07 ippt

7Identifying

Market Segments and Targets

7-2Copyright © 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.

Chapter Questions

What are the different levels of market segmentation?

How can a company divide a market into segments?

What are the requirements for effective segmentation?

How should business markets be segmented? How should a company choose the most

attractive target markets?


Effective Targeting Requires Marketers to:

Identify and profile distinct groups of buyers who differ in their needs and preferences

Select one or more market segments to enter Establish and communicate the distinctive

benefits of the market offering


What Is a Market Segment?

A market segment consists of a group of customers who share a similar set of needs and wants.


Segmenting Consumer Markets

Geographic

Demographic

Psychographic

Behavioral


Geographic Segmentation

Geographic segmentation divides the market into geographical units such as nations, states, regions, counties, cities, or neighborhoods. The company can operate in one or a few areas, or it can operate in all but pay attention to local variations.


SEC Rural Consumers


Demographic Segmentation

Age and life cycle Life stage Gender Income Generation Social class Race and Culture


Age and Lifecycle Stage


Gender and Income


SEC Classification: Urban Markets


Psychographic Segmentation and The VALS Framework


Behavioral Segmentation Based on Needs and Benefits

Needs and BenefitsDecision RolesUser and Usage


Behavioral Segmentation: Decision Roles

Initiator

Influencer

Decider

Buyer

User


Behavioral Segmentation: Behavioral Variables

Occasions Benefits User Status Usage Rate

Buyer-Readiness Loyalty Status Attitude


Figure 7.2 Example of a Brand Funnel


Loyalty Status

Hard-core Split loyals Shifting loyals Switchers


Figure 7.3 Behavioral Segmentation Breakdown


Segmenting for Business Markets

Demographic Operating variable Purchasing approaches Situational factors Personal characteristics



Demographic:

Industry

Company Size

Location



Operating Variables:

Technology

User or non-user status

Customer capabilities



Purchasing Approaches:

Purchasing-function organization (centralized or

decentralized)

Power structure

Nature of existing relationships

General purchasing policies

Purchasing criteria



Situational Factors:

Urgency

Specific application

Size or order



Personal Characteristics:

Buyer-seller similarity

Attitude toward risk

Loyalty


Steps in Segmentation Process

1. Need-based segmentation2. Segment identification (distinct & identifiable

– based on segmentation bases)3. Segment attractiveness4. Segment profitability5. Segment positioning6. Segment acid test7. Market mix strategy


Effective Segmentation Criteria

Measurable (characteristics, size and purchasing power of the segment)

Substantial (large & profitable) Accessible (reachable and servable) Differentiable Actionable


Attractiveness of a Market Segment The following are some examples of aspects that

should be considered when evaluating the attractiveness of a market segment:

Size of the segment (number of customers and/or number of units)

Growth rate of the segment Competition in the segment Brand loyalty of existing customers in the segment Attainable market share given promotional budget and

competitors' expenditures Required market share to break even Sales potential for the firm in the segment (Actionable) Expected profit margins in the segment

7-28Copyright © 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from the United States edition of Marketing Management, 14e.TARGET MARKET 28

Market Targeting Strategies

Five Patterns of Target Market Selection


Porter’s Five Forces Model

Threat of Rivalry

Threat of SupplierBargaining Power

Threat of Buyer Bargaining Power

Threat of New Entrants

Threat of Substitutes


Figure 7.4 Possible Levels of Segmentation


Strategies for Reaching Target Market

Concentrated Marketing Micromarketing

Undifferentiated Marketing

Differentiated Marketing


For Review

What are the different levels of market segmentation?

How can a company divide a market into segments?

What are the requirements for effective segmentation?

How should business markets be segmented? How should a company choose the most

attractive target markets?