CHAPTER 9

Identifying
Market
Segments &
Targets
 The “STP” of Marketing
To compete more effectively, many companies are now embracing target marketing.
Effective target marketing requires that marketers:

1. 2. 3.
Identify and profile Select one or For each target segment,
distinct groups of more market establish, communicate,
buyers who differ segments to enter and deliver the right
in their needs and (market targeting) benefits for the company’s
wants (market market offering (market
segmentation) positioning)
OUTLINES
Bases for Segmenting
01 Consumer Market
How could Business
02 Market be Segmented

03 Market Targeting

04 Effective Segmentation
Criteria
 01 Bases for Segmenting
Consumer Market
Geographic, Demographic, Psycographic,
& Behavioral Segmentation
 Market segmentation divides a market into well-
defined slices. The marketers usually use two
broad groups.

DESCRIPTIVE BEHAVIORAL
CHARACTERISTICS CHARACTERISTICS
• GEOGRAPHIC • CONSUMER
• DEMOGRAPHIC RESPONS TO
• PSYCOGRAPHIC BENEFIT
• USAGE
OCCASIONS OR
BRANDS

The major segmentation

variables are summarized in
Table 9.1
GEOGRAPHIC SEGMENTATION
Divides the market into geographical units such as nations, states, regions,
countries, cities, or neighborhoods. The company can operate in one or few
areas, or it can operate in all but pay attention to local variations.

Grassroots Marketing
In a growing trend called grassroots marketing, marketers concentrate on making such activities as
personally relevant to individual customers are possible. For example Nike success came from enganging
target consumers through grassroots marketing efforts such as sponsorship of local sports team, clothing
and equipment to young athletes.

Specific ZIP Code

Many companies use mapping software to pinpoint the geographic locations of their
customers.
PRIZM (Potential Rating Index by Zip Markets) by Nielsen Claritas

Classifies more than half millions U.S. residential neighborhoods into 14 distinct groups
and 66 distinct lifestyle segments called PRIZM Clusters. The five broad category which
take into consideration 39 factors are education & affluence, family life cycle, urbanization,
race & ethnicity, and mobility.
Example of PRIZM Cluster

Young Digerati. Are the nation’s tech-savvy singles and couples living in fashionable
neighborhoods on the urban fringe. Affluent, highly educated, and ethnically mixed, they
live in areas typically filled with trendy apartments and condos, fitness clubs and clothing
boutiques.
 DEMOGRAPHIC SEGMENTATION
The demographic variables such as age, family size, gender, etc are so popular with marketers because they are often associated
with consumer needs and wants.

AGE AND LIFE-CYCLE STAGE. Consumer wants and abilities change with age. For example toothpaste brands, Crest and Colgate offer
three main lines of products to target kids, adults, and older consumers. Pampers divided its market into prenatal, new baby (0-5 months),
1
baby (6-12 months), toddler (13-23 months), and preschooler (24 months+). Nevertheless, age and life cycle can be tricky variables. The
target for some products may be the phychologically young.

LIFE STAGE. May be different with life cycle, life stage defines a person’s major concern, such as going through a divorce, going into a
2 second marriage, buying new home, and so on. These life stages present opportunities for marketers who can help people cope with the
accompanying decisions.

GENDER. Man and women have different attitudes and behave differently, based partly on genetic makeup and partly on socialization.
3 Men often like to read product information; women may relate to a product on a more personal level. Gender differences are shrinking in
some other areas as man and women expand their roles.

INCOME. This segmentation is a long standing practice in such categories as automobiles, clothing, cosmetics, financial services, and
4 travel. However, income does not always predict the best customers for a given product. Blue collar workers were among the first
purchasers of color television sets, it was cheaper than to go to movies and restaurant.
DEMOGRAPHIC SEGMENTATION (cont’d)
GENERATION. Each generation or cohort is profoundly influenced by the times in which it grow up- the music, movies, politics, and defining
5 events of that period. Marketers may choose to advertise to a cohort by using the icons and images prominent in its experiences.
Millennials (Gen Y); born between 1977 – 1994

• Also known as the Echo Boomers “digital native” Millennials have been wired almost from birth-playing computer games, surfing the
internet, downloading music, connecting with friends via social media. Some tactics that marketers try for Gen Y are:
• Students Ambassadors : Red Bull enlisted college students as Red Bull Students Brand Managers to distribute samples, marketing
initiative, etc.
• Street Teams : Long a mainstay in the music business, this help to promote bands.
• Cool Events : Hurley has been a sponsor of the U.S. Open of Surfing.

Gen X; born between 1964 – 1977

• The popularity of rock band Nirvana, and the lifestyle portrayed in the film Slacker led to use of term like grunge and slacker to
characterize Gen X when they were teens and young adults. But these stereotypes have slowly disappeared. Gen Xers prize self-
sufficiency and the ability to handle any circumstance. Unlike the more optimistic, team oriented Gen Yers, Gen Xers are more
pragmatic and individualistic.

Baby Boomers; born between 1946 – 1964

• They are controlling three quarters of the country’s wealth, marketers often overlook them. One study of boomers
ages 55 to 64 found a significant number are willing to change brands, spend on technology, and purchase online.
They love buy things, but they hate being sold too.

Silent Generation; born between 1925 – 1945

• Strategies emphasizing seniors roles as grandparents are well received. Many older consumers often provide basic
needs and occasional gift for their grankids.
DEMOGRAPHIC SEGMENTATION (cont’d)
RACE AND CULTURE. Multicultural marketing is an approach recognizing that different ethnic and cultural segments have
sufficiently different needs and wants to require targeted marketing activities and that a mass market approach is not refined
6 enough for the diversity of the marketplace. Marketers need to factor the norms, language nuances, buying habits, and
business practices of multicultural markets into the initial formulation of their marketing strategy. Multicultural marketing can
require different marketing messages, media, channels, and so on.
PSYCHOGRAPHIC
SEGMENTATION

In psychographic segmentation, buyers are divided into

groups on the basis of psychological/personality traits,
lifestyle or values..

One of the most popular commercially available

classification systems based on psychographic
measurements is Strategic Business Insight’s (SBI)
VALSTM framework.

The main dimensions of the VALS segmentation

framework are consumer motivation (horizontal) and
consumer resources (vertical). Consumers are
inspired by one of three primary motivations : ideals,
achievement and self-expression.
 BEHAVIORAL SEGMENTATION
In behavioral segmentation, marketers divide buyers into groups on the basis of their
knowledge of, attitude toward, use of, or response to a product.

1. NEEDS AND BENEFITS

Not everyone who buys a product has the same needs or wants the
same benefits from it. Example six different benefit segments from
U.S. Premium Wine :
Enthusiast (12% of market) Image Seekers (20%)
Skewing female, their average income is The only segment that skews male, with
about $76,000 a year an average age of 35.

Savvy Shoppers (15%) Traditionalist (16%)

They love to shop and believe they don’t With very traditional values, they like to buy brands
have to spend a lot to get a good bottle of they’ve heard of and from wineries that have been
wine. around a long time.

Satisfied Sippers (14%) Overwhelmed (23%)

Not knowing much about wine, they tend A potentially attractive target market, they find
to buy the same brands. purchasing wine confusing.
 BEHAVIORAL SEGMENTATION (cont’d)
2. DECISION ROLES
In US, men normally choose their shaving equipment and women choose their
pantyhose, but even marketers must be careful in making targeting decisions
because buying roles change. ICI discovered that women made 60 percents of
decisions on the brand of household paint, it decided to advertise its Dulux brand to
women.

60% 40%
 BEHAVIORAL SEGMENTATION (cont’d)
3. USER AND USAGE-RELATED VARIABLES
Many marketers believe variables related to users or their usage-occasions, user status, usage rate, buyer-readiness
stage, and loyalty status- are good starting points for constructing market segments.

OCCASIONS
Occasions mark a time of day, week, month, year, or other well-
defined temporal aspects of a consumer’s life.

USER STATUS USAGE RATE

The key to attracting potential users, or even possibly We can segment markets into light, medium, and heavy
nonusers, is understanding the reasons they are not using. product users. Heavy users are often a small slice but account
Included in the potential-user group are consumers who will for high percentage of total consumption. And Light users may
become users in connection with some life stage or event be more responsive to new marketing appeals.

BUYER-READINESS STAGE
Some people are unaware of the product, some are LOYALTY STATUS
aware, some are informed, some are interested, The groups are : Hardcore loyals, split loyals,
some desire the product, and some intend to buy. shifting loyals, and switchers.
Use Marketing Funnel to break the market into
buyer-readiness stage.

ATTITUDE MULTIPLE BASES

Five consumer attitudes bout products Combining different behavioral bases can provide
are enthusiastics, positive, indifferent, a more comprehensive and cohesive view of a
negative, and hostile.. market and its segments. Figure 9.3 depicts one
possible way to break down a target market by
various behavioral segmentation bases.
 02 How could Business
Market be Segmented
Demographic, Operating Variables, Purchasing
Approaches, Situational Factors, Personal
Characteristics
Major Segmentation
Variables for
MOST IMPORTANT
Business Markets
Table 9.5 shows one set of Major Segmentation Variables
for Business Markets. The table lists major questions that
business marketers should ask in determining which
segments and customers to serve.

Example, a rubber-tire company can sell tires to

manufacturers of automobiles, trucks, farm tractors, or
aircraft.

FOLLOWED BY
 BUSINESS TO BUSINESS
MARKETING EXPERT
Have urged marketers to present flexible market offerings to
all members of a segment.
There are consist of two parts : a naked solution containing the
product and service elements that all segment members value.
And discretionary options that some segment member value.

Ex: Siemens Electrical Apparatus Division sells metal-clad boxes to

small manufacturers at prices that include free delivery & warranty,
but it also offers installation, tests, and communication peripherals as
extra-cost options.

James C. Anderson
& James A. Narus
03 Market Targeting
 Group customers into segments based on similar needs
1. Needs-Based Segmentation and benefits sought by customers in solving a particular
consumption problem.
Steps in the
Segmentation Content B
For each needs-based segment, determine which
Modern PowerPoint
2. Segment Identification Process demographics, lifestyles, and usage behaviors make the
Presentation
segment distinct and identifiable (actionable).

Using predetermined segment attractiveness criteria (such

3. Segment Attractiveness as market growth, competitive intensity, and market
access), determine the overall attractiveness of each
segment

4. Segment Profitability Determine segment profitability.

For each segment, create a “value proposition” and

product-price positioning strategy based on that segment’s
5. Segment Positioning unique customer needs and characteristics.

Create “segment storyboard” to test the attractiveness of

6. Segment “Acid Test” each segment’s positioning strategy.

Expand segment positioning strategy to include all aspects

7. Marketing-Mix Strategy of the marketing mix :product, price, promotion, and place.
04 Effective Segmentation
Criteria
5 Key Criteria
The segments can be effectively
01 The size, purchasing power, and characteristics
reached and served.
of the segments can be measured.

03

03 01
05 Accessible Measurable
Effective programs can be
05
Actionable
formulated for attracting and
serving the segments.
04
Differentiable
02 02
04 Substantial The segments are large and profitable enough to
The segments are conceptually serve. A segment should be the largest possible
distinguishable and respond differently homogeneous group worth going after with a
to different marketing-mix elements and tailored marketing program.
programs.
Porter’s 5 Forces
Evaluating & Selecting The Market Segments 1.
Identify your
prospects and
customers
A firm selects a
subset of all the
possible segments, 2.
each objectively Differentiate
attractive and Also called as customers in terms of

Frame
“segments of

wrok
appropriate. There their needs and their
are Product & Market one”, “one-to-
value to your
Specialization Single Segment one
marketing”. company
Full Market Concentration
Coverage 3.
Interact with individual
customers to improve
your knowledge about
Multiple Individual their individual needs
A firm attend Segment The firm markets to Marketing and to build stronger
only one particular relationships
to serve all
customer
Specialization segment. A niche is
groups with all a more narrowly 4.
defined customer
the products Customize products,
they might group seeking a
distinctive mix of services, and
need.
benefits within a messages to each
segment customer
05 Marketing Mini Case
Thank You