Identifying Market Segments and Targets

• Market segmentation


  Divides a market into well-defined slices
• Market segment


  A group of customers who share a similar set of needs and wants
• Geographic segmentation


  Divides the market into geographical units such as nations, states, regions, counties, cities, or neighborhoods
• Demographic segmentation


  Divides the market on variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class
• Life stage


  Defines a person's major concern, such as going through a divorce, going into a second marriage, taking care of an older parent, deciding to cohabit with another person, deciding to buy a new home, and so on
• Income segmentation


  A long-standing practice in such categories as automobiles, clothing, cosmetics, financial services, and travel
• Multicultural marketing


  An approach recognizing that different ethnic and cultural segments have sufficiently different needs and wants to require targeted marketing activities, and that a mass market approach is not refined enough for the diversity of the marketplace
• Psychographics


  The science of using psychology and demographics to better understand consumers
• Psychographic segmentation


  Buyers are divided into different groups on the basis of psychological/personality traits, lifestyle, or values
• Groups with higher resources

  • Successful, sophisticated, active, "take-charge" people with high self-esteem
  • Mature, satisfied, and reflective people motivated by ideals and who value order, knowledge, and responsibility
  • Successful, goal-oriented people who focus on career and family
  • Young, enthusiastic, impulsive people who seek variety and excitement
• Groups with lower resources

  • Conservative, conventional, and traditional people with concrete beliefs
  • Trendy and fun-loving people who are resource-constrained
  • Practical, down-to-earth, self-sufficient people who like to work with their hands
  • Elderly, passive people concerned about change and loyal to their favorite brands
• Behavioral segmentation


  Marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product
• Benefit segments in the U.S. premium wine market ($5.50 a bottle and up)


  • Enthusiast (12% of market, skewing female, average income $76,000)
  • Image Seekers (20%, only segment skewing male, average age 35)
  • Savvy Shoppers (15%, love to shop, believe they don't have to spend a lot to get a good bottle of wine)
  • Traditionalist (16%, with very traditional values, like to buy brands they've heard of and from wineries that have been around a long time)
  • Satisfied Sippers (14%, not knowing much about wine, tend to buy the same brands)
  • Overwhelmed (23%, a potentially attractive target market, find purchasing wine confusing)
• Loyalty Status

  • Hard-core loyals
  • Split loyals
  • Shifting loyals
  • Switchers
• Naked solution


  The product and service elements that all segment members value
• Discretionary options


  The elements that some segment members value
• Criteria for market segments

  • Measurable
  • Substantial
  • Accessible
  • Differentiable
  • Actionable
• Five forces determining market attractiveness

  • Threat of intense segment rivalry
  • Threat of new entrants
  • Threat of substitute products
  • Threat of buyers' growing bargaining power
  • Threat of suppliers' growing bargaining power
• Selective specialization


  A firm selects a subset of all the possible segments, each objectively attractive and appropriate
• Supersegment


  A set of segments sharing some exploitable similarity
• Product specialization


  The firm sells a certain product to several different market segments
• Market specialization


  The firm concentrates on serving many needs of a particular customer group, such as by selling an assortment of products only to university laboratories
• Single-segment concentration


  The firm markets to only one particular segment
• Customerization


  Combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice
• Bases for segmenting consumer markets

  • Consumer characteristics
  • Consumer responses
• Major segmentation variables for consumer markets

  • Geographic
  • Demographic
  • Psychographic
  • Behavioral
• Levels of targeting

  • Mass
  • Multiple segments
  • Single segment
  • Individuals
• Mass market targeting approach

  Adopted only by the biggest companies
• Niche


  A more narrowly defined group