for self conscious buyers of
intimate products such as lingerie and
condoms
Variables of Behavioral Segmentation
• Purchase Frequency- Regular and Occasional
• User Status- Non-user, Ex-user, Occasional
use, Regular User
• Usage Rate- Heavy user, Medium User, Light
User
• Loyalty Status- Absolute, Strong, Medium,
Small, None
• Readiness- Awareness, Knowledge, Interest,
Desire, Intention to buy.
 Psychographic Segmentation
Psychographics Segmentation is concerned
more with answers to questions such as “What
you do” (instead of who you are) and “how you
spend your money (instead of how much you
earn). It is more often used for creating
advertising messages. It is done by asking
consumers various questions and classifying
them according to a cluster of answers.
Variables of Psychographic Segmentation

• Social Issues- Religion, Politics, Work, Drugs,

Women’s rights, Sexuality, Values, Risk
Management, Social Attitude, Aspirations.
• Personal Interests- Family, Home, Food,
Health, Friends, Self Image, Shopping, Real
Estate, Finances, Advertising, Media,
Technology, Travel, Sports, Arts.
VALS Framework
a system for grouping
consumers according to
psychological and sociological
theories in order to predict
their behavior in the purchase
decision process. VALS can aid
in defining targets for products
and are also helpful in the
development of advertising
copy and media strategies. The
concept was introduced in 1978
by the California consulting firm
of SRI International.
 The four groups with lower resources are:

1. Believers—Conservative, conventional, and traditional

people with concrete beliefs. They prefer familiar, U.S.-
made 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.
3. Makers—Practical, down-to-earth, self-sufficient people
who like to work with their hands. They seek U.S.-made
products with a practical or functional purpose.
4. Survivors—Elderly, passive people concerned about change
and loyal to their favorite brands
 Four Groups with Higher Resources
1. Innovators—Successful, sophisticated, active, “take-charge”
people with high self-esteem. Purchases often reflect cultivated
tastes for relatively upscale, niche-oriented products and
services.
2. Thinkers—Mature, satisfied, and reflective people motivated by
ideals and who value order, knowledge, and responsibility. They
seek durability, functionality, and value in products.
3. Achievers—Successful, goal-oriented people who focus on
career and family. They favor premium products that
demonstrate success to their peers.
4. Experiencers—Young, enthusiastic, impulsive people who seek
variety and excitement. They spend a comparatively high
proportion of income on fashion, entertainment, and socializing.
 Price Segmentation
Price segmentation is the process of charging
different prices for the same or similar product
or service. You can see examples everywhere:
student prices at movie theaters, senior prices
for coffee at McDonald’s, people who use
coupons, and so on.
 Bases for Segmenting Business Markets

Business markets generally identify segments

through a sequential process.

Business to business marketing has fewer buyers

who order in larger quantities and has more
levels of decision makers.
Industrial or Business to Business Segmentation
 Market Targeting
The target market is a fairly homogenous group of
people or organizations to which a company wishes
to appeal.
Example:
Penshoppe- targets teenagers who like stylish
clothes and whose purchasing power is dependent
on their parents. Since it opened stores
internationally, they tapped celebrity endorsers
who are internationally known for their target
market.
 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 program.
• 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.
• Actionable. Effective programs can be formulated for
attracting and serving the segments
 5 forces that determine the intrinsic long-run
attractiveness of a market or market segment

• Threat of intense segment rivalry

• Threat of new entrants
• Threat of substitute products
• Threat of buyer’s growing bargaining
power
• Threat of suppliers bargaining power
 Criteria to Choose Market Segment
• All market segments must be considered and
reviewed periodically.
• Marketers must consider their own SWOT
Analysis in choosing what market segments to
compete in.
• Firms must therefore use an objective set of
criteria to shortlist their desired market
attractiveness.
 Measures for Market Attractiveness
• Market Size
• Market Growth
• Homogeneity
• Ease of creating awareness
• Purchase authority
• Loyalty level
• Responsiveness of customers
 Steps in Segmentation, Target
Marketing and Product Positioning
Any Questions?