CHAPTER THREE

Market Segmentation and Strategic Targeting

Learning Objectives
1. To Understand Why Market Segmentation Is Essential. 2. To Understand the Criteria for Targeting Selected Segments Effectively. 3. To Understand the Bases for Segmenting Consumers. 4. To Understand How Segmentation and Strategic Targeting Are Carried Out.
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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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Why Segmentation is Necessary

Consumer needs differs Differentiation helps products compete Segmentation helps identify media

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Positioning
The value proposition, expressed through promotion, stating the products or services capacity to deliver specific benefits.

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Criteria for Effective Targeting

Identifiable Sizeable

Stable

Accessible

Congruent with the companys 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 Ads Benefit is Fresh Breath and the Nicorette Ad is Whitening and Smoking Cessation

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Bases for Segmentation

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Discussion Questions
Considering the largest bank in your colleges 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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Consumer-Rooted Segmentation Bases

Demographics Geodemographic Personality Traits Lifestyles Sociocultural
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Demographic Segmentation
Age Gender

Marital Status

Family Lifecycle

Income, Education, and Occupation

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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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Geodemographic Segmentation
Based on geography and demographics People who live close to one another are similar Birds of a feather flock together

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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: 3564

CHARACTERISTICS
Movers & Shakers is home to Americas 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, theres 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
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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

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Lifestyles
Psychographics Includes activities, interests, and opinions They explain buyers purchase decisions and choices

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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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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.
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VALS Figure 3.4

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Socio-Cultural Values and Beliefs

Sociological = group Anthropological = cultural Include segments based on
Cultural values Sub-cultural membership Cross-cultural affiliations

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Consumption-Specific Segmentation Bases

Usage rate Usage situation Benefit segmentation Perceived brand loyalty Brand relationship
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Consumption-Specific Segmentation Usage-Behavior

Usage rate
Awareness status Level of involvement

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Consumption-Specific Segmentation Usage-Behavior

Usage-situation segmentation
Segmenting on the basis of special occasions or situations Example : When Im away on business, I try to stay at a suites hotel.

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Which Consumption-Related Segmentation Is Featured in This Ad?

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This is an Example of a Situational Special Usage Segmentation.

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Benefits Segmentation
Benefits sought represent consumer needs Important for positioning Benefits of media

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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.
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. 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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Want-it-all Tourists

Independent Tourists

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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
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Implementing Segmentation Strategies

Micro- and behavioral targeting
Personalized advertising messages Narrowcasting
Email Mobile

Use of many data sources

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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 thingswork and familyconsume these professional working couples. Theyre putting their college degrees into action, climbing the corporate ladder for lucrative careers, while saving for their childrens education through do-it-yourself home improvements and trips to the zoo for entertainment. With time at a premium, its not surprising that the radio is the most relied-upon source for news and entertainment.
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Implementing Segmentation Strategies

Concentrated Marketing
One segment

Differentiated
Several segments with individual marketing mixes

Countersegmentation

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

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