Consumer Segmentation and
Chapter 6 (Sharp, 2013)
BHO1171 – Lecture 3 Slide 2
Marketers often assume buyers differ from one
another in their buying behaviour
Marketer’s can choose to cater for these differences.
Market segmentation is the process of dividing
up the market into distinct sub-groups
These target segments should react differently to
Targeting is the practice of creating differences in
the marketing mix to cater for these different
or choosing not to serve some segments.
BHO1171 – Lecture 3 Slide 3
Segmentation of the market needs to meet a number
of criteria in order to be useful to the marketer.
Marketers need to be able to answer the following
questions in relation to the segment:
Who are the buyers?
How can we reach them? How are the segment customers
different from others?
Where are they located? Where do they purchase?
What are their interests and behaviours? What do they
buy and/or like?
The segments worthy or being targeted must be of a
certain size and targetable.
BHO1171 – Lecture 3 Slide 7
Why Segment the Market? (1)
Offering the same product and marketing mix to
Mass Marketing Issues
• Appropriate if all consumers respond to a similar
• Benefits are that it is a low cost marketing strategy
– one advertising and promotional strategy targeted to a single
market for a generic product.
BHO1171 – Lecture 3 Slide 8
Why Segment the Market? (2)
Market Segmentation Issues
Allows producers to avoid head on confrontation
• By differentiating by
price, styling, packaging, promotional
appeal, usage, and distribution.
Increased costs of segmentation
• i.e. Shorter production runs, different promotional
campaigns, consumer research
BHO1171 – Lecture 3 Slide 9
+ e.g. of product tailored to different
Melb to London
$8,400Melb to London
BHO1171 – Lecture 3 Slide 11
BHO1171 – Lecture 3 Slide 12
Age and life-cycle stage
• Wants and needs vary with
• Buying patterns frequently follow
Race and culture
Risk of stereotyped
For example the profile
of mX readers:
“a bright, energetic
must read for the busy
city worker targeting the
young and affluent – a
generation driven by
(p.1, MX, 2012).
BHO1171 – Lecture 3 Slide 13
Divide market into
provinces, cities etc.
Quite likely in Global
BHO1171 – Lecture 3 Slide 14
Grouping customers together based on
social class, lifestyles and psychological
Attitudes, interests and opinions
Adds richness of behavioural and social
sciences to demographics
Socio-economic, status, values, attitudes
and lifestyle groupings, personality
BHO1171 – Lecture 3 Slide 15
10% of population
Social class in Australia*
BHO1171 – Lecture 3 Slide 16
Social standing and
BHO1171 – Lecture 3 Slide 17
Magazine covers for different
social class segments?
BHO1171 – Lecture 3 Slide 20
Apparent benefits of segmentation
more closely what
Customers can feel more
responsive and loyal to
organisations that speak
directly to them and
tailor their products
Enables organisations to
target its marketing mix
BHO1171 – Lecture 3 Slide 21
Dangers of segmentation
Risk of poor definition and implementation of
Knowing where to stop.
Assumption that customers only fit into one
Assumption that it is profitable to tailor
products to each segment
BHO1171 – Lecture 3 Slide 22
Criteria For Effective Targeting of Market
Relevant characteristics (eg: demographics,
lifestyle, benefits sought)
Sufficient number of people
Stable and likely to grow
Economical to reach
BHO1171 – Lecture 3 Slide 25
Targeting high value customers
Many businesses use profitability
segmentation to target profitable consumers
• E.g. Business travellers get priority check in & baggage
• High value customers get their own 1800 number or
are recognised by input of client number
BHO1171 – Lecture 3 Slide 26
Two High-End Watches for
Different Lifestyle Segments?
BHO1171 – Lecture 3 Slide 28
First appeared in the Advertising Age
Reis and Trout (1972)
Now in every marketing textbook
Seen as a fundamental aim of marketing
Yet not empirically tested
Position brand in consumers’ minds
Make it the preferred brand for your brand’s
BHO1171 – Lecture 3 Slide 29
The final objective is to position a product
in the mind of the consumer
Differentiated from competition
„own‟ an image
“Positioning is…how you differentiate yourself
in the mind of the prospect” ”
• (Reis & Trout, 2001)
BHO1171 – Lecture 3 Slide 30
Developing and maintaining
1. Consider which positions are held by
2. Which position is currently held by your
3. What is the desired position for your brand?
4. Can you sustain that position?
5. Implement a programme to establish the
6. Monitor the perception held by consumers
BHO1171 – Lecture 3 Slide 31
Positioning Strategy –
emphasize value in terms of quality, price, or both
E.g. Stella Artois “Reassuringly Expensive”
Characteristics as a positioning base
e.g., Volvo brand is positioned on „Safety‟While the BMW brand is
positioned on „Driving‟.
Positioning based on a products typical use
E.g. Nutri-Grain Bars replacing cereal
Against a competitor,
e.g. Avis tries harder because it’s in 2nd place
BHO1171 – Lecture 3 Slide 32
PERCEPTUAL MAPPING CAN BE USED TO:
Show how (potential) customers view a firm's current
or potential offering.
Show how customers view competitors' offerings.
See what kind of offering different segments see as
See what offerings are likely to appeal to which
Help with combining and segmenting - by revealing
which segments view the market in similar (or
BHO1171 – Lecture 3 Slide 33
+ Identifying a Positional Direction
BHO1171 – Lecture 3 Slide 34
In a competitive, price driven market, firms try to
differentiate their products from competitive
Adding new features
This is a product oriented view of the world and
usually occurs before segmentation of the
Some companies instigate product differentiation
e.g. Coke, Qantas – Premium Economy
The problem with
segmentation, targeting and
BHO1171 – Lecture 3 Slide 36
Brand user profiles seldom differ
Emprical evidence shows competing brands do
not really have different sorts of customer bases.
The results demonstrate that brand-specific
segments generally do not exist
Interchangeable brands usually compete in what for
them is a single, unsegmented mass market.
There is no support for the idea that competing
brands each appeal to a unique sub-set of users
that look different from the customer bases of
BHO1171 – Lecture 3 Slide 37
Segmentation does not necessarily
Segmentation and targeting does not guarantee
maximum return from marketing expenditure.
It is not suggested that the segmentation
targeting approach is not always inferior to mass
marketing—simply segmentation is not always
superior to mass marketing.
There are and will always be conditions under
which segmentation is not the best, most
profitable course of action.
BHO1171 – Lecture 3 Slide 38
Talking to everyone is possible
There are some reasons why marketers may
want to limit who they talk to. Reasons include:
The expense involved in talking to everyone
Difficulty to appealing to all types of buyers in a
Different companies vary in their abilities to serve
different segments of the market.
There is some counter-evidence to these ideas:
• Mass marketing can be more cost-effective than targeted
• Brands should be as inclusive as possible
BHO1171 – Lecture 3 Slide 39
Yorkie Bar – great positioning?
BHO1171 – Lecture 3 Slide 40
Yorkie Bar – great positioning?
Yorkie Bar ad
Male 56 26 73 57 46 0 40
Female 44 74 27 43 54 100 60
Source: TNS – pg 64 Sharp (2010)
BHO1171 – Lecture 3 Slide 41
Smart targeting in practice
Smart marketers take a number of steps to ensure they do
not over-target. They:
Make sure they understand and document who buys the
Always check real numbers instead of relying only on indices
Quantify any skews in brands and media
Realise that adding a brand, SKU or focusing on a specific
occasion is typically about selling more to the same people.
Know that heavy buyers are not the key to growth
Use overall profit contribution rather than campaign ROI to
assess marketing performance
Look to maximise overall sales and margins, not just response
from the target market.