1. Market Segmentation and Strategic Targeting
CHAPTER
THREE
Market Segmentation and Strategic Targeting

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Learning Objectives
To Understand Why Market Segmentation Is Essential.
To Understand the Criteria for Targeting Selected Segments Effectively.
To Understand the Bases for Segmenting Consumers.
To Understand How Segmentation and Strategic Targeting Are Carried Out.
Here is an outline of the topics for Chapter Three.
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3. What Kind of Consumer Does This Ad Target?
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This Ad Targets Runners Who Are Physically Active People and Also Relish the Outdoors.
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5. Why Segmentation is Necessary
Consumer needs differs
Differentiation helps products compete
Segmentation helps identify media
Not all consumers are alike – different customers have different needs. By segmenting the market and choosing target markets, companies can differentiate their products to provide the benefits that the segments desire. Once a marketer has identified their segment, they can choose media that is targeted to that segment for their advertising.
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Positioning
The value proposition, expressed through promotion, stating the product’s or service’s capacity to deliver specific benefits.
Positioning is the unifying element of each marketing mix. Product, place, price, and promotional strategies must work to state the product or service’s ability to deliver benefits to the consumer. Positioning is discussed in more detail in Chapter 6, but it is important to think about the concept as it is closely tied to the choice of a target market.
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7. Criteria for Effective Targeting
Identifiable
Sizeable
Stable
Accessible
Congruent with the company’s objectives and resources
There are five criteria for effective targeting, as shown on the slide. First of all, the target must be identifiable. This means that the marketer must be able to see or find the characteristic they have chosen for segmentation. The segment must also be sizeable. It must be large enough to be profitable to the marketer. A stable segment means that the consumers are not “fickle” and likely to change very quickly. A group of consumers must be accessible to be targeted. The marketer must be able to reach that market in an affordable way. Finally, the target must be congruent with the company’s objectives and resources.
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Which Distinct Benefit Does Each of the Two Brands Shown in This Figure Deliver?
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The Dentyne Ad’s Benefit is Fresh Breath and the Nicorette Ad is Whitening and Smoking Cessation
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10. Bases for Segmentation
This two-by-two matrix is important for understanding types of segmentation schemes. It is possible to break segmentation into two broad groups – those that are based on the consumers themselves and those that are based on the consumers’ interaction or potential interaction with the product and are therefore consumption based. Within each of these two larger types of schemes, segmentation variables can be considered to be based on facts or what is absolutely known and measureable about the consumer versus cognitions, which are abstract and can be determined only through more complex questioning.
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Discussion Questions
Considering the largest bank in your college’s city or town:
How might consumers’ needs differ?
What types of products might meet their needs?
What advertising media makes sense for the different segments of consumers?
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12. Consumer-Rooted Segmentation Bases
Demographics
Geodemographic
Personality Traits
Lifestyles
Sociocultural
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13. Demographic Segmentation
Age
Gender
Marital Status
Family Life-cycle
Income, Education, and Occupation
Demographics are the core of almost all segmentation because they are easy and logical. In addition, they are a cost-effective way to reach segments and demographic shifts are easier to identify than other types of shifts. When researching segmentation and media exposure, a consumer researcher will learn that media exposure is often directly related to demographics. Age segmentation includes segments such as the baby boomers and generations X and Y. Family life-cycle is based on the premise that many families pass through similar phases in their lives and share major life events such as moving, marriage, birth of a child, and retirement. Income, education, and occupation tend to tie together and lead to segmentation based on social class.
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Discussion Questions
What types of marketers might segment according to social class?
What ethical issues might marketers have when marketing to different social classes?
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15. Geodemographic Segmentation
Based on geography and demographics
People who live close to one another are similar
“Birds of a feather flock together”
Geodemographic segmentation is a popular use of geography in targeting. People who live close to one another are likely to be similar in tastes, incomes, lifestyles and consumption. They might eat similar foods, like the same movies, and take the same types of vacations.
This web link is to Claritas’ Prizm classifications. If you enter your zip code, you can find out which Prizm clusters are in your area.
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16. One PRIZM Segment - Table 3.4 (excerpt)
MOVERS & SHAKERS
1.59 of U.S. households, Median household income: $95,372, Predominant employment: Professional
Social group: Elite suburbs, Life stage group: Midlife success, Key education level: College grad+
Adult age range: 35–64
CHARACTERISTICS
Movers & Shakers is home to America’s up-and-coming business class: a wealthy suburban world of dual-income couples who are highly educated, typically between the ages of 35 and 54 and often with children. Given its high percentage of executives and white-collar professionals, there’s a decided business bent to this segment: Movers & Shakers rank number-one for owning a small business and having a home office.
LIFESTYLE TRAITS:
Go scuba diving/snorkeling, Plan travel on the Internet
Read PC Magazine, Listen to adult contemporary radio
Drive a Porsche
This is one of four PRIZM segments that are shown in the text. The other two are the New Empty Nests, The Boomtown Singles, and Bedrock America. Each one is described by where they live, their income, their lifestyle traits, and characteristics.
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Personality Traits
People often do not identify these traits because they are guarded or not consciously recognized
Consumer innovators
Open minded
Perceive less risk in trying new things
Personality traits help us identify what segments are valuable to marketers. For instance, if an innovator also classifies themselves high on an “exhibition” personality trait, it means they want to be the center of a group and might be important as these are the type of innovators to spread word-of-mouth messages regarding new products and services.
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Lifestyles
Psychographics
Includes activities, interests, and opinions
They explain buyer’s purchase decisions and choices
Demographics will tell us the consumer’s ability to buy them and will work for segmentation of basic products, but psychographics or lifestyles are based on consumer’s values. These shared values, interests, activities, opinions, and interests are an effective way to explain buyers’ purchase decisions.
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Discussion Questions
How might you differ from a person with similar demographics to yourself?
How would this be important for marketers?
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20. Two Views of Post-Retirement Lifestyle Table 3.6 (excerpt)
AS AN OPPORTUNITY TO MAKE A NEW START
This group regards retirement as an exciting time. Work will have been largely unrewarding, so the transition is seen as a freedom from the constraints of their former role. Retirement will invigorate such people and inspire them toward undertaking activities that work largely prevented them from pursuing.
AS A CONTINUATION OF THEIR PRE-RETIREMENT LIFESTYLE
To such people, retirement is not perceived as signaling a drastic change. Work life has not been as unsatisfying as for others, hence its ending is not greeted with euphoria. There is, however, some satisfaction that retirement permits more opportunity to devote time to existing activities outside of their working role. The future is likely to see an increase in such activities but no real desire to engage in new ones.
These are two of the four views presented in the book in Table In this segmentation by lifestyle, you will have two individuals with similar demographics who share a very different view of this stage of the family life-cycle.
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VALS – Figure 3.4
VALS is the most popular segmentation system that combines lifestyles and values. You can see how it is related to Maslow’s hierarchy of needs and the concept of social character. The system looks at three primary motivations and then the resources that individuals might have to draw upon. The lower resource consumer is at the bottom and labeled survivors while the highest resource consumer is often the innovator. We will talk about innovators in later chapters who are similar to this innovator.
This web link will take you to the VALS website so you can see where you are classified. If you are a full-time student, run the survey twice – once with your own salary and once with your parents’.
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22. Socio-Cultural Values and Beliefs
Sociological = group
Anthropological = cultural
Include segments based on
Cultural values
Sub-cultural membership
Cross-cultural affiliations
An American might identify with common American cultural values, such as fitness and health but also with sub-cultural values if they are Hispanic or Asian Americans. In this global world, marketers must often think cross-culturally, including many countries and more global marketing segmentation. A consumer may be cross-cultural if they were born in one country and are now living in another.
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23. Consumption-Specific Segmentation Bases
Usage rate
Usage situation
Benefit segmentation
Perceived brand loyalty
Brand relationship
Consumption-specific bases include facts about actual consumption behavior and cognitions consumers have about products and services in the form of attitudes and preferences.
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24. Consumption-Specific Segmentation Usage-Behavior
Usage rate
Awareness status
Level of involvement
Usage rate is often based on whether a group of consumers are heavy, medium, light, or nonusers of a product. Many marketers target the heavy consumers since they are often the most loyal and account for the largest portion of sales. A company with a strong growth objective might target the other usage segments to fuel their growth in the marketplace. Furthermore, a marketer might target those who are unaware of their product in order to start the process that could lead to purchase. Level of involvement is discussed in future slides when we reach Chapter seven.
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25. Consumption-Specific Segmentation Usage-Behavior
Usage-situation segmentation
Segmenting on the basis of special occasions or situations
Example : When I’m away on business, I try to stay at a suites hotel.
Usage rate or amount is important to some marketers, but it might also be worth considering WHEN a given product is used. This is the basis for a usage-situation segmentation opportunity. People might consume certain products for special events, certain days of the week, or certain times during the year. Think of the rise of sales in chocolate and flowers for Valentine’s Day.
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26. Which Consumption-Related Segmentation Is Featured in This Ad?
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27. This is an Example of a Situational Special Usage Segmentation.
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28. Benefits Segmentation
Benefits sought represent consumer needs
Important for positioning
Benefits of media
In many ways, segmentation is tied to the benefits that a group desires from your product or service. Knowing these benefits is important for positioning your product in the minds of the consumer. Consumers are constantly weighing the benefits of different types of media and noticing that digital media might be preferred in immediacy and accessibility but that traditional media often provides more depth and details.
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Benefits Visiting Tourists Seek in National Park – Table 3.13 (excerpt)
Segment
Description
Environmentalists
Interested in an unpolluted, un-spoilt natural environment
and in conservation. Not interested in socializing, entertainment, or sports. Desire authenticity
and less man-made structures and vehicles
in the park.
Want-it-all Tourists
Value socializing and entertainment more than
conservation. Interested in more activities and
opportunities for meeting other tourists. Do not
mind the “urbanization” of some park sections.
Independent Tourists
Looking for calm and unpolluted environment,
exploring the park by themselves, and staying at
a comfortable place to relax. Influenced by word
of mouth in choosing travel destinations.
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30. Brand Loyalty and Relationships
Brand loyalty includes:
Behavior
Attitude
Frequency award programs are popular
Customer relationships can be active or passive
Retail customers seek:
Personal connections vs. functional features
Banking customers seek:
Special treatment
Confidence benefits
Social benefits
Brand loyalty includes the behavior to the brand – how often somebody purchases the brand, in addition to the attitude or feeling the consumer has to a brand. Many companies have frequency award or loyalty programs where loyal customers receive rewards and benefits for purchasing often. Customer relationships are very complex and differ based on commitment by the customers, their sense of loyalty, their expectations of specialty treatment, their confidence in the company, and how they are treated by staff and employees from the company.
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31. Implementing Segmentation Strategies
Micro- and behavioral targeting
Personalized advertising messages
Narrowcasting
Mobile
Use of many data sources
Micro-targeted began in 2004 and is growing field within marketing. It is growing due to the marketer’s ability to use complex databases and personalized media including and mobile phones. Micro-targeting focuses on delivering a personalized advertising message to the user whether they are at work, at home, or on-the-go.
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32. Sample Acxiom Clusters - Table 3.16 (excerpt)
Shooting Stars
Still relatively young at a mean age of 36, and with top rankings for income, college education, home value and net worth, these consumers have the world by the tail. Feeling financially secure with large investment portfolios, Shooting Stars spend their disposable Income making life a comfortable one, focusing on health, exercise, gourmet food, golf, and travel.
Tots & Toys
Two things—work and family—consume these professional working couples. They’re putting their college degrees into action, climbing the corporate ladder for lucrative careers, while saving for their children’s education through do-it-yourself home improvements and trips to the zoo for entertainment. With time at a premium, it’s not surprising that the radio is the most relied-upon source for news and entertainment.
Acxiom is a major company involved in profiling customers and providing marketers with data. Like VALS and PRIZM, they have created segments or clusters for marketers. This table shows three sample clusters, including shooting stars, tots & toys, and Mid Americana.
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33. Implementing Segmentation Strategies
Concentrated Marketing
One segment
Differentiated
Several segments with individual marketing mixes
Countersegmentation
Concentrated marketing usually involves only one segment, whereas a differentiated marketing strategy is targeting several segments with individual marketing mixes. Differentiated marketing is usually used by financially strong companies that are well established in their market sector. Countersegmentation involves combining existing segments for a company to become more efficient and profitable.
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