Identifying Market Segments and Targets

1. Identifying Market Segments and Targets KEY CONCEPTS

2. Segmentation-Targeting-Positioning (STP) • Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation). • Select one or more segments to enter (market targeting). • Establish and communicate the offering’s distinctive benefit(s) to each target segment (marketing positioning).

3. Levels of Market Segmentation • Segment marketing • Niche marketing • Local marketing • Individual marketing

4. Segment Marketing • Market segment—a group of customers who share a similar set of needs and wants. • Homogeneous preferences—exist when all consumers have roughly the same preferences. • Diffused preferences—consumers vary greatly in their preferences.

5. Niche Marketing • Niche—a more narrowly defined customer group seeking a distinctive mix of benefits. • Attractive when: • Customers have a distinct set of needs • Fairly small but has size, profit, and growth potential • Customers will pay a premium • Nicher gains certain economies through specialization

6. Local Marketing • Marketing programs tailored to the needs and wants of local customer groups in particular trading areas, neighborhoods, even individual stores. • Grassroots marketing—concentrating on getting as close and personally relevant to individual customers as possible.

7. Individual Marketing • Leads to: • “Segments of one” • “Customized marketing” • “One-to-one marketing” • 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.

8. Bases for Segmenting Consumer Markets • Geographic • Demographic • Psychographic • Behavioral

9. Geographic Segmentation • Dividing the market into different geographical units such as: • Nations • States • Regions • Counties • Cities • Neighborhoods

10. Demographic Segmentation • Divide the market into groups based on age and other variables: • Life-cycle stage • Life stage • Gender • Income • Generation • Social class

11. Psychographic Segmentation • Psychographics—the science of using psychology and demographics to better understand consumers. • Buyers divided into groups on the basis of: • Psychological/personality traits • Lifestyle • Values

12. Behavioral Segmentation • Divide consumers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. • Behavioral variables: • Occasions • Benefits • User status • Buyer-readiness stage • Loyalty status • Attitude

13. Bases for Segmenting Business Markets DEMOGRAPHIC OPERATING VARIABLES PURCHASING APPROACHES SITUATIONAL FACTORS PERSONAL CHARACTERISTICS

14. Effective Segmentation Criteria • Measurable • Substantial • Accessible • Differentiable • Actionable

15. Evaluating and Selecting Market Segments • Must look at two factors: • Segment’s overall attractiveness • Company’s objectives and resources

16. Patterns of Target Market Selections • Single-segment concentration • Focus on one segment • Selective specialization • Select a number of segments • Product specialization • Specialize in making a certain product for several segments. • Market specialization • Serve many needs of a particular customer group. • Full market coverage • Serve all customer groups with all the products they might

17. Full Market Coverage • Undifferentiated marketing—firm goes after the whole market with one market offering. • Differentiated marketing—operate in several market segments and design different programs for each segment.