Opening Slide

Fundamentals of Marketing
Module 6:
Market Segmentation and Target
Markets

1
Module 6 Learning Objectives

1. Define markets, segmentation, and target markets.

2. Understand the advantages and disadvantages of
segmentation and target marketing.
3. Describe the criteria for effective segmentation and
the three primary segmentation strategies.
4. Discuss the six key variables used to segment
markets
5. Define positioning strategy and describe the key
positioning strategies available.
1. Defining Markets, Segmentation, and Target Markets
Markets and Target Marketing

• Market - any individual, group of individuals,

or organizations willing, able, and capable of
purchasing a firm’s product.

• Before a firm can effectively market its

products to you, it must fully understand
your needs and wants from that product.
Markets and Target Marketing

• Heterogeneous demand- different groups of

customers have differing needs from specific
products.

• Market Segmentation- the separation of

markets into distinctive groups based on
homogeneous (similar) characteristics.
Markets and Target Marketing

• Market Segment- a group of consumers

that are alike based on some characteristics.

• Target Market- the specific group of

customers toward which a firm directs its
market efforts.
 Markets and Target Marketing

• Target Marketing- the process of matching

a specialized marketing mix with the needs
of a specific market segment.
Target the Mass Market versus the
Individual Consumer

Mass
Market
Niche Micro-
marketing The
Individual

Personal-
Micro- ization
Standardized Niche marketing
Marketing Mix
Target the Mass Market versus the
Individual Consumer

• The options for the size of a market

segment range from one mass market to
one individual.

• Niche Marketing- the process of targeting

a small market segment with a specific,
specialized marketing mix.
 Target the Mass Market versus the
Individual Consumer

• Micromarketing- the process of targeting

small, narrowly defined market segments.

• For example, the Target Corporation

researches the demographic characteristics
of consumers who live within three miles of a
store, and then stocks merchandise that fits
the neighborhood consumers’ needs.
 Target the Mass Market versus the
Individual Consumer

• On the personalization (individual) end of

the continuum, a firm may decide to target
individual consumers and personalize
marketing efforts toward each.
2. Advantages and Disadvantages of Segmentation and Target
Marketing
 Advantages of Segmentation and
Target Marketing

• better understand potential and actual

consumers
• develop and implement a marketing mix
tailored to the specific needs of the market
• assess potential demand
• identify competing products in their specific
market
 Advantages of Segmentation and
Target Marketing

• increases the likelihood of sales effectiveness

and cost efficiencies in reaching the market
• allows a firm to position its products
• allows a firm to identify opportunities
Disadvantages of Segmentation and
Target Marketing

• Generally increases marketing costs

• Can lead to proliferation of products that
becomes overly burdensome and costly to
manage
• Too small niches may be viewed cynically
• Personalized marketing efforts require that
vast amounts of data
Disadvantages of Segmentation and
Target Marketing

• Target marketers have been widely criticized

for unethical or stereotypical activities.
Marketing Stereotypes

25% of all gamers are over 45 years old

52% of all gamers are women.
3. Criteria for Effective Segmentation and Primary Segmentation
Strategies
 Market Criteria

• Segmentable markets are:

• Heterogeneous
• Measurable=>identifiable
• Substantial=> size and purchasing power
• Actionable
• Companies must be able to respond to preferences with an
appropriate marketing mix
• Accessible
• Market must be efficiently reachable
Determine Need for
Segmentation

Segmentation Strategy

Undifferentiated targeting strategy

Concentrated strategy

Differentiated strategy
Determine Need for Segmentation

Undifferentiated targeting strategy

• Companies might
develop one
marketing mix
Concentrated strategy strategy that is
appropriate for all
Differentiated strategy members of the total
market.
Determine Need for Segmentation

Undifferentiated targeting strategy

• Only one marketing
mix is developed and
directed toward a few,
Concentrated strategy or perhaps one,
profitable market
Differentiated strategy segments.
 Determine Need for
Segmentation

Undifferentiated targeting strategy

• Exists when a firm
develops different
marketing mix plans
specially tailored for
Concentrated strategy

each of two or more

Differentiated strategy
market segments.
4. Key Variables Utilized for Market Segmentation
 Determine Bases for
Segmentation

• Segmenting means dividing markets into

homogenous groups based on similar
characteristics or traits.

• To divide a market into segments, firms use

segmentation variables that describe the
characteristics of each part of the market.
 Segmentation Variables

Demographic Benefits-Sought

Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
 Demographic Segmentation

Age Income Level

Family

Education Ethnicity
Segmentation Variables

Demographic Benefits-Sought

Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
 Geographic Segmentation

• When an organization localizes its marketing

efforts to accommodate the unique needs of
specific geographic regions
 Segmenting Consumer
Behaviors

Demographic Benefits-Sought

Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
Psychographic Segmentation

• Grouping customers together

based on social class, lifestyles
and psychological
characteristics (activities,
interests and opinions)
Psychographic Segmentation

• Psychographic Profiles
• Yuppies
• Dinks
• Dewks
• Mobys
• Woofs
• Puppies
• Guppies
 Segmenting Consumer
Markets

Demographic Benefits-Sought

Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
 Benefits-Sought Segmentation

• Markets can be
segmented based on
the benefits that
consumers desire
from using a specific
product
Segmenting Consumer
Markets

Demographic Benefits-Sought

Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
Situation Segmentation

• Purchase situation or occasion

• Physical surroundings
• Social surroundings
• Temporal perspective
• How much time to make a purchase?
• Task definition
• Prepurchase attitude
 Segmenting Consumer
Markets

Demographic Benefits-Sought

Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
 Behavior/Usage Segmentation

• Markets can be segmented by how often or how

heavily consumers use a specific product
• 80/20 Principle - 80% of revenue generated by 20% of
customers

Light Users
80% Heavy Users
20%
5. Positioning Defined and Key Positioning
Strategies
 Select Positioning Strategy

• Key to developing the appropriate marketing

mix is the positioning strategy of the product.
 Select Positioning Strategy

• Effective positioning means determining:

1. What consumers currently think about the product,
especially in relation to competing products
2. What the marketer wants consumers to think about
the product
3. Which positioning strategy will elevate the
consumers’ current product image to the desired
product image.
 Select Positioning Strategy

• Perceptual Mapping- creating a visual

depiction about consumer perceptions of a
product on two or more dimensions in
relation to competitors.
 Select Positioning Strategy

• The positioning strategy must determine where a

company wants to go and specify how to get
there by positioning the product according to any
of the following ways:

• Price/Quality
• Product Attributes
• Symbol
• Product User
• Product Usage
• Product Class
• Competition
 Positioning Strategy

• Differentiation
through:
• Price/quality -
emphasize value in
terms of quality, price,
or both
• Every Day Low Pricing
• EDLP
 Positioning Strategy

• Differentiation • Differentiation
through:
through:
• Product attributes that
lead to benefits – Symbol - use of a
• Toothpaste symbol or icon to
• Automobiles
position a product
• Fuel consumption
• Towing capacity in the consumer
• Horsepower consciousness
• Golden Arches
 Positioning Strategy

• Differentiation
through:
• Product user - the
typical user of a
product
 Positioning Strategy

• Differentiation
through:
• Product class -
positioning against
another type of
product or product
class
• Bounce
• Rogaine
 Positioning Strategy

• Differentiation
through:
• Competition -
comparisons to a
product’s
competition
(directly or
indirectly)
• King of beers
 Select Positioning Strategy

• Repositioning - the process of creating a new

image about an existing product in consumers’
minds.
• Mountain Dew
• Snickers
• Old Spice Deoderant
 Mountain Dew’s
Original Positioning Strategy
 Mountain Dew’s
New Positioning Strategy
 The Target Market
Selection Process

Identify Total Market

Determine Need for

Segmentation
Determine Bases for
Segmentation Assess Potential
Profitability of Segment
Profile Each Selected and Select Target
Segment Segment
Select Positioning
Strategy
Develop and Implement
Appropriate Marketing Mix

Monitor, Evaluate and

ControlObjective 3
Module 6 Learning Objectives

1. Define markets, segmentation, and target markets.

2. Understand the advantages and disadvantages of
segmentation and target marketing.
3. Describe the criteria for effective segmentation and
the three primary segmentation strategies.
4. Discuss the six key variables used to segment
markets
5. Define positioning strategy and describe the key
positioning strategies available.