2 The Importance of Market Segmentation Markets have a variety of product needs and preferencesMarketers can better define customer needsDecision makers can define objectives and allocate resources more accuratelyCompetitiveAdvantage
3 Criteria for Segmentation SubstantialityIdentifiabilityMeasurabilityAccessibilityResponsivenessSegment must be large enough to warrant a special marketing mix.Segments must be identifiable and their size measurable.Members of targeted segments must be reachable with marketing mix.Unless segment responds to a marketing mix differently, no separate treatment is needed.
4 Bases for Segmentation Usage RateBenefits SoughtPsychographicsDemographicsGeographyBases Used to Segment Consumer Markets
5 Geographic Segmentation Region of the country or worldMarket sizeMarket densityClimate
6 Bases for Demographic Segmentation AgeGenderIncomeEthnic backgroundFamily Life Cycle
7 Ethnic Background Largest ethnic markets are: African-AmericanHispanic-AmericanAsian-AmericanWill comprise 1/3 of U.S. population by 2010 with buying power of a trillion dollars
13 CLARTAS’ PRIZM 62 American clusters Each cluster is a member of 15 social groups arranged by urbanization density and socio-economic standing.County CityHigh$ $LowRURAL TOWN 2nd CITY SUBURB URBAN
14 CLARTAS’ PRIZM 62 American clusters Each cluster is a member of 15 social groups arranged by urbanization density and socio-economic standing.01: BLUE BLOOD ESTATES 05: KIDS & CUL-DE-SACS07: MONEY & BRAINS 09: AMERICAN DREAMS12: UPWARD BOUND 14: COUNTRY SQUIRES18: YOUNG INFLUENCIALS 28: BIG CITY BLEND31: LATINO AMERICA 40: MILITARY QUARTERS41: SHOTGUNS & PICKUPS 62: HARD SCRABBLETo look up a ZIP code useFor definitions of each cluster, see for complete descriptions
16 Benefit SegmentationThe process of grouping customers into market segments according to the benefits they seek from the product .
17 Usage-Rate Segmentation Dividing a market by the amount of product bought or consumed.
18 The 80/20 PrincipleA principle holding that 20 percent of all customers generate 80 percent of the demand.80/20
19 Steps in Segmenting a Market Select a market for studyChoose bases for segmen-tationSelect descrip-torsProfile and analyze segmentsSelect target marketsDesign, imple- ment, maintain mkting mix
20 Strategies for Selecting Target Markets UndifferentiatedStrategyConcentratedStrategyMultisegmentStrategy
21 Undifferentiated Targeting Strategy Advantages:Potential savings on production and marketing costsDisadvantages:Unimaginative product offeringsCompany more susceptible to competition
22 Concentrated Targeting Strategy Advantages:Concentration of resourcesMeets narrowly defined segmentSmall firms can competeStrong positioningDisadvantages:Segments too small, or changingLarge competitors may market to niche segment
23 Multisegment Targeting Strategy Advantages:Greater financial successEconomies of scaleDisadvantages:High costsCannibalization
24 Costs of Multisegment Targeting Product design costsProduction costsPromotion costsInventory costsMarketing research costsManagement costsCannibalization
25 Cannibalization Situation that occurs when sales of a new product cut into sales of afirm’s existing products.
26 PositioningDeveloping a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general.
27 Effective Positioning Assess the positions of competing productsDetermine the dimensions of these positionsChoose an effective market position
33 Why Do Consumers Purchase Technology? Primary MotivationFamily Career Entertainment StatusNeo-hearthmindersFastForwardsTechno-striversMousePotatoesGadgetGrabbersCyber-snobsX-techsTechnology pessimists Technology optimistsDisposable Income Disposable IncomeLow High Low HighTraditionalistsHandshakersMediaJunkiesCountryClubbersSidelined CitizensSource: Forrester Research, Inc.