Segmenting

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Segmenting and Targeting Markets
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Objectives
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Market Segmentation
A market is... (1) people or organizations
with (2) needs or wants, and with (3) the
ability and (4) the willingness to buy
A group of people that lacks any one of these
characteristics is not a market.
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Market Segmentation involves
(1) aggregating prospective buyers into groups
(2) that have common needs and wants (3) and
will respond similarly to marketing activities
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Using Age to Segment Markets
SNEAKER BRAND CONSUMERS AVERAGE
AGE Nike Reebok Vans New Balance
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Why Segment Markets?

• Markets have a variety of product needs and
  preferences
• Marketers can better define customer needs
• Marketers can better respond to increase in
  competition
• Decision makers can define objectives and
  allocate resources more accurately

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Criteria for Successful Segmentation
Criteria for Market Segments
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Bases for Segmenting Consumer Markets
Characteristics Used toSegmentMarkets
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Bases for Segmenting Consumer Markets
Geographic Segmentation

• Region of the country or world
• Market size
• Climate

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Bases for Segmenting Consumer Markets
Demographics

• Age/Life Cycle
• Gender
• Income
• Education
• Multivariate

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Family Life Cycle
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Bases for Segmenting Consumer Markets
Psychographics
PsychographicSegmentation
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VALS Dimensions http//www.sric-bi.com/VALS/pres
urvey.shtml
Achievement
Ideals
Self- Expression
Abundant Resources
Innovators
Experi-encers
Achievers
Thinkers
Makers
Believers
Strivers
Survivors
Minimal Resources
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Bases for Segmenting Consumer Markets
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Benefit Segmentation of the Toothpaste Market
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Heavy and Light Users of Common Consumer Products
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LIGHT-USER HALF
HEAVY-USER HALF
Soaps
Shampoo
Cake Mixes
Toilet tissue
Cola
Beer
Bourbon
94
74
67
41
20
94
95
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Steps in Segmenting a Market
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Strategies for Selecting Target Markets
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Undifferentiated Strategy

• Advantages
• Potential savings on production and marketing
  costs
• Disadvantages
• Unimaginative product offerings
• Company more susceptible to competition

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Concentrated Strategy

• Advantages
• Concentration of resources
• Meet needs of narrowly defined segment
• Small firms can compete
• Strong positioning
• Disadvantages
• Segments too small, or changing
• Large competitors may effectively market to niche
  segment

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Multisegment or Differentiated Strategy

• Advantages
• Greater sales volume
• Higher profits
• Higher market share
• Disadvantages
• High costs

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Costs of Multisegment Targeting

• Product design costs
• Production costs
• Promotion costs
• Inventory costs
• Marketing research costs
• Management costs
• Cannibalization

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