1. Segmentation & Target Marketing
Dr. Close
Segmentation & Target Marketing

2. Market Segmentation Dividing market into meaningful, similar groups
(or aggregating those with similar needs)
Why is segmentation important?....
Markets have a variety of product preferences
Marketers can better define customer needs
Decision makers can define objectives and allocate resources more accurately
Target market – Group or market segment that a company selects to focus on

3. A Model of the Market Segmentation Process

4. Understanding Market Segmentation
Delineate the firm’s current situation
Intended to be a reminder of tasks to be performed prior to marketing planning
Determine consumer needs and wants
Successful marketing strategies depend on meeting consumer needs and wants
Industry within which firm operates specifies boundaries of firm’s need satisfaction activities
At a strategic level, need and wants usually are translated into more operational concepts

5. Dimensions for Market Division
Three important questions to be considered are
Should the segmentation be a priori or a post hoc?
How does one determine the relevant dimensions or bases to use for segmentation?
What are some bases for segmenting consumer and organizational buyer markets?

6. A Priori versus Post Hoc Segmentation
A priori segmentation – An approach where the marketing manager has decided on the appropriate basis for segmentation in advance of doing any research on a market
Post hoc segmentation – An approach in which people are grouped into segments on the basis of research findings

7. Relevance of Segmentation Dimensions
At least some initial dimensions can be determined from
Previous research
Purchase trends
Managerial judgment
Consideration and research of sought benefits are a strongly recommended approach

8. Bases for Segmenting Markets
Geography
Demographics
Psychographics
Benefits
Usage Rate
Region
Market size
Market density
Climate
Age
Gender
Income
Ethnicity
Family life cycle
Personality
Motives
Lifestyle
Geodemo-graphics
Benefits sought
Former
Potential
1st time
Light or irregular
Medium
Heavy

9. Bases for Segmentation
Benefit segmentation – Focuses on benefits sought by consumers
Is a market-oriented approach
Psychographic segmentation – Focuses on consumer lifestyles
Lifestyles are measured on the bases of activities, interests and opinions (AIO) of consumers
Best-known type of segmentation is VALSTM (“values and lifestyles”)
Product of SRI Consulting Business Intelligence

10. Bases for Segmentation
Geodemographic Segmentation – Identifies households in a market by focusing on local geography
PRIZM NE – Potential Ranking Index by ZIP Markets – New Evolution
Assumes that consumers in particular neighborhoods are similar in many respects and that the best prospects are those who actually use a product
Classifies every U.S. neighborhood into a total of 66 distinct segments
You are where you live: PRIZM data exercise.
Is your zipcode accurate for market segmentation purposes?

11. Bases for Segmentation
Useful Segmentation Bases for Consumer
Markets

12. Bases for Segmentation
Useful Segmentation Bases for Consumer
Markets

13. Positioning
Developing a marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general.
How is Wal-Mart Positioned?
Notes:
Position is the place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings.
Positioning assumes that consumers compare products on the basis of important features. Effective positioning requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions, and choosing a position in the market where the marketing efforts will have the greatest impact.

14. Positioning Bases Attribute Price and Quality Use or Application
Product User
Product Class
Competitor
Emotion
Notes:
The following bases for positioning are used:
Attribute: Association of a product with a product feature, an attribute, or customer benefit.
Price and quality: High price as a symbol of quality, or low price as an indicator of value may be used to position a product.
Use or application: Stressing use or applications.
Product user: Positioning base focuses on a personality or type of user.
Product class: Product is positioned as associated with a particular category of products.
Competitor: Positioning against competitors is a part of any positioning strategy.
Emotion: Positioning using emotion focuses on how the product makes customers feel.
One or more positioning bases is often used.

15. Develop Product Positioning
Positioning can be achieved through any one of these strategies
Superiority to competitive products on one or more product attributes
Positioned by use or application
Positioned in terms of particular types of users
Positioned relative to a product class
Positioned directly against particular competitors
Position mapping – Visual depiction of customer perceptions of competitive products, brands, or models

16. Positioning Map for Automobiles

17. Market Segmentation Strategies
Firm may decide to do the following
Not to enter the market
To segment but to be a mass marketer
Market is so small that it is not profitable to market to one portion of it
Heavy users comprise such a large proportion of sales that they are the only relevant target
Product is a dominant brand, and targeting to a few segments is not beneficial
To market to one segment
To market to more than one segment and design a separate marketing mix for each

18. Market Segmentation Strategies
Criteria to base a firm’s segmentation strategy decisions are
Measurable – Firm must be capable of measuring its size and characteristics
Meaningful – Large enough to deliver sufficient sales and growth potential
Marketable – Can be reached and served in an efficient manner

19. Market Segmentation Strategies
Selecting Target Markets: Some Questions Marketing Managers Should Answer

20. Market Segmentation Strategies
Selecting Target Markets: Some Questions Marketing Managers Should Answer

21. Design Marketing Mix Strategy
Selection of target market and designing the market should go hand in hand
Marketing mix decisions should have already been carefully considered
Product positioning has many implications for promotion and channel distribution

22. Product Differentiation
A positioning strategy that some firms use to distinguish their products from those of competitors.
Are distinctions real or perceived?