Market Segmentation in Business Development

Segmentation

1. Segmentation, Segmentation,
Targeting, Targeting,
and Positioningand Positioning
Chapter 3
Segmentation,
Targeting,
and Positioning

2. Mass-marketing
A strategy that presumes there is one
undifferentiated market and that one
product will appeal to all consumers in that
market.

3. Advantages
Lower cost
One advertising campaign is needed
One marketing strategy is developed
Usually only one standardized product is
developed

4. Disadvantage
It only works if all consumers have the same
needs, wants, desires, and the same
background, education and experience

5. Market matching strategy
Today, mass marketing has largely been
replaced by a three-step market matching
strategy

6. PositioningSegmentation
Market Matching Strategy
Market Matching
Targeting

7. Market Matching Strategy
Segmentation
Act of dissecting the marketplace into submarkets
that require different marketing mixes
Targeting
Process of reviewing market segments and deciding
which one(s) to pursue
Positioning
Establishing a differentiating image for a product or
service in relation to its competition

8. Market segmentation
The process of dividing a market into distinct
subsets (segments) of consumers with
common needs or characteristics and
selecting one or more to target with a distinct
marketing mix

9. Segmentation Variables
Segmentation Variables
Geographic
Demographic Psychographic
BehavioralGeodemographic

10. Marketers may use a single variable
Marketers may use two or more variables

11. Geographic Segmentation
Division of the market based on the location of the
target market
People living in the same area have similar needs
and wants that differ from those living in other areas
Climate
Population density
Taste
Micromarketing

12. Demographic Segmentation
Partitioning of the market based on factors
such as

age

gender

marital status

income

occupation

education

ethnicity

13. Age
Product needs and interests often vary with
consumers’ age

14. Age Effects
Occurrences due to chronological age

15. Cohort Effects
Based on the idea that people hold onto the
interests they learned to appreciate growing
up

16. Gender

Gender is frequently a distinguishing variable
Changes in the family and growth of the dual-
income household have blurred some of the
lines

17. Marital Status
Marketers have identified specific marital
status groups, such as:
1.Singles
2.Divorced individuals
3.Single parents
4.Dual-income married couples
They then market products specifically
designed for one or more groups

18. Income, Education & Occupation
These three variables are often related and
therefore often used together as a measure
of one’s social class.
Income is commonly used because
marketers feel it is a strong indicator of ability
to pay for a particular product or service
Income is often combined with other
variables to narrow target markets:
With age to identify the important affluent elderly
With age and occupation to produce the yuppie
segment

19. Race and Ethnicity

The size and purchasing power of minorities
make them an attractive target market
The size of the market is growing
dramatically relative to the “majority”
population
Targeting certain products (e.g., alcohol,
tobacco) to such groups raises ethical issues

20. Tobacco and the African American
Community
Why is there a concern about targeting
African Americans?
During the ’90s, youth smoking rates
increased sharply

12.6% in 1991

22.7% in 1997

80% increase

21. After Native Americans, African Americans
have the highest rate of smokers of any
ethnic group in the US
African American men have the highest rate
of death from lung cancer of any ethnic group
in the US
81% of African American men who smoke and
contract lung cancer die
51% of white men who smoke and contract lung
cancer die

22. Tobacco companies have clearly targeted African Americans
Brown & Williamson’s Kool brand
used a cartoon character, the penguin Willie, that was popular
with black teens
Has sponsored an annual jazz festival that attracts large black
audiences
In 1998 cigarette advertisements represented 60% of ad space
in black newspapers
Following the success of the movie “Malcolm X”, Star Tobacco
Co. introduced a new brand called “X,” packaged in the black,
red and green colors of the black nationalist movement
Marketed in 20 states before pressure from the community forced
discontinuance of the brand

23. Geodemographic Segmentation
A hybrid segmentation scheme
Based on notion that people who live close to one
another are likely to have similar financial means,
tastes, preferences, lifestyles and consumption
habits

24. Market research firms specialize in producing
computer-generated geodemographic market
“clusters” of consumers
They have clustered the nation’s >250,000
neighborhoods into lifestyle groupings based on
postal zip codes

Marketers use the cluster data for mail campaigns,
to select retail sites and merchandise mixes, to
locate banks and restaurants, etc.
“You Are Where You Live”.

25. Psychographic Segmentation
Partitioning of the market based on lifestyle
and personality characteristics
Marketers use it to further refine a target
market

Its appeal lies in the vivid and practical
profiles of consumer segments that it can
produce
Accomplished by using AIO inventories

26. AIO Inventories

AIO research seeks consumers’ responses to
a large number of statements that measure
Activities
Interests
Opinions

27. Examples of the use of psychographic
segmentation reflected in marketing
messages

Kellogg’s targets health-conscious
consumers with brands such as Special K
and Product 19
Old Spice is targeting the active sports
lifestyle with High Endurance deodorant

28. Behavioral Segmentation
Partitioning of the market based on attitudes
toward or reactions to a product and to its
promotional appeals

29. Behavioral segmentation can be done on
the basis of:
1.Usage rate
2.Benefits sought from a product
3.Loyalty to a brand or a store

30. 1. Usage Rate
Differentiates between
heavy users
medium users
light users
nonusers
In general, a relatively small number of heavy
users account for a disproportionately large
percentage of product usage
Targeting those heavy users is a common
marketing strategy

31. 2. Benefit Segmentation
Marketers constantly attempt to identify the
single most important benefit of their product
that will be the most meaningful to
consumers
Changing lifestyles play a major role in
determining the product benefits that are
important to consumers and also provide
marketers with opportunities for new products
and services

32. 3. Brand and Store Loyalty
The tendency of some consumers to
repeatedly select the same brand within a
given product category

A parallel tendency of some consumers to
repeatedly patronize a particular retail
establishment

33. Marketers often try to identify the
characteristics of their brand-loyal customers
so they can target consumers with similar
characteristics in the larger population
Marketers also target consumers who show
no brand loyalty as a means of penetrating a
larger market

Marketers reward brand loyalty by offering
special benefits to frequent customers

34. Choosing Market Segments to Target
Once an organization has identified its most
promising market segments, it must decide whether
to target one segment or several segments
Each targeted segment will then receive a specially
designed marketing mix — i.e., a specially tailored
product, price, distribution network and/or
promotional campaign

35. Market Targeting Strategies
There are three basic types of strategies:
1.Undifferentiated
2.Multisegment (Differentiated)
3.Concentration (Niche)

36. 1. Undifferentiated Strategy
A strategy that ignores differences between
groups within a market and offers a single
marketing mix to the entire market

It works when a product is new to the market
and there is minimal or no competition

37. Advantages and Disadvantages
Economies in production and marketing
Vulnerability to competitors offering more
differentiated products and services to market
subsegments

38. 2. Multisegment/Differentiated Strategy
Targeting two or more segments with
different marketing mixes for each

39. Advantages and disadvantages
Minimizes risks, as losses in one segment
can be made up for in others
Unique product features allow for higher
prices
Increased costs for differentiated products
and marketing

40. 3. Concentration/Niche Marketing
Strategy
Focus on one sub-market

41. Greater knowledge of customers’ needs
Economies of scale
Entry of a strong competitor
Change in size or tastes of the segment

42. Positioning
Deciding how the firm wants the company and
its brands to be perceived and evaluated by
target markets
Differentiating the product from other products of
the firm or its competition

43. Positioning complements and is an integral
part of the company’s segmentation strategy
and selection of target markets

The same product can be positioned
differently to different market segments
The result of successful positioning is a
distinctive brand image on which consumers
rely in making product choices

44. Perceptual Mapping
A spatial picture of how consumers view
products or brands within a market
Allows marketers to determine how their
product appears in relation to competitive
brands
Enables them to see gaps in in positioning of
all brands in the product class to identify
areas in which consumer needs are not being
met

45. A visual profile of how consumers perceive a number of pain
relievers on the two dimensions of effectiveness vs. gentleness.

E
f
f
e
c
t
i
v
e
n
e
s
s Tylenol
Extra-Strength Tylenol
Bufferin
Nuprin
MotrinAdvil
Anacin
Bayer
Excedrin
Private Label Aspirin
Aleve
 OrudisActron 
Gentleness to Stomach MoreLess
More

46. Repositioning
Marketers may be forced to reposition
products due to competition or a changing
environment

47. Modifying an existing brand
Targeting it to a new market segment
Emphasizing new product uses and benefits
Stressing different features with the intention
of boosting sales

48. Selected Psychographic/Demographic Characteristics
of the PC Magazine Subscriber
Source: 1997 Lifestyles Study, PC Magazine Subscriber Study, Ziff-Davis, Inc., June 1997.
DEMOGRAPHICSDEMOGRAPHICS PercentPercent
SEX (BASE 990)
Men 86
Women 13
PSYCHOGRAPHICSPSYCHOGRAPHICS PercentPercent
USE A COMPUTER 100
At home 96
At work 89
On vacation/traveling46
AGE
Under 25 5
25 - 34 18
35 - 44 29
45 - 54 31
55 - 64 12
65 or older 5
Mean age 44.1
SELECTED USE OF
COMPUTER
Word Processing 96
Connect to Internet86
E-mail 84
For work 80
Accounting/record keeping75
Reference 68
Recreation/games 66

49. DEMOGRAPHICSDEMOGRAPHICS PercentPercentPSYCHOGRAPHICSPSYCHOGRAPHICS PercentPercent
EDUCATION
Some college or less27
Graduate college 27
Education beyond
college graduate 46
EMPLOYMENT STATUS
Employed by someone else68
Self-employed 21
Other 11
PORTABLE DEVICES USED
WHEN TRAVELING ON
BUSINESS
Laptop/notebook
computer 57
Cellular phone 47
Beeper or pager 30
Personal Digital Assistant/
electronic organizer14

50. DEMOGRAPHICSDEMOGRAPHICS PercentPercentPSYCHOGRAPHICSPSYCHOGRAPHICS PercentPercent
OCCUPATION/BUSINESS
DEPT.
Computer related-
professional 22
Senior or corporate
management 16
Engineering-related
professional 13
Administrative/
manufacturing,
accounting, finance,
purchasing, advertising,
marketing, sales 26
Others 23
TRAVEL FOR
BUSINESS/PLEASURE
Business Travel
5 or more days per month31
5 or more nights away
from home per month17
Pleasure/Vacation Travel
15 or more days per year37
Mean number of days
per year 15.5
MEMBER OF
FREQUENT FLYER
PROGRAMS 90

51. DEMOGRAPHICS PercentPSYCHOGRAPHICS Percent
INCOME
Under $30,000 7
$30,000 - $49,999 15
$50,000 - $74,999 24
$75,000 - $99,999 19
$100,000 or more 24
Mean income $87,700
PRIMARY RESIDENCE
Own 74
Rent 18
Other 3
No answer 5
FINANCIAL SERVICES
Currently own
Mutual funds 48
Stocks 44
Bonds 24
Life insurance/annuities44
Currently use
Brokerage services 36
On-line investment
services 16
Retirement/financial
planning 41

52. RESPONSE OF SELECTED
CONSUMER
PSYCHOGRAPHIC
STATEMENTS Percent
Research before choose
brand of new product
to buy 41
Other people ask my opinion
about which computer
products to buy 41
Usually buy products based
on quality, not price26
Prefer products that are
latest in new technology26
Among group I am one of
first to try new product19
Walking/running/jogging63
Exercise/fitness/weight
training 44
Bicycling 7
Swimming 37
Golf 27
Fishing 23
Boating/sailing 19
Skiing 19
Tennis 14
SELECTED
SPORTS/ACTIVITES
PLAYED/PARTICIPATED IN
PAST YEAR Percent

53. Listen to music 77
Reading 61
Going to movies 60
Surfing the Internet50
Games-videos on
computer 48
Gardening 32
Going to the theater32
Cooking 30
Photography 30
Collecting stamps/coins11
Sewing needlecraft 6
HOBBIES/OTHER ACTIVITIES
PARTICIPATED IN Percent