Chapter 10 Identifying Market Segments and Selecting Target Markets by

Kotler on Marketing “Don’t buy market share. Figure out how to earn it.”

Levels and Patterns of Market Segmentation Levels of Market Segmentation Mass marketing Micromarketing Segment marketing Market segment Sector Flexible market offering Naked solution Discretionary options

Levels and Patterns of Market Segmentation Niche Marketing Niche Local Marketing Individual Customer Marketing Mass-customization Choiceboard Customerization Segments Individuals

Steps in Market Segmentation, Targeting,and Positioning 1. Identify segmentation variables and segment the market 2. Develop profiles of resulting segments Market Segmentation 3. Evaluate attractiveness of each segment 4. Select the target segment(s) Market Targeting 5. Identify possible positioning concepts for each target segment 6. Select, develop, and communicate the chosen concept Market Positioning

Basic Market-Preference Patterns (a) Homogeneous preferences Sweetness Creaminess (b) Diffused preferences Creaminess Sweetness (c) Clustered preferences Creaminess Sweetness

Bases for Segmenting Consumer Markets Geographic Region, City or Metro Size, Density, Climate Demographic Age, Gender, Family size and Fife cycle, Race, Occupation, or Income ... Lifestyle or Personality Psychographic Occasions, Benefits, Uses, or Attitudes Behavioral

Bases for Segmenting Business Markets Demographic Operating Variables Purchasing Approaches Situational Factors Personal Characteristics

Table 10-3: Major Segmentation Variables for Business Markets Demographic Industry: Which industries should we serve? Company size: What size companies should we serve? Location: What geographical areas should we serve? Operating Variables Technology: What customer technologies should we focus on? User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers? Customer capabilities: Should we serve customers needing many or few services? Purchasing Approaches Purchasing-function organization: Should we serve companies with highly centralized or decentralized purchasing organizations? Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on? See text for complete table

Effective Segmentation Measurable Effective Segmentation Substantial Size, purchasing power, profiles of segments can be measured. Accessible Segments must be large or profitable enough to serve. Differential Segments can be effectively reached and served. Actionable Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments.

Additional Segmentation Criteria Ethical Choice of Market Targets Segment Interrelationships & Supersegments Segment-by-Segment Invasion Plans Intersegment Cooperation

Target Marketing Target marketing requires marketers to take three major steps: Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation). Select one or more market segments to enter (market targeting). For each target segment, establish and communicate the key distinctive benefit(s) of the company’s market offering (market positioning).

Market Targeting Evaluating and Selecting the Market Segments Single-Segment Concentration Selective Specialization Product Specialization Market Specialization Full Market Coverage Undifferentiated marketing Differentiated marketing

Five Patterns of Target Market Selection Single-segment concentration Selective specialization M1 M2 M3 P1 P2 P3 Product specialization M1 M2 M3 P1 P2 P3 P1 P2 P3 M1 M2 M3 P = Product M = Market Market specialization M1 M2 M3 P1 P2 P3 M1 M2 M3 Full market coverage P1 P2 P3

Segment-by-Segment Invasion Plan Customer Groups Truckers Railroads Airlines Company B Company C Company A Large computers Product Varieties Personal Mid-size