Target Market

Selection
Lesson 5
Objectives

• Explain market segmentation, and identify several possible bases

for segmenting consumer markets, business markets and
international markets.
• List and distinguish among the requirements for effective
segmentation: measurability, accessibility, substantiality and
actionability
• Outline the process of evaluating market segments, and suggest
some methods for selecting market segments
Markets
• Mass marketing – the seller mass produces, mass
distributes and mass promotes one product to all buyers
• Product – variety marketing – the seller produces two or
more products that have different features, styles, quality,
sizes and so on.
• Target marketing – the seller identifies market segments,
selects one or more of them, and develop product and
marketing mixes tailored to each
Micromarketing
• A form of target marketing in which companies tailor
their marketing programs to the needs and wants of
narrowly defines geographic, demographic,
psychographic or behavioral segments.
Three Major Steps in Target Marketing

6. Develop marketing mix

for each target segment
Market Positioning
5. Develop positioning for
each target segment
4. Select the target
segments
Market Targeting
3. Develop measures of
segment attractiveness
2. Develop profiles of
resulting segments
Market segmentation
1. Identify bases for
segmenting the market
• Market Segmentation – dividing a market into distinct group of
buyers with different needs, characteristics or behavior who might
require separate products or marketing mixes.
• Market Targeting – the process of evaluating each market
segment’s attractiveness and selecting one or more segments to
enter.
• Market Positioning – arranging for a product to occupy a clear,
distinctive and desirable place relative to competing products in
the minds of target consumers. Formulating competitive
positioning for a product and detailed marketing mix.
Bases for Segmenting Consumer Markets

• Geographic Segmentation – dividing a market into

geographical units such as nations, states, regions, countries,
cities or neighborhoods.
• Demographic Segmentation – dividing the market into groups
based on demographic variables such as age, sex, family size,
family life cycle, income, occupation, education, religion, race
and nationality.
• Age and life-cycle segmentation – dividing a market into
different age and life-cycle groups.
• Gender segmentation – dividing a market into groups based
on sex.
• Income segmentation – dividing a market into different
income groups.
• Multivariate demographic segmentation – segmenting a market
by combining two or more demographic variables.
Bases for Segmenting Consumer Markets

• Psychographic Segmentation – dividing a market into different

groups based on social class, lifestyle or personality
characteristics.
• Social Class
• Lifestyle
• Personality

• Behavioral Segmentation – dividing a market into groups

based on consumer knowledge, attitude, use or response to a
product.
• Occasion Segmentation – dividing a market into groups
according to occasions when buyers get the idea to buy, actually
make their purchase, or use the purchased item.
Bases for Segmenting Consumer Markets

• Benefit Segmentation – dividing the market into groups

according to the different benefits that consumers seek from the
product.
• User Status – markets can be segmented into groups of
nonusers, ex-users potential users, first-time users and
regular users of a product.
• Usage Rate – markets can also be segmented into light,
medium and heavy user groups. Heavy users are often a
small percentage of the market but account for a high
percentage of total buying.
• Loyalty Status – markets can also be segmented by
consumer loyalty. Consumers can be loyal to brands (Tide),
stores (Wal-Mart) and companies (Ford). Buyers can be
divide into groups according to their degree of loyalty.
 Benefit Segmentation of the Toothpaste Market

BENEFIT DEMOGRAPHI BEHAVIOR PSYCHOGRAP FAVORED

SEGMENTS CS HICS BRANDS
Economy (low Men Heavy users High autonomy, Brands on sale
price) value oriented

Medicinal (decay Large families Heavy users Hypochondrial Crest

prevention) conservative

Cosmetic (bright Teens, young Smokers High Sociability, Aqua-Fresh Ultra

teeth) adults active Brite

Taste (good Children Spearmint lovers High self- Colgate, Aim

tasting) involvement,
hedonistic
Factors to Consider When Selecting a Target
Market Segment

1. Attractiveness of a Market
2. Suitability of Segments to the Firm
1. Attractiveness of a Market
1. Size of the segment (number of customers and/or number of
units)
2. Growth rate of the segment
3. Competition in the segment
4. Brand loyalty of existing customers in the segment
5. Attainable market share given promotional budget and
competitors' expenditures
6. Required market share to break even
7. Sales potential for the firm in the segment
8. Expected profit margins in the segment
2. Suitability of Segments to the Firm
1. Whether the firm can offer superior value to the customers in
the segment
2. The impact of serving the segment on the firm’s image
3. Access to distribution channels required to serve the segment
4. The firm's resources vs. capital investment required to serve
the segment
5. The better the firm's fit to a market segment, and the more
attractive the market segment, the greater the profit potential
to the firm.
Target Market Strategies
1. Single-segment strategy - also known as a concentrated
strategy. One market segment (not the entire market) is served
with one marketing mix. A single-segment approach often is
the strategy of choice for smaller companies with limited
resources.

2. Selective specialization - this is a multiple-segment strategy,

also known as a differentiated strategy. Different marketing
mixes are offered to different segments. The product itself may
or may not be different - in many cases only the promotional
message or distribution channels vary.
Target Market Strategies
3. Product specialization - the firm specializes in a particular
product and tailors it to different market segments.

4. Market specialization - the firm specializes in serving a

particular market segment and offers that segment an array of
different products.

5. Full market coverage - the firm attempts to serve the entire

market. This coverage can be achieved by means of either a
mass market strategy in which a single undifferentiated
marketing mix is offered to the entire market, or by a
differentiated strategy in which a separate marketing mix is
offered to each segment
 Diagrams showing the five market selection
patterns.

S1 S2 S3 S1 S2 S3 S1 S2 S3 S1 S2 S3 S1 S2 S3

P1 P1 P1 P1 P1

P2 P2 P2 P2 P2

P3 P3 P3 P3 P3

Single Selective Product Market Full Market

Segment Specialization Specialization Specialization Coverage