MKT

1. Copyright © 2003 Prentice-Hall, Inc.
3-1
Chapter 5
Identifying Market Segments and
Targets

2. Copyright © 2003 Prentice-Hall, Inc.
10-2
Chapter Objectives
The following topics will be covered in this chapter:
 Bases for Segmenting Consumer Markets
- Geographic Segmentation
- Demographic Segmentation
- Psychographic Segmentation
- Behavioral Segmentation
 Bases for Segmenting Business Markets
 Market Targeting

3. Copyright © 2003 Prentice-Hall, Inc.
10-3
Market Segmentation
 Target marketing requires marketers to take three
major steps:
 Identify and profile distinct groups of buyers who differ
in their needs and preferences (market segmentation).
 Select one or more market segments to enter (market
targeting).
 For each target segment, establish and communicate the
key distinctive benefit(s) of the company’s market
offering (market positioning).

4. Copyright © 2003 Prentice-Hall, Inc.
10-4
Bases for Segmenting Consumer
Markets
 Bases for Segmenting Consumer Markets
 Geographic Segmentation
 Demographic Segmentation
 Psychographic Segmentation
 Behavioral Segmentation

5. Copyright © 2003 Prentice-Hall, Inc.
10-5
Table: Major Segmentation Variables for Consumer
Markets
Geographic
Region South India, western Region, North, East
City
Class-I Cities, Class-II Cities, Metro Cities, Cities with a
Population of 0.5 Million o 1 Million, Cities with a
Population of Over 1 Million
Rural and Semi-Urban
Areas
Urban, suburban, rural
Climate Northern southern
Demographic
Age Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+
Family size Young, single; young, married, no children; young,
married, youngest child under 6; young, married, youngest
child under 6 or over ; older, married, with children; older,
married, no children under 18; older, single; other
10-5

6. Copyright © 2003 Prentice-Hall, Inc.
Table: Major Segmentation Variables for Consumer Markets
Gender Male, female
Income Low, lower middle, middle, upper middle, and high
Occupation
Unskilled worker, skilled worker, petty traders, shop
owners, businessman/industrialist, self-employed
Education
Illiterate, school upto 4 years, school between 5 to 9
years, SSC/ HSC, non-graduate,
graduate/postgraduate (general),
graduate/postgraduate (professional)
Psychographic
Socioeconomic
Classification (SEC)
A1, A2, B1, B2, C, D, E1, E2
Lifestyle Culture-oriented, sports-oriented, outdoor-oriented
Personality Compulsive, gregarious, authoritarian, ambitious
10-6

7. Copyright © 2003 Prentice-Hall, Inc.
Behavioral
Occasions Regular, special
Benefits Quality, service, economy, speed
User Status
Non-user, ex-user, potential user, first-time user,
regular user
User Rate Light, medium, heavy
Loyalty Status None, medium, strong, absolute
Readiness Stage Unaware, aware, informed, interested, desirous,
intending to buy
Attitude Toward
Product
Enthusiastic, positive, indifferent, negative, hostile
10-7

8. Copyright © 2003 Prentice-Hall, Inc.
10-8
Segmenting Consumer Markets
1. Geographic Segmentation:
 Nations
 States
 Regions
 Countries
 Cities or
 Neighborhoods
Geo-clustering

9. Copyright © 2003 Prentice-Hall, Inc.
10-9
Segmenting Consumer Markets
2. Demographic Segmentation
Age and Life –Cycle Stages: Johnson & Johnson,
Disney, MTV, Aastha Channel
Life Stage
Gender
Income
Generation

10. Copyright © 2003 Prentice-Hall, Inc.
Age and Life-Cycle Stage
10-10

11. Copyright © 2003 Prentice-Hall, Inc.
Life Stage
10-11

12. Copyright © 2003 Prentice-Hall, Inc.
Gender
Women:
Influence 80% of consumer
purchases
Make 75% of new home decisions
Purchase 60% of cars
10-12

13. Copyright © 2003 Prentice-Hall, Inc.
Income
10-13

14. Copyright © 2003 Prentice-Hall, Inc.
Generation
Gen X (1964-1978)
Baby Boomers (1946-1964)
Silent Generation (1925-1945)
Millennials (Gen Y) – (1979-1994)
-78 Million people
-$187 annual spending power
10-14

15. Copyright © 2003 Prentice-Hall, Inc.
Cohort Size Defining Features
Millennials
(1979-1994)
78 m
Raised in affluence, tech savvy,
perceived immunity from marketing
Gen X
(1964-1978)
50 m
Parents relied on day care, accepts
diversity, pragmatic and individualistic
Baby Boomers
(1946-1964)
76 m
Control 3/4th
of the wealth in the U.S,
seek fountain of youth (hair color, hair
replacement), home exercise equipment
Silent
Generation
(1925-1945)
42 m
Lead vibrant lives, spend money and
time on grandchildren.
U.S. Generation Cohorts
10-15

16. Copyright © 2003 Prentice-Hall, Inc.
Race and Culture
10-16

17. Copyright © 2003 Prentice-Hall, Inc.
10-17
Segmenting Consumer Markets
3. Psychographic Segmentation:
- Personality traits
- Lifestyle
- Values
- One of the most popular commercially available classification
systems based on psychographic measurements is-the SRI
Consulting Business Intelligence’s (SRIC-BI) VALS
Framework.
- The main dimensions are- Consumer Motivation (Horizontal
Dimension) and Consumer Resources (Vertical Dimension)

18. Copyright © 2003 Prentice-Hall, Inc.
10-18
VALS Framework

19. Copyright © 2003 Prentice-Hall, Inc.
Consumers are inspired by one of the three primary motivations-
 Ideals: those primarily motivated by ideals are guided by knowledge
and principles.
 Achievement: those primarily motivated by achievements are guided
by products and services that demonstrate success to their peers..
 Self-expression: those primarily motivated by self-expression are
guided social or physical activity, variety and risk.
The four groups with higher resources are:
 Innovators-Successful, sophisticated, active, ‘take-charge’ people
with high self-esteem. Purchases often reflect cultivated tastes for
relatively upscale, niche-oriented products and services.
 Thinkers- Mature, satisfied, and reflective people who are motivated
by ideals and who value order, knowledge and responsibility. They
seek durability, functionality and value in products.
VALS Framework
10-19

20. Copyright © 2003 Prentice-Hall, Inc.
10-20
• Achievers- Successful, goal-oriented people who focus on career and
family. They favor premium products that demonstrate success to their peers.
• Experiencers- Young, enthusiastic, impulsive people who seek variety and
excitement. They spend a comparatively high proportion of income on
fashion, entertainment and socializing.
The other four groups with lower resources are:
 Believers- Conservative, conventional and traditional people with concrete
beliefs. They prefer familiar products and are loyal to established brands.
 Strivers- Trendy and fun-loving people who are resource-constrained. They
favor stylish products that emulate the purchases of those with greater
material wealth.
 Makers- Practical, down-to-earth, self-sufficient people who like to work
with their hands. They seek products with a practical or functional purpose.
 Survivors- Elderly, passive people who are concerned about change. They
are loyal to their favorite brands.
VALS Framework

21. Copyright © 2003 Prentice-Hall, Inc.
10-21
Segmenting Consumer Markets
4. Behavioral Segmentation:
 Decision Roles-
- Initiator, ex- doctors
- Influencer, ex- pharmaceutical companies
- Decider, ex-patients’ relatives
- Buyer, ex-patients’ relatives
- User, ex-patient
 Behavioral Variables-
 Occasions, ex- Archies & Hallmarks
 Benefits, ex- Clinic, Pantene, Sunsilk, Head & Shoulder
Needs and Benefits

22. Copyright © 2003 Prentice-Hall, Inc.
10-22
User Status, ex- non-users, ex-users, potential users , first
time users etc
Usage Rate, ex- light, medium, heavy
Loyalty Status-
 Hard-core loyals- loyal to only one brand all the
time
 Split loyals- loyal to two or three brands
 Shifting loyals- shift loyalty from one brand to
another
 Switchers- show no loyalty to any brand
Attitude, ex-enthusiastic, positive, indifferent, negative and
hostile
Segmenting Consumer Markets

23. Copyright © 2003 Prentice-Hall, Inc.
Behavioral Segmentation Breakdown
10-23

24. Copyright © 2003 Prentice-Hall, Inc.
10-24
Bases for Segmenting Business Markets
Demographics:
1. Industry: Which industries should we serve?
2. Company size: What size companies should we serve?
3. Location: What geographical areas should we serve?
Operating Variables
4. Technology: What customer technologies should we focus on?
5. User or nonuser status: Should we serve heavy users, medium users, light
users, or nonusers?
6. Customer capabilities: Should we serve customers needing many or few
services?
Purchasing Approaches
7. Purchasing-function organization: Should we serve companies with highly
centralized or decentralized purchasing organizations?
8. Power structure: Should we serve companies that are engineering
dominated, financially dominated, and so on?
9. Nature of existing relationship: Should we serve companies with which we
have strong relationships or simply go after the most desirable companies?

25. Copyright © 2003 Prentice-Hall, Inc.
10-25
Bases for Segmenting Business Markets
10. General purchasing policies: Should we serve companies that prefer
leasing? Service contract? Systems purchases? Sealed bidding?
11. Purchasing criteria: Should we serve companies that are seeking quality?
Service? Price?
Situational Factors
12. Urgency: Should we serve companies that need quick and sudden delivery
of services?
13. Specific application: Should we focus on certain application of our product
rather than all applications?
14. Size or order: Should we focus on large or small orders?
Personal Characteristics
15. Buyer-seller similarity: Should we serve companies whose people and
values are similar to ours?
16. Attitude toward risk: Should we serve risk-taking or risk-avoiding customers?
17. Loyalty: Should we serve companies that show high loyalty to their
suppliers?

26. Copyright © 2003 Prentice-Hall, Inc.
Market Targeting
 Effective Segmentation Criteria:
 Measurable: size, purchasing power and
characteristics of the segments can be measured.
 Substantial: segments are large and profitable enough
to serve.
 Accessible: segments can be effectively reached and
served.
 Differentiable: segments are conceptually
distinguishable and respond differently
 Actionable: effective programs can be formulated for
attracting and serving the segments.
10-26

27. Copyright © 2003 Prentice-Hall, Inc.
10-27
Table : Steps in Segmentation Process
1. Needs-Based
Segmentation
Group customers into segments based on similar
needs and benefits sought by customer in solving a
particular consumption problem.
2. Segment Identification For each needs-based segment, determine which
demographics, lifestyles, and usage behaviors make
the segment distinct and identifiable (actionable).
3. Segment Attractiveness Using predetermined segment attractiveness criteria
(such as market growth, competitive intensity, and
market access), determine the overall attractiveness of
each segment.
4. Segment Profitability Determine segment profitability.
5. Segment Positioning
6. Segment Acid Test
7. Marketing Mix Strategy
For each segment, create a “value proposition” and
product-price positioning strategy based on that
segment’s unique customer needs and characteristics.
Create ‘segment storyboard’ to test the attractiveness
of each segment’s positioning strategies
Expand segment positioning strategy to include all
aspects of the marketing mix.
10-27

28. Copyright © 2003 Prentice-Hall, Inc.
10-28
Market Targeting
Figure : Five Forces Determining Segment Structural Attractiveness
10-28

29. Copyright © 2003 Prentice-Hall, Inc.
10-29
Market Targeting
Michael Porter has identified five forces that determine the intrinsic
long-run profit attractiveness of a market segment:
1. Threat of Intense Segment Rivalry:
- A segment is unattractive if it contains numerous, strong or
aggressive competitors.
- It is even unattractive if it is stable or declining, if fixed costs
are high, if exit barriers are high or competitors have high
stakes in staying in the segment.
- These conditions lead to- frequent price wars, advertising
battles and new product introductions.
2. Threat of New Entrants:
- A segment’s attractiveness varies with the height of its entry
and exit barriers. The most attractive segment is one, in which,
entry barriers are high and exit barriers are low.
10-29

30. Copyright © 2003 Prentice-Hall, Inc.
10-30
Market Targeting
3. Threat of Substitute Products
- A segment is unattractive when there are actual or potential
substitute for the product.
- Substitutes place a limit on prices and on profits.
4. Threat of Buyers’ Growing Bargaining Power
- A segment is unattractive if the buyers possess strong or growing
bargaining power. Ex: Health-Care Services
- Buyers’ bargaining power grows when—
 they become more concentrated or organized
 product segments a significant fraction of the buyers’
costs
 product is undifferentiated
 buyers’ switching costs are low
 buyers are price sensitive because of low profits
 buyers can integrate upstream. 10-30

31. Copyright © 2003 Prentice-Hall, Inc.
10-31
Market Targeting
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. Ex: DESA, WASA.
- Suppliers tend to be powerful when—
 they become more concentrated or organized
 there are few substitutes
 the supplied product is an important input
switching costs are high
Suppliers can integrate downstream.
10-31

32. Copyright © 2003 Prentice-Hall, Inc.
10-32
Full Market Coverage:
The firm attempts to serve all customer groups with all the
products they might need.
Only large companies can undertake a full market coverage
strategy. Ex: Microsoft, Coca-Cola ,General Motors, etc
• Undifferentiated Marketing: the firm ignores segment
differences and goes after the whole market with one offer.
• Differentiated Marketing: the firm operates in several
market segments and designs different products for each.
Evaluating and Selecting the Market
Segments

33. Copyright © 2003 Prentice-Hall, Inc.
Evaluating and Selecting the
Market Segments

34. Copyright © 2003 Prentice-Hall, Inc.
10-34
 Single-Segment Concentration
A firm selects and serves only one segment. Ex- Maternity
Hospitals & Clinics
 Selective Specialization/ Multiple Segment Specialization
A firm selects a number of segments, each objectively
attractive and appropriate. Ex- P&G’s Crest Toothpaste
 Market Specialization
Here the company takes up a particular market segment for
supplying all relevant products to the target group. For
example, the company X can implement Market
Specialisation strategy by producing all sorts of home
appliances like TV, washing machine, refrigerator and micro
oven for middle class people.
Evaluating and Selecting the Market
Segments

35. Copyright © 2003 Prentice-Hall, Inc.
10-35
 Product Specialization
When a company sells certain products to several different
types of potential customers. Ex- Microscope producers for
university, government and commercial laboratories.
Evaluating and Selecting the Market
Segments

36. Copyright © 2003 Prentice-Hall, Inc.
 Ethical Choice of Market Targets
- Marketers must target segments carefully to avoid
consumer backlash
- Singles and elderly people may not want to be
identified as singles or olds.
10-36
Market Targeting

37. Copyright © 2003 Prentice-Hall, Inc.
10-37
Thank You