Market Segmentation and

Customer Targeting

Market segmentation & targeting

Marketing Excellence at Sony

Marketing strategy and implementation

Develop and
Understand the
implement a market
consumer market
offering

What are my four What is my target

ps? segment?

Understand your Identify the

company competition

What are my goals? What is my

position?

Market segmentation & targeting

Marketing Excellence at Sony

Main questions for this morning

• What is the definition of market

segmentation?
• What is the purpose of market
segmentation?
• How are market segments identified?
• How do these questions apply to
Nissan’s market segments?

Market segmentation & targeting

Marketing Excellence at Sony

1
 Segmentation Exercise

The following are quotations from

trade magazines published in
April/May 2007. They describe
segments in different industries.
Select the quotation(s) that
illustrate the most accurate
understanding of the definition of
market segmentation.
Market segmentation & targeting
Marketing Excellence at Sony

What is a market segment?

A group of individuals who share a common
need/want or a common set of needs/wants.

Market segmentation & targeting

Marketing Excellence at Sony

“The beer market refers to the production,

distribution, marketing and sale of alcoholic
beverages brewed primarily from water, hops
and malt. These cover the full range of beers,
including lagers, ales and stouts. Lagers
dominate the market but, due to a tax loophole,
low malt beers, known as happoshu, are
significantly cheaper than traditional beers and
the segment has been growing rapidly.”
Datamonitor, January 2002
Market segmentation & targeting
Marketing Excellence at Sony

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 The beer category (and sub-categories)
HAPPOSHU (25%)

? ?
(beer-like low-malt beverage)
Shochu

Chu-Hi

REGULAR LAGERS (50%) “THIRD BEER” (18%)

(beer-like no-malt beverage)
Market segmentation & targeting
Marketing Excellence at Sony

What segments do these categories imply?

Market segmentation & targeting

Marketing Excellence at Sony

Some don’t like the taste (but think the price is worth it)

• 30-year-old graduate student: “It’s bogus. I’ve never tried it

and I never will. Simple as that.”
• 38-year-old director of research: “It tastes awful. It has a very
artificial flavor, with funny (sometimes sweet, sometimes
bitter) aftertastes.”
• 40-year-old beer expert: “It’s like using chemicals to make
strawberries taste sweet. People just buy happoshu because
it’s cheap.”
• 28-year-old masseuse: “Happoshu tastes like medicine. I
drink Kirin’s Tanrei because of the price and because it tastes
the best of the worst.”
• 33-year-old office worker: “Happoshu may taste a bit thin,
but the savings add up if you drink daily”
• 35-year-old scientist: “Generally, it is too light. It doesn’t
taste good. If the price were raised, I would never drink
happoshu.”

Market segmentation & targeting

Marketing Excellence at Sony

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 Some like the taste (and think the price is a bonus)

• 24-year-old office worker (who lives with family): “We love it.
Everyone in my family drinks it every day. We buy it in cases since
it’s cheaper, and yet it tastes just like beer.”
• 45-year-old liquor store manager: “Yes, it is like water. But it is
light and good in a refreshing way. Some people like it for this.”
• 35-year-old computer programmer: “It looks like beer, it contains
the same amount of alcohol as beer, but it is made with less malt
than beer, giving it a different, lighter taste.”
• 52-year-old writer: “Happoshu looks like beer, smells like beer,
and tastes almost like Japanese beer. It’s a bit more watery than
Japanese beer, which makes it taste like American beer, but I like
American beer.”
• 55-year-old fruit vendor: “I love the taste of the tiny bubbles”
• 35-year-old teacher: “It had a very good beer smell, a light body,
and a touch of pale ale bitterness. I thought it was a real beer until
my wife told me it was happoshu.”
• 22-year-old student: “If you drink beer in Japan you are seen as
“oyaji” (old man). My friends and I drink Happoshu and Chu-hai.”

Market segmentation & targeting

Marketing Excellence at Sony

Product category versus consumer segment

Merely It is not
guessing why informa-
customers tive to say
buy in a that the
particular target
category segment
means using for hap-
intuition poshu is
only to make “happoshu
one of the drinkers”.
most
important
marketing Dividing a market by product
decisions. categories tells us little about who the
buyers are and why they buy.
Market segmentation & targeting
Marketing Excellence at Sony

An un-segmented market

Why segment a market?

Market segmentation & targeting
Marketing Excellence at Sony

4
 What about mass-market products?

Market segmentation & targeting

Marketing Excellence at Sony

What about mass-market products?

50% of US
38% of US
households consume
households consume
instant coffee in any
Folgers in any
given year
given year

All US
households

Market segmentation & targeting Source: Hallberg

Marketing Excellence at Sony All Customers are not Created Equal

What about mass-market products?

70% of Folgers
volume comes
from 40% of its
households

All Folgers
households

Market segmentation & targeting

Marketing Excellence at Sony

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 What about mass-market products?
All instant 7.6% of
coffee households households
produce 70%
of the brand’s
All US All Folgers volume
grocery households

households
Heavy
Folgers
households

40% of 38% of 50% = 7.6%

Market segmentation & targeting
Marketing Excellence at Sony

What about mass-market products?

• 24% of all US soft-drink buyers buy Diet

Coke, but 8% of all buyers produce 84% of
the volume.
• 15% of all US clothing buyers buy Levi’s
blue jeans, but 5% of all buyers produces
85% of the profit.

Market segmentation & targeting Source: Hallberg

Marketing Excellence at Sony All Customers are not Created Equal

SO WHAT?
• Most of your profits are going to come from
a small percent of the total market. You can
either ignore this or make it part of your
strategy.
• The return you earn on your marketing
investments will depend on the customers
you decide to invest in.

Market segmentation & targeting

Marketing Excellence at Sony

6
Market segmentation & targeting
Marketing Excellence at Sony

Using consumer research to

understand your key market
segment—or to identify new ones

Market segmentation & targeting

Marketing Excellence at Sony

How are ice cream customers segmented?

Market segmentation & targeting

Marketing Excellence at Sony

7
 Is it useful to segment by gender
and/or other demographics?

If 50% of the market

is female, what % of
ice cream eaters
would you expect to
be female?
Market segmentation & targeting
Marketing Excellence at Sony

Demographic characteristics
Ice Cream Eaters
(depending on your goals, could be “Ice Cream Buyers” instead)
% of % of
pop mkt. index

Male 48% 33% 69

Female 52% 67% 129

Kids in HH 43% 54% 126

No Kids in HH 57% 46% 81

High income 15% 13% 87

Middle income 60% 66% 110

Low income 25% 21% 84

This kind of analysis can also be done for your own product/brand.
Market segmentation & targeting
Marketing Excellence at Sony

“Psychographic” characteristics
Collected, for example, via a consumer preference questionnaire

How much do you like each of the following ice cream

flavors? Next to each flavor, write a number from 1
(absolutely hate it) to 7 (one of my favorites)
• Green Tea • Espresso
• Vanilla • Azuki Bean
• Cookies & Cream • Mango
• Strawberry • Black Sesame
• Macadamia Nut • Hazelnut
• Rum Raisin • Chocolate
Market segmentation & targeting
Marketing Excellence at Sony

8
 Statistically determined preference map
The closer together words are on the map, the more frequently
they were rated similarly by respondents.
Higher Preference for Texture Variety

Cookies &

Higher Preference for Sweetness

Azuki
Lower Preference for Sweetness

Cream
Bean

Rum Raisin
Black Sesame

Macadamia
Nut
Hazelnut
Strawberry
Espresso
Green Chocolate
Vanilla
Tea Mango

Lower Preference for Texture Variety

Market segmentation & targeting
Marketing Excellence at Sony

Statistically determined preference map

Each dot represents where a consumer’s preference
lies on the map
These customers
Higher Preference for Texture Variety
have a higher
index for less Cookies &
Higher Preference for Sweetness

Azuki
Lower Preference for Sweetness

sweet, more Bean

Cream
textured ice
Rum Raisin
cream. Black Sesame

Macadamia
Nut
Hazelnut
Strawberry
Espresso
Green Chocolate
Vanilla
Tea Mango

Lower Preference for Texture Variety

Market segmentation & targeting
Marketing Excellence at Sony

Statistically determined preference map

Your statistical analysis can include more dimensions.

Higher Preference for Texture Variety

Eats ice
Less Health
Cookies &
cream as an
Higher Preference for Sweetness

Azuki
Lower Preference for Sweetness

Conscious Cream
Bean infrequent
treat
Rum Raisin

HH has
Black Sesame
?
no children Macadamia HH has
Nut children
Hazelnut
Strawberry

More HealthEspresso Eats ice

Conscious
Green cream 1 time
Vanilla Chocolatea week or
Tea Mango
more

Lower Preference for Texture Variety

Market segmentation & targeting
Marketing Excellence at Sony

9
 Gaining deeper consumer insights

Market segmentation & targeting

Marketing Excellence at Sony

Combining demographics and psychogrpahics

What segments are currently important to our business?

% of % of
mkt. co. rev. index

Self-Rewarding Moms 13% 23% 176

Adventurous Kids 11% 15% 136

Picky Gourmets 20% 10% 50

Favorite-Flavor Bingers 21% 19% 90

Occasional Eaters 35% 33% 94

Under what conditions would we target SRMs and AKs?

Under what conditions would this be a bad idea?
Market segmentation & targeting
Marketing Excellence at Sony

Summary conclusions
• Segments are not products.
• The premises of segmentation:
– Different people want different things
– One product cannot be all things to all people
• Products/brands depend on segments whether
they realize it or not.
• The more distinguishing dimensions you use to
define a segment, the better able you are to target
and position.
• Decisions about market segmentation have
considerable influence on market attractiveness.
Market segmentation & targeting
Marketing Excellence at Sony

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