Mma6e chapter-08 final

Marketing Management:
An Asian Perspective,
6th Edition
Instructor Supplements
Created by Geoffrey da Silva

Identifying Market Segments and Targets
3
8 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

Learning Issues for Chapter Eight
1. What are the different levels of market segmentation?
2. In what ways can a company divide a market into segments?
3. What are the requirements for effective segmentation?
4. How should business markets be segmented?
5. How should a company choose the most attractive target
markets?

Importance of Market Segmentation
• Companies cannot connect with all customers in large, broad, or diverse
markets.
• But they can divide such markets into groups of consumers or segments
with distinct needs and wants.
• A company then needs to identify which market segments it can serve
effectively.
• This decision requires a keen understanding of consumer behavior and
careful strategic thinking.
• To develop the best marketing plans, managers need to understand what
makes each segment unique and different.

Target Marketing
• To compete more effectively, many companies are now
embracing target marketing.
• Effective target marketing requires that marketers:
a. Identify and profile distinct groups of buyers who differ in their
needs and wants (market segmentation).
b. Select one or more market segments to enter (market
targeting).
c. For each target market, establish and communicate the
distinctive benefit(s) of the company’s market offering (market
positioning).

Bases for Segmenting Consumer Markets
• Market segmentation divides a market into well-defined
slices.
• A market segment consists of a group of customers who
share a similar set of needs and wants.
• The marketer’s task is to identify the appropriate number and
nature of market segments and decide which one(s) to target.

Bases for Segmenting Consumer Markets
• There are two broad groups of variables to segment
consumer markets.
a. Descriptive characteristics: geographic, demographics, and
psycho-graphic.
b. Behavioral considerations: consumer responses to benefits,
usage occasions, or brands.
• Regardless of which type of segmentation scheme we use, the
key is adjusting the marketing program to recognize
customer differences.

Table 8.1: Major Segment Variables for Consumer
Markets

Table 8.1 Major Segment Variables for Consumer
Markets (cont’d)

Geographic Segmentation
• Geographic segmentation calls for dividing the market into
different geographical units such as nations, states, regions,
counties, cities, or neighborhoods.
• The company can operate in one or a few areas, or operate in
all but pay attention to local variations.
• In that way, it can tailor marketing programs to the needs
and wants of local customer groups in trading areas,
neighborhoods, and even individual stores.

Example of Geographic Segmentation
Even in a small country like Singapore, Esprit practices segmentation. Its Liat Towers store carries a
wider range and attracts a different clientele, mostly tourists and expatriates, while a few hundred
meters away, its Wisma Atria store attracts locals.

Geographic Segmentation: Grassroots Marketing
In a growing trend called grassroots marketing, such activities
concentrate on getting as close and personally relevant to
individual customers as possible.

Geographic Segmentation: Grassroots Marketing
Example: HP in India
Working with the local government, as
well as a branch of HP Labs based in
India, the company, through grassroots
marketing, provides the rural poor with
access to government records, schools,
health information, crop prices, and so on.
Its hope is to stimulate small, tech-based
businesses. Not only does this build
goodwill and the HP brand in India, it also
helps the company discover new,
profitable lines of business.

Geographic Segmentation: Regional Marketing
• More and more, regional marketing means marketing right
down to a specific district.
• Some companies use mapping software to show the
geographic locations of their customers.
• By mapping the densest areas, the retailer can resort to
customer cloning, assuming that the best prospects live
where most of his customers come from.

Geographic Segmentation: Regional Marketing
• Some approaches combine geographic data with demographic
data to yield even richer descriptions of consumers and
neighborhoods.
• Called geo-clustering, it captures the increasing diversity of
the population.

Using Data Mining to Determine Shopper Profiles
(Circle K in Hong Kong)
Hong Kong convenience store
chain, Circle K, uses data
mining to find out the purchase
profile of shoppers in different
geographic area. Each outlet
carries different items
depending on the profile.

Demographic Segmentation
In demographic segmentation, we divide the market by
variables such as age, family size, family life cycle, gender,
income, occupation, education, religion, race, generation,
nationality, and social class.

Reasons for Popularity of Demographic
Segmentation
• First, consumer needs, wants, usage rates, and product and
brand preferences are often associated with demographic
variables.
• Second, demographic variables are easier to measure.
• Even when the target market is described in non-demographic
terms (say, a personality type), the link back to
demographic characteristics is needed to estimate the size of
the market and the media that should be used to reach it
efficiently.

Age and Life-Cycle Stage
• Consumer wants and abilities change with age.
• Nevertheless, age and life cycle can be tricky variables.
• The target market for some products may be the
psychologically young.

Eversoft Infinite
Eversoft Infinite targets the young segment who wants anti-aging products. It has Charmaine Sheh,
a mature but youthful-looking celebrity, endorse the product.

Gender Segmentation
• Gender differentiation has long been applied in clothing,
hairstyling, cosmetics, and magazines.
• Men and women have different attitudes and behave
differently, based partly on genetic makeup and partly on
socialization.
• Examples:
–Women tend to be more communal-minded and men tend to be
more self-expressive and goal-directed.
–Men often like to read product information; women may relate to
a product on a more personal level.

Gender Segmentation
• Some traditionally more male-orientated markets are
beginning to recognize gender segmentation, changing how
they design and sell their products.
• Example: Several Korean car manufacturers have designed
cars specifically for women. Banks are also finding women a
lucrative segment in Japan.

Income
• Income segmentation is a long-standing
practice in product and
service categories.
• However, income does not always
predict the best customers for a
given product.
• Increasingly, companies are finding
their markets are hourglass-shaped
as middle-market consumers
migrate toward both discount and
premium products.

Example of Income Segmentation: Banyan Tree
Banyan Tree is a niche international chain of high-end resorts and hotels catering to the affluent.

Example of Income Segmentation: Kraft in Rural
Indonesia
• In Indonesia, for instance, such rising rural incomes have not gone
unnoticed and Kraft has adapted its products to suit this segment.
• Rural consumers are still extremely price sensitive. Television ads
are thus adapted to make the products more approachable and
affordable.
• Kraft offers products in biscuit and soft cake forms, and in smaller
packages to be sold at snack kiosks in towns and villages.
• Small packets costs 500 rupiah (6 cents) thereby making it
extremely affordable to the rural customer.

Marketing Insight: Trading Up, Down, and Over
• A new pattern in consumer behavior has emerged in recent
years: “New Luxury” and in order to trade up to these brands
that offer emotional benefits, consumers often “trade down”
by shopping at discounters.
• Three main types of New Luxury products are identified:
–Accessible super-premium brands
– Old Luxury brand extensions
–Masstige goods

Generation
• Each generation or cohort is
profoundly influenced by the times in
which it grows up.
• Demographers call these groups
cohorts.
• They share similar outlooks and
values.
• Marketers often advertise to a cohort
by using the icons and images
prominent in its experiences.

Gen Y
• A generation group of interest to marketers is the Gen Y.
• Because Gen Y members are often turned off by overt
branding practices and “hard sell,” marketers use different
approaches to reach and persuade them.
• These include online buzz, student ambassadors, product
placements in computer games, and sponsoring cool events.

Gen Y in China
China’s Gen Y are more entrepreneurial, more Internet connected, and know more about Westerners
than Westerners know about them.

Psychographic Segmentation
• Psychographics is the science of using psychology and
demographics to better understand consumers.
• In psychographic segmentation, buyers are divided into
different groups on the basis of psychological/personality
traits, lifestyle, or values.
• People within the same demographic group can exhibit very
different psychographic profiles.

Psychographic Segmentation
• One of the most popular commercially available classification
systems based on psychographic measurements is Strategic
Business Insights’ VALSTM framework.
• VALS classifies adults into eight primary groups based on
personality traits and key demographics.
• The segmentation system is based on responses to a
questionnaire featuring four demographic and 35 attitudinal
questions (see Figure 8.1).

Figure 8.1: The VALS Segmentation System
33
The main dimensions of the VALS segmentation framework are consumer motivation (the
horizontal dimension) and consumer resources (the vertical dimension).
© Pearson Education South Asia Pte Ltd 2013. All rights reserved

Four groups with HIGHER resources
1. Innovators—Successful, sophisticated, active, and “take-charge”
people with high self-esteem. Purchases often reflect
cultivated tastes for relatively upscale, niche-oriented
products and services.
2. Thinkers—Mature, satisfied, and reflective people who are
motivated by ideals and value order, knowledge, and
responsibility. Favor durability, functionality, and value in
products.

Four groups with HIGHER resources
3. Achievers—Successful career- and work-oriented people
who value consensus and stability. They favor established
and prestige products that demonstrate success to their
peers.
4. Experiencers—Young, enthusiastic, and impulsive people
who seek variety and excitement. Spend a comparatively
high proportion of income on fashion, entertainment, and
socializing.

Four groups with LOWER resources
1. Believers—Conservative, conventional, and traditional
people with concrete beliefs. Favor familiar and established
products and are loyal to established brands.
2. Strivers—Trendy and fun-loving people who seek the
approval of others but are resource-constrained. Favor
stylish products that emulate the purchases of those with
greater material wealth.

Four groups with LOWER resources
3. Makers—Practical, self-sufficient, traditional, and family-oriented
people who focus on their work and home context.
Favor basic products with a practical or functional purpose.
4. Strugglers—Elderly, resigned, and passive people who are
concerned about change. Loyal to their favorite brands.

Behavioral Segmentation
In behavioral segmentation, marketers divide buyers into
groups on the basis of their knowledge of, attitude toward, use
of, or response to a product.

Needs and Benefits
• Not everyone who buys a product has the same needs or
wants the same benefits from it.
• Needs-based or benefits-based segmentation is a widely used
approach because it identifies distinct market segments with
clear marketing implications.

Needs and Benefits Segmentation – P&G
Procter & Gamble, for instance, has
different shampoo brands according to
the needs of each segment.
• Head & Shoulders is for those who
need to control their dandruff problem;
• Pantene is for those who want to
protect their hair from environmental
damage from the sun;
• Rejoice is for those who want a mild
shampoo for everyday use.

Tourism Australia
• Tourism Australia wanted to find out the needs of various
tourists to attract them to visit Australia.
• It used two dimensions to identify tourist needs—the level of
experience travellers have in long-haul travel and preference
towards challenging themselves when traveling.
• There are four main segments:
i. Family Focus Koreans
ii. Comfort Tourists
iii. Adventure Seekers
iv. Functional Travelers

Decision Roles
• It is easy to identify the buyer for many products.
• People play five roles in a buying decision: initiator, influencer,
decider, buyer, and user.
• Different people are playing different roles, but all are crucial
in the decision process and ultimate consumer satisfaction.

User and Usage—Real User and Usage-related
Variables
Many marketers believe that behavioral variables—occasions,
benefits, user status, usage rate, loyalty status, buyer-readiness
stage, and attitude—are the best starting points for constructing
market segments.

Occasions
• Occasions are determined by a time of day, week, month,
year or other well-defined temporal aspects of a consumer’s
life.
• Buyers can be distinguished according to the occasions when
they develop a need, purchase a product, or use a product.

Occasions
• For example, air travel is triggered by occasions related to
business, vacation, or family.
• Occasion segmentation can help firms expand product usage.

User Status
• Markets can be segmented into non-users, ex-users, potential
users, first-time users, and regular users of a product.
• Each will require a different marketing strategy.
• The key to attracting potential users, or even possibly nonusers, is
understanding the reasons they are not using.
• Market-share leaders tend to focus on attracting potential users
because they have the most to gain.
• Smaller firms focus on trying to attract current users away from the
market leader.

Usage Rate
• Markets can be segmented into light, medium, and heavy
product users.
• Heavy users are often a small percentage of the market but
account for a high percentage of total consumption.
• Marketers would rather attract one heavy user than several
light users.
• A potential problem is that heavy users are often either
extremely loyal to one brand, or never stay loyal to a brand
and are always looking for the lowest price.

Usage Rate—The Chinese Internet Market
The Digital Junkies are the most intensive Internet users among the Chinese. They spend more than
34 hours a week with digital media compared to the average of 15.8 hours.

Buyer Readiness Stage
• Some people are unaware of the product, some are aware,
some are informed, some are interested, some desire the
product, and some intend to buy.
• To help characterize how many people are at different stages
and how well they have converted people from one stage to
another, some marketers employ a marketing funnel.
• See Figure 8.2: The Brand Funnel.

Figure 8.2: The Brand Funnel
The relative numbers of consumers at different stages make a big difference in designing the
marketing program.

Loyalty Status
Buyers can be divided into four groups according to brand
loyalty status:
1. Hard-core loyals—Consumers who buy only one
brand all the time.
2. Split loyals—Consumers who are loyal to two or three
brands.
3. Shifting loyals—Consumers who shift loyalty from
one brand to another.
4. Switchers—Consumers who show no loyalty to any
brand

Marketing Applications
A company can learn a great deal by analyzing the degrees of
brand loyalty:
i. By studying its hard-core loyals, the company can identify its
products’ strengths;
ii. By studying its split loyals, the company can pinpoint which
brands are most competitive with its own; and
iii. By looking at customers who are shifting away from its brand,
the company can learn about its marketing weaknesses and
attempt to correct them.

Attitude
Five attitude groups can be found in a market: enthusiastic,
positive, indifferent, negative, and hostile.

Multiple Bases
• Combining different behavioral bases can help to provide a
more comprehensive and cohesive view of a market and its
segments.
• Figure 8.3 depicts one possible way to break down a target
market by various behavioral segmentation bases.

Figure 8.3: Behavioral Segmentation Breakdown

Bases for Segmenting Business Markets
• Business markets can be segmented with some of the same
variables used in consumer market segmentation, such as
geography, benefits sought, and usage rate, but business
marketers also use other variables.
• Thomas Bonoma and Benson Shapiro proposed segmenting
the business market with the variables shown in Table 8.2.

Table 8.2: Major Segmentation Variables for
Business Markets

Table 8.2: Major Segmentation Variables for
Business Markets (cont’d)

Marketing Applications of Business Segmentation
• The table lists major questions that business marketers
should ask in determining which segments and customers to
serve.
• Within a chosen target industry, a company can further
segment by company size. The company might set up
separate operations for selling to large and small customers.
• Within a given target market industry and customer size, a
company can segment further by purchase criteria.

Segmenting Business Markets
• Business marketers generally identify segments through a sequential
process.
• The company first undertook macro-segmentation.
• It looked at which end-use market to serve: automobile, residential, or
beverage containers.
• It chose the residential market, and it needed to determine the most
attractive product application: semi-finished material, building components,
or aluminum mobile homes.
• Deciding to focus on building components, it considered the best customer
size and chose large customers.

• The second stage consisted of micro-segmentation.
• The company distinguished among customers buying on
price, service, or quality.
• Because it had a high-service profile, the firm decided to
concentrate on the service-motivated segment of the market.

• Business-to-business marketing experts Anderson and Narus
have urged marketers to present flexible market offerings
to all members of a segment.
• A flexible market offering consists of two parts: a naked
solution containing the product and service elements that all
segment members value, and discretionary options that some
segment members value.
• Each option might carry an additional charge.

Market Targeting
• Once the firm has identified its market-segment
opportunities, it has to decide how many and which ones to
target.
• Marketers are increasingly combining several variables in an
effort to identify smaller, better-defined target groups.
• This has lead some researchers to advocate a needs-based
market segmentation approach.

Table 8.3: Steps in the Segmentation Process

Effective Segmentation Criteria
1. Measurable—The size, purchasing power, and
characteristics of the segments can be measured.
2. Substantial—The segments are large and profitable enough
to serve. A segment should be the largest possible
homogeneous group worth going after with a tailored
marketing program.

Effective Segmentation Criteria
3. Accessible—The segments can be effectively reached and
served.
4. Differentiable—The segments are conceptually
distinguishable and respond differently to different
marketing-mix elements and programs.
5. Actionable—Effective programs can be formulated for
attracting and serving the segments.

Porter’s Five Forces Model and Segment
Attractiveness
Michael Porter has identified five forces that determine the
intrinsic long-run attractiveness of a market or market segment:
industry competitors, potential entrants, substitutes, buyers,
and suppliers.

Attractiveness
1. Threat of intense segment rivalry—A segment is
unattractive if it already contains numerous, strong, or
aggressive competitors.
2. Threat of new entrants—The most attractive segment is
one in which entry barriers are high and exit barriers are
low.
3. Threat of substitute products—A segment is unattractive
when there are actual or potential substitutes for the
product. Substitutes place a limit on prices and on profits.

Attractiveness
4. Threat of buyers’ growing bargaining power—A
segment is unattractive if buyers possess strong or growing
bargaining power.
5. Threat of suppliers’ growing bargaining power—A
segment is unattractive if the company’s suppliers are able
to raise prices or reduce quantity supplied.

Evaluating and Selecting the Market Segments
• In evaluating different market segments, the firm must look
at two factors:
– The segment’s overall attractiveness and
– The company’s objectives and resources
• Does a potential segment have characteristics that make it
generally attractive, such as size, growth, profitability, scale
economies, and low risk?
• Does investing in the segment make sense given the firm’s
objectives, competencies, and resources?

Segment Attractiveness
Energy drink, 100 Plus, considers the tertiary segment attractive enough for it to allocate resources
such as this promotional banner put up at the National University of Singapore’s Business School to
welcome students when they began their new academic year.

Possible Levels of Segmentation
• Marketers have a range or continuum of possible levels of
segmentation that can guide their target market decisions.
• As Figure 8.4 shows, at one end is a mass market of
essentially one segment; at the other are individuals or
segments of one person.
• Between lie multiple segments and single segments.

Figure 8.4: Possible Levels of Segmentation

Full Market Coverage
• The firm attempts to serve all customer
groups with all the products they might
need.
• In undifferentiated marketing, the firm
ignores segment differences and goes after
the whole market with one offer.
• In differentiated marketing, the firm
operates in several market segments and
designs different products for each
segment.

Full Market Coverage
Samsung identified six segments of mobile phone users based on their need for style, infotainment,
business, multimedia, connection, and basic necessities. It has a slew of mobile phones to address
these varied needs.

Undifferentiated Marketing
• In undifferentiated marketing or mass marketing, the firm
ignores segment differences and goes after the whole market
with one offer.
• It designs a product and a marketing program that will appeal
to the broadest number of buyers.
• It relies on mass distribution and advertising.
• It aims to endow the product with a superior image.

Undifferentiated Marketing
• Undifferentiated marketing is “the marketing counterpart to
standardization and mass production in manufacturing.”
• The narrow product line keeps down costs of research and
development, production, inventory, transportation,
marketing research, advertising, and product management.
• The undifferentiated advertising program also reduces costs.
• Presumably, the company can turn its lower costs into lower
prices to win the price-sensitive segment of the market.

Differentiated Marketing
• In differentiated marketing, the firm operates in several
market segments and designs different products for each
segment.
• Differentiated marketing typically creates more total sales
than undifferentiated marketing. However, it also increases
the costs of doing business.
• Because differentiated marketing leads to both higher sales
and higher costs, nothing general can be said about the
profitability of this strategy.

Differentiated Marketing – Lenovo
Lenovo practices differentiated
marketing to reach out more
effectively to consumer and
business customers.

Multiple Segment Specialization
• With selective specialization, a
firm selects a subset of all the
possible segments, each
objectively attractive and
appropriate.
• There may be little or no synergy
among the segments, but each
promises to be a moneymaker.

• Keeping synergies in mind,
companies can try to operate in
supersegments rather than in
isolated segments. A
supersegment is a set of
segments sharing some
exploitable similarity.

• With product specialization, the firm sells a certain product to
several different market segments. This leads to a strong reputation
in the specific product area. The downside/risk is that the product
may be supplanted by an entirely new technology.
• With 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. The firm
gains a strong reputation among this customer group and becomes
a channel for additional products its members can use. The
downside/risk is that the customer group may suffer budget cuts or
shrink in size.

Although P&G initially targeted
very specific segments with its
Crest Whitestrips tooth-whitening
product, it later
expanded both its product
offerings and its target markets.

Single-segment Concentration
• With single-segment concentration, the firm markets to only
one particular segment.
• Through concentrated marketing, the firm gains deep
knowledge of the segment’s needs and achieves a strong
market presence.
• Further, the firm enjoys operating economies through
specializing its production, distribution, and promotion.
• If it captures segment leadership, the firm can earn a high
return on its investment.

Tiger Motorcycles in Thailand
Tiger’s bikes are targeted at a
segment that Japanese
producers have overlooked—the
thrifty, yet style-conscious, rural
rider.

Niche Marketing
• A niche is a more narrowly defined customer group seeking a
distinctive mix of benefits within a segment. Marketers
usually identify niches by dividing a segment into sub-segments.
• Niche marketers aim to understand their customers’ needs so
well that customers willingly pay a premium.
• However, there are risks. A market segment can turn sour or
a competitor may invade the segment.

Individual Marketing
• The ultimate level of segmentation leads to “segments of one,” “customized
marketing,” or “one-to-one marketing.
• Today customers are taking more individual initiative in determining what
and how to buy.
• They log onto the Internet; look up information and evaluations of product
or service offerings; conduct dialogue with suppliers, users, and product
critics; and in many cases design the product they want.
• 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.

Ethical Choice of Market Targets
• Market targeting also can generate public controversy when
marketers take unfair advantage of vulnerable or
disadvantaged groups, or promote potentially harmful
products.
• Example, the fast-food industry has been heavily criticized for
marketing efforts directed toward children.

Ethical Choice of Market Targets
Socially responsible marketing calls for targeting that serves not
only the company’s interests, but also the interests of those
targeted.

Mma6e chapter-08 final

Recommended

Recommended

More Related Content

What's hot

What's hot (19)

Viewers also liked

Viewers also liked (8)

Similar to Mma6e chapter-08 final

Similar to Mma6e chapter-08 final (20)

Recently uploaded

Recently uploaded (20)

Mma6e chapter-08 final