Market Segmentation,

1
Chapter 10

• Market Segmentation,
• Targeting, and Positioning

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Market Segmentation
Market segmentation involves aggregating
prospective buyers into groups that 1. Have
common needs, and 2. Will respond similarly
to the marketing action.
Key Concept Homogenous within / Heterogeneous
between
3
Market Segmentation
Implies Product Differentiation 1. Between
companies 2. Within companies
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Targeting
Selecting and directing a marketing program
toward one or more specific groups of consumers
(market segments)
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Steps in Segmentation and Targeting

• Form prospective buyers into segments
• Form products to be sold into groups
• Develop a market-product grid and estimate
  market sizes
• Select Target markets
• Take marketing action to reach target markets

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Criteria for Effective Segmentation Should we
segment?

• Potential for increased profit and ROI
• (i.e., substantiality)
• Similarity of needs of potential buyers within
  a segment
• differences of needs of buyers between segments
• (i.e., differentially responsive)
• Simplicity and cost of assigning potential
  buyers to
• segments (i.e., measurability)
• Feasibility of a marketing action to reach a
  segment
• (i.e., accessibility)

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Bases for Segmenting Consumer Markets

• Customer Characteristics
• Geographics
• Demographics
• Psychographics
• Buying Situations
• Benefits Sought
• Usage Rate

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Bases for Segmenting Business Markets

• Location
• NAICS Code
• Number of Employees

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Steps in Segmentation and Targeting

• Form prospective buyers into segments
• Form products to be sold into groups
• Develop a market-product grid and estimate
  market sizes
• Select Target markets
• Take marketing action to reach target markets

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Market-product grid for pillows for three
different segments of sleepers
Products
MediumPillow
Markets
Soft Pillow
Firm Pillow
S M L
Stomach sleepers Back sleepers Side sleepers
L M S
M L M
Key L, Large market M, medium market S, small
market
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How Apple segments its market
MARKETS PRODUCTS (PERSONAL COMPUTERS)
POWERMACINTOSH G3 ? ? ? ? ? ? ?
POWERBOOK G3 ? ? ? ? ? ? ?
IMAC ? ? ?
POWERMACINTOSH G3 SERVER ?
? ? ? ? ?
SECTOR Consumer/ household Kindergarten
thru 12th grade College and University Small
business Large business Design and Publishing
SEGMENT Family/ Games Students Faculty/
administration Students Faculty
administration Owners/ employees Administration
/ technical Media/graphics/ Internet Desktop
publishing
EDUCATION COMMERICAL
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Steps in Segmentation and Targeting

• Form prospective buyers into segments
• Form products to be sold into groups
• Develop a market-product grid and estimate
  market sizes
• Select Target markets
• Take marketing action to reach target markets

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Criteria for Selecting Target Markets Which
consumers should we target?

• Size
• Expected Growth
• Competitive Position
• Cost of Reaching Segment
• Compatibility with organizational objectives
• and resources

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Target Market Strategies

• Market Aggregation
• Single Segment Concentration
• Multiple-Segment Targeting

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Aggregation Strategy

• Mass marketing, undifferentiated market
• single product
• one pricing structure
• one distribution system
• one promotional program
• for the entire market
• not very common (e.g., table salt)
• minimizes costs, inventory

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Single Segment Strategy

• One segment within total market (e.g.,
  Rolls-Royce)
• allows market penetration (in-depth)
• can use limited resources
• large competitors may leave smaller companies
• alone (for awhile!--e.g., Celestial
  Seasonings)
• risky (all eggs in one basket)
• may be difficult to expand

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Multiple Segment Strategy

• Two or more groups of potential customers
• identified as target markets
• separate marketing mix for each segment
• different or same versions of original product
• General Motors
• Evian
• may be more expensive
• production
• advertising
• distribution

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Selecting a target market for a fast-food
restaurant next to a metropolitan college
Products Meals
After- DinnerSnack
Between-mealsnack
Markets
Breakfast
Lunch
Dinner
Student Dormitory Apartment Day commuter Night
commuter
L L M S
O S S L
L S O M
O S O O
S L L O
Nonstudent Faculty or staff Live in area Work in
area
O S O
O O S
L S L
S M O
S M S
Key L, Large market M, medium market S, small
market O, no market
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Steps in Segmentation and Targeting

• Form prospective buyers into segments
• Form products to be sold into groups
• Develop a market-product grid and estimate
  market sizes
• Select Target markets
• Take marketing action to reach target markets

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Advertising actions to reach specific student
segments
Products Meals
After- DinnerSnack
Between-mealsnack
Markets
Lunch
Dinner
Dormitory students Apartment students Day
commuter students Night commuter students
S L L O
L S O M
O S S L
L L M S
Ads in buses flyers under windshield wipers of
cars in parking lot
Ad campaign Ten percent off all purchases
between 200 and 430 PM during fall semester.
Ad on flyer under windshield wipers of cars in
night parking lotsFree Frosty with this coupon
when you buy a hamburger and french fries
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Product Positioning

• The place a product occupies in consumers
  minds on
• important attributes relative to
  competitive offerings
• What our brand stands for in the product
  category
• A set of associations a consumer has with the
  brand--
• similarities and differences with others

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Perceptual Mapping
A graph showing the relationship among different
product offerings with respect to certain product
attributes
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Repositioning
Changing the place a product offering occupies in
a consumers mind relative to competitive
offerings
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GMs Perceptual Maps