Market Segmentation

and Target Markets

chapter 7
Harcourt, Inc.
 Objectives

 Understand the concepts: market,

segmentation, and target markets
 Learn the advantages and
disadvantages of target marketing
 Explain the steps in target market
selection

Dr. Rosenbloom
 Objectives

 Discuss segmentation criteria,

strategies, bases, and information
sources
 Understand market profiling and
positioning strategies
 Discuss differences for business and
international marketing
Dr. Rosenbloom
 What is a market?

 Individuals or organizations
who:

Are willing, able, and capable of
purchasing a firm’s product

Segmentation is critical because
demand is often heterogeneous

Dr. Rosenbloom
What is market segmentation?

 Market Segmentation

Process of dividing a large
market into smaller target
markets, or customer groups
with similar needs and/or
desires

Dr. Rosenbloom
 Market Segmentation
Mass
Market
Niche Micro-
marketing The
Individual

e n ta ti o n S ize
Mar ke t Se gm
f
Continuum o Personal-
Micro- ization
Standardized Niche marketing
Marketing
Mix Dr. Rosenbloom
 Target Marketing
 Advantages

Easier analysis of potential and actual
consumers

Tailoring of products to market

Assessment of demand potential

Identify competing products

Increased sales effectiveness and cost
efficiencies

Product positioning and easy identification
of opportunities
Dr. Rosenbloom
 Target Marketing
 Disadvantages

Increased marketing costs

Personalization can become
burdensome to manage

Faux segmentation may be viewed
cynically

Narrow segmentation can impact
brand loyalty

Ethics and stereotyping issues
Dr. Rosenbloom
 Target Market Selection
Identify Total Market

Determine Need for

Segmentation

Determine Bases for

Segmentation
Assess Potential
Profile Each Selected Profitability of Segment
Segment and Select Target Segment

Select Positioning
Strategy

Develop and Implement

Appropriate Marketing Mix

Monitor, Evaluate and

Dr. Rosenbloom Control
 Market Criteria
 Segmentable markets are:

Heterogeneous

Measurable

Substantial

Actionable
• Companies must be able to respond to preferences
with an appropriate marketing mix

Accessible
• Market must be efficiently reachable
Dr. Rosenbloom
 External Factors

 Stage in product life cycle

 Competition
 Product specific issues
 Market for the product

Dr. Rosenbloom
 Segmentation Variables

Demographic Benefits-Sought
Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
Dr. Rosenbloom
 Demographic Segmentation

Age Income Level

Family

Education Ethnicity

Dr. Rosenbloom
 Demographic Segmentation
 Age

Some products
are marketed to
specific age
groups

Dr. Rosenbloom
 Demographic Segmentation
 Age

Some products
are marketed to
specific age
groups

Dr. Rosenbloom
 Demographic Segmentation
 Income Level

Some products
are marketed to
consumers with
different income
levels

Dr. Rosenbloom
 Demographic Segmentation
 Income Level

Some products
are marketed to
consumers with
different income
levels

Dr. Rosenbloom
Demographic Segmentation
Bartles and James

Hal Riney and

Dr. Rosenbloom Partners
 Demographic Segmentation
 Family

Some products are
marketed to
consumers with
special family
consideration
• Family Life Cycle
• Bachelor, marriage,
married with children,
retired, etc.
Dr. Rosenbloom
Functions Of Advertising
KinderCare

Dr. Rosenbloom The Martin Agency

 Demographic Segmentation
 Family

Some products are
marketed to
consumers with
special family
consideration
• Family Life Cycle
• Bachelor, marriage,
married with children,
retired, etc.
Dr. Rosenbloom
 Demographic Segmentation
 Education

Some products are
marketed to
consumers with
certain educational
levels

Dr. Rosenbloom
 Demographic Segmentation
 Ethnicity

Some products are
marketed to
consumers from
specific ethnic
backgrounds

Dr. Rosenbloom
 Demographic Segmentation
 Ethnicity

Some products are
marketed to
consumers from
specific ethnic
backgrounds

Dr. Rosenbloom
 Segmentation Variables

Demographic Benefits-Sought
Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
Dr. Rosenbloom
 Geographic Segmentation
 When an organization localizes its
marketing efforts to accommodate the
unique needs of specific geographic
regions

Dr. Rosenbloom
 Geographic Segmentation
 When an organization localizes its
marketing efforts to accommodate the
unique needs of specific geographic
regions

Dr. Rosenbloom
 Geographic Segmentation

 Metropolitan Statistical Areas


An urbanized area of 50,000 and a total
metropolitan area population of at least
100,000
• Charlottesville, Virginia

Dr. Rosenbloom
 Geographic Segmentation

 Primary Metropolitan Statistical

Areas

An urbanized county or cluster of
counties with a population of more
than 1 million
• Gary/Hammond, Indiana

Dr. Rosenbloom
 Geographic Segmentation

 Consolidated Metropolitan
Statistical Area

A metropolitan area that includes at
least two PMSAs
• Baltimore, Maryland and Washington,
D.C.

Dr. Rosenbloom
Segmenting Consumer Markets

Demographic Benefits-Sought
Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
Dr. Rosenbloom
Psychographic Segmentation


Grouping customers together
based on social class,
lifestyles and psychological
characteristics (attitudes,
interests and opinions)

PRIZM analysis from Claritas

Dr. Rosenbloom
Segmenting Consumer Markets

Demographic Benefits-Sought
Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
Dr. Rosenbloom
 Benefits-Sought Segmentation
 Markets can be
segmented based
on the benefits that
consumers desire
from using a
specific product

Dr. Rosenbloom
Benefits-Sought Segmentation
American Pork
Council

Dr. Rosenbloom Bozell, Incorporated

Segmenting Consumer Markets

Demographic Benefits-Sought
Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
Dr. Rosenbloom
 Situation Segmentation

 Purchase situation or occasion


Physical surroundings

Social surroundings

Temporal perspective
• How much time to make a purchase?

Task definition

Pre-purchase attitude
Dr. Rosenbloom
Segmenting Consumer Markets

Demographic Benefits-Sought
Segmentation Segmentation

Geographic Situation
Segmentation Segmentation

Psychographic Behavior/Usage
Segmentation Segmentation
Dr. Rosenbloom
 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
Light Users
Users
80%
80%
Heavy
Heavy Users
Users
20%
20%

Dr. Rosenbloom
 Segmentation Data
 Internal sources

In-house customer and marketing databases

Data mine to explore patterns and
relationships in collected data
 External sources

Lists of catalog/magazine subscribers

U.S. Census information

Mediamark, CACI Marketing Systems, etc.
Dr. Rosenbloom
 Positioning Strategy
 Differentiation
through:

Price/quality -
emphasize value
in terms of
quality, price, or
both

Dr. Rosenbloom
 Positioning Strategy
 Differentiation  Differentiation
through: through:

Product attributes - 
Symbol - use of a
characteristics as a symbol or icon to
positioning base position a product

Product usage - in the consumer
positioning based consciousness
on a products
typical use
Dr. Rosenbloom
 Positioning Strategy
 Differentiation
through:

Product user - the
typical user of a
product

Dr. Rosenbloom
 Positioning Strategy
 Differentiation
through:

Product class -
positioning against
another type of
product or product
class

Dr. Rosenbloom
 Positioning Strategy
 Differentiation
through:

Competition -
comparisons to a
product’s
competition
(directly or
indirectly)

Dr. Rosenbloom
 Segmenting Business Markets

 Demographics

Industry size, growth potential, etc.
 Operating Characteristics

Technology, brand-user status, etc.
 Purchasing Approaches

Purchasing policies, size of orders,
etc.
Dr. Rosenbloom
 Segmenting Business Markets

 Product Use or Usage Situation


The way the product will be used
and customer service levels
required
 Situational Factors

Urgency, special product uses
 Buyer’s Personal Characteristics
Dr. Rosenbloom
Segmenting Global Markets
 Economic

Stage of development in a host
country
 Political/Legal

Regulations and laws
 Cultural

Language barriers, differences in
consumer customs
Dr. Rosenbloom
Segmenting Global Markets
 Some segments transcend
national borders

Rich around the world

Older and comfortable

Indulged kids

Emerging middle class

Women employed outside the
house
Dr. Rosenbloom
 Market Segmentation

 Differentiated
 Concentrated
 Undifferentiated

Dr. Rosenbloom
 Differentiated Marketing
 Differentiated
Marketing

An organization
targets multiple
market
segments and
develops
segment
specific mixes

Dr. Rosenbloom
 Concentrated Marketing
 Concentrated
Marketing

When an
organization
concentrates its
marketing
efforts on a
smaller
segment of a
larger market
Dr. Rosenbloom
 Undifferentiated Marketing
 Undifferentiated
Marketing

An organization
develops one
strategy
appropriate for
all members of
the total market

Dr. Rosenbloom