BUS 620 Week 3 Assignment
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Chapter 6
Market Segmentation and Target Marketing
ès/SuperStock
Learning Outcomes
By the end of this chapter, you should:
Iden�fy the role of market segmenta�on in developing a marke�ng strategy and understand the ra�onale for segmen�ng markets. Recognize the different levels of market segmenta�on. Iden�fy the steps in the market segmenta�on process. Recognize each of the primary categories of bases for segmen�ng consumer markets. Iden�fy the bases used to segment business markets. Specify the criteria necessary for useful and effec�ve marke�ng segments and describe four basic strategies for reaching target markets.
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Ch. 6 Introduction No individual product or marke�ng mix can sa�sfy every consumer in a given product market. In most cases, the poten�al market for a product or service is simply too diverse or heterogeneous to be treated as a single or uniform target market. Market segmenta�on enables companies to adapt different marke�ng mixes to appeal to the unique needs of specific, homogeneous target market segments. This strategy creates growth opportuni�es and higher levels of customer sa�sfac�on. The op�mal variables used to segment any given market depend on many factors, including trends in buyer demand, the benefits being sought by consumers, and the characteris�cs of compe�ng brands.
Market segmenta�on describes both a process and strategy by which the total market for a product is divided into smaller parts or segments. Managers create segments by clustering prospec�ve buyers according to dis�nc�ve shared traits or factors in order to construct subsets of customers with similar needs. The resul�ng segments are said to be homogeneous with respect to these dimensions. As a consequence, consumers within each segment are more similar to each other on these factors than they are to buyers assigned to other segments.
The first half of this chapter inves�gates the purpose and strategic significance of segmen�ng product markets with a primary emphasis on the iden�fica�on of target markets. The general ra�onale suppor�ng four alterna�ve levels of segmenta�on is addressed. The second half of the chapter examines the processes involved in segmen�ng markets. A four-step model is introduced to iden�fy discrete clusters of buyers that will yield the best possible opportuni�es for profits and compe��ve leverage. The crea�on of these segments is necessarily guided by a relentless focus on customer needs and the firm's drive to sa�sfy its selected customers. The criteria and bases used in the specifica�on of useful market segments are discussed and four basic strategies for reaching target markets are introduced.
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O�en�mes big opportuni�es can come disguised as small technical problems. In the late 1980s, Bob Benne� solved what might seem like an insignificant engineering challenge: how to combine a microwave oven with a compact refrigerator/freezer into a single opera�ng unit that would not overload conven�onal electrical circuits. The solu�on was simple. He built in a separate circuit between the two units that automa�cally turned off the refrigera�on side whenever the microwave oven was engaged. This limited the total amount of current that the combined unit could draw to 10 amps. He approached General Electric with this innova�ve concept, but the company had li�le interest.
Within five years of its introduc�on, product sales exceeded $12 million. However, the key to the success of this venture was not solely dependent on a technological innova�on. From the incep�on of the company, Bob Benne� had a clear understanding of the strategic significance and necessity of market segmenta�on. Today, the home page of MicroFridge (www.microfridge.com) is organized according to the company's six primary target markets: individuals (home users), academic ins�tu�ons, hotels, governmental/military, seniors, and office product suppliers.
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Gerber is one of the most popular baby food brands in the world. What factors other than geography can affect the company's sales?
Associated Press
6.1 Strategic Rationale for Segmenting Markets Market segments are clusters of prospec�ve and current customers who are similar to each other in ways that lead them to respond to a firm's marke�ng mix similarly. Marke�ng managers create or detect segments as a means of improving brand performance and profitability. The essen�al principle of segmenta�on is to divide the total market into dis�nct submarkets based on similar wants, needs, behaviors, or other characteris�cs to enable companies to be�er serve the specific wants and needs of smaller groups. Segmenta�on enhances customer sa�sfac�on and provides marketers with opportuni�es to build segment-specific compe��ve advantages.
The strategic significance of segmenta�on in compe��ve markets is substan�al. It permits companies to focus their limited resources on building greater levels of customer sa�sfac�on within a limited cluster of buyers. By concentra�ng their efforts in this way, organiza�ons can op�mize both the efficiency and effec�veness of marke�ng programs.
Perhaps less obvious is the strategic value of segmenta�on in making the firm more responsive to market dynamics. Companies that have focused their resources on specific segments have a greater understanding of buyers' wants and the character of the opera�ng environment. Consequently, they should be be�er prepared to respond to changes in the behavior of their suppliers, intermediaries, and compe�tors than firms with a broader market focus.
Marketing to Segments
The importance of segmenta�on to the success of the firm's marke�ng programs, however, depends on several market- specific characteris�cs. As product markets mature, the rate of overall sales growth declines. In many product markets, sales growth may remain negligible for years and some�mes decades. This is par�cularly true when overall popula�on trends are unfavorable to the sales of specific products. For example, the sale of baby care products is dependent on the prevailing birthrate within a given geographic market. In the absence of aggregate sales growth, the ba�les for market share o�en intensify. Segmenta�on takes on greater strategic importance within this context as firms compete to build sales volume at each others' expense by finding be�er ways to sa�sfy segment-specific preferences. In this sense, each segment becomes a unique ba�lefield in an ongoing war.
Other types of market-specific characteris�cs that impact the value of segmenta�on include changes in the economic and cultural composi�on of buying groups. As markets become more diverse in these ways, profitable opportuni�es to refine or redefine segment profiles emerge. This pa�ern is o�en observed in developing na�ons around the globe. As incomes, educa�onal levels, and lifestyles go through transi�ons over �me, marketers have opportuni�es to appeal to new clusters of buyer preferences.
Think About It
Cultural shi�s within na�onal boundaries can be more difficult to detect than changes in other countries. Iden�fy three significant cultural changes within this country's borders that have taken place in the past decade. Be specific. Iden�fy the subcultures at the center of the change process and those groups being most directly impacted.
How have these changes created new marke�ng opportuni�es?
How have they affected the ways in which brands compete?
Market segments can be created based on any product or buyer characteris�cs that will yield the most efficient and effec�ve approach to selling the product in a compe��ve market. This o�en includes the refinement of old segment defini�ons as well as the crea�on of wholly new segments within established product markets. In some instances, the study of alterna�ve market segmenta�on opportuni�es may lead to brand extensions.
Brand Extensions
Brand extensions are new products or services introduced under the same brand name as exis�ng goods. Familiar examples of successful brand extensions include Jell-O Instant Pudding, Harley Davidson Apparel, Febreze Candles, and Na�onal Geographic Television. Brand extensions represent an effort to capitalize on the posi�ve impressions and values associated with the exis�ng brand name. This can have the synergis�c effect of increasing brand awareness and profitability across mul�ple product categories. As with other forms of product development, a successful brand extension requires extensive knowledge of the selected market segments.
The failure to understand the unique preferences, values, and a�tudes of targeted market segments can result in failed extensions and damage to a valued brand name. Examples of brand extensions that reflect a weak linkage between the core brand iden�ty and the new product concept include Smith & Wesson Mountain Bikes, Colgate Kitchen Entrees, Hooters Airlines, and Cheetos Lip Balm. In
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Febreze extended its brand from exclusively air freshener sprays to include candles and scented oil.
Associated Press
addi�on, it is important to remember that even a seemingly successful product launch can work against the brand's significance to target segments if it blurs or dilutes the brand's iden�ty or posi�oning.
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Frontera salsas proved to be best sellers in Whole Foods Markets around the U.S. Now, Frontera wants to go up against mass-marketed products made by the likes of Tos�tos and Pace. How is Frontera marke�ng its brand? Which consumer group does it interest?
6.2 Levels of Market Segmentation As noted in Chapter 1, it is a common misconcep�on that market segments are somehow preexis�ng divisions of the market that the marke�ng manager needs to discover. This is not the case. Marke�ng managers can create market segments based on any product or buyer characteris�cs that will be useful or profitable. Consequently, markets can be segmented at various levels based on the intended use of the informa�on and the character of the market itself.
In a cost-free environment, the best path to sa�sfying buyers would be to provide a unique, custom-designed product and marke�ng plan for each individual consumer. Although this is possible in some instances, in most contexts sellers need to develop programs suited to clusters or pools of buyers to make them profitable. The most effec�ve and efficient segment size for this purpose can be thought of as the op�mal level of market segmenta�on. There are four levels of market segmenta�on: mass marke�ng, segment marke�ng, niche marke�ng, and customized marke�ng.
Mass Marketing
In mass marke�ng, the seller does not differen�ate between prospec�ve buyers at all. Every individual within the market is part of the company's target market. Sellers make no effort to create separate marke�ng mixes to suit different types of buyers according to their preferences and needs. In most instances, this strategy results from a percep�on that there are no significant product-related differences between poten�al buyers. Alterna�vely, marketers may pursue this path if they cannot iden�fy discrete market segments apart from the whole that are financially viable. Some products that are regarded as commodi�es (e.g., water so�ener salt) can be sold this way. Mass marke�ng is some�mes referred to as undifferen�ated marke�ng.
Henry Ford's marke�ng strategy for the Model T is o�en held up as one of the most successful applica�ons of mass marke�ng. By offering buyers the same car "in any color as long as it is black," he was able to capitalize on the scale economies related to the mass produc�on, mass distribu�on, and mass promo�on of one product for all consumers. This approach to selling has grown increasingly difficult, however, as consumers gain access to more channels of distribu�on (including e- commerce), increasing levels of global compe��on, and a growing array of media sources and informa�on.
Segment Marketing
Segment marke�ng, or differen�ated marke�ng, is a term used to describe marke�ng strategies that differen�ate between customer groups within a product market. In contrast to mass marke�ng, this approach enables sellers to execute marke�ng plans for individual brands targe�ng specific clusters of prospec�ve buyers. Matching marke�ng mix decisions to the preferences of targeted segments generally improves the fit between the brand and consumers' needs, thereby providing higher levels of customer sa�sfac�on. In many markets, the decision to pursue some specific segments rather than others may also limit the range of relevant compe�tors challenging the brand.
Although there are many different bases on which sellers segment markets, iden�fying the specific benefits consumers seek from the product category is o�en the first �er of inves�ga�on in defining fairly broad segments. Segment marke�ng is characteris�c of many of the products we purchase frequently, such as most consumer packaged goods, popular lines of apparel, and electronics. Most items sold through big-box retailers and chain grocery stores fall into this category. Segment marke�ng is more narrowly targeted than mass marke�ng but less precise in prac�ce than niche marke�ng.
Mass-Market Compe��on
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The Fat Tire brand, which stems from the New Belgium Brewing Company, reflects the poten�al profit from niche marke�ng.
Associated Press
Think About It
Breakfast cereals seem like a pre�y basic household staple, right? Yet the typical grocery store will stock more than three dozen brands from companies such as Kellogg's, General Mills, Quaker, and Post. Many of these seem to be similar.
Are any brands being mass marketed? If so, which ones?
Who is the target market for some of the brands with which you are most familiar? Why can't large companies be more successful by mass marke�ng a smaller number of core brands, thereby reducing the expenses related to marke�ng a large number of different brands to several smaller market segments?
Niche Marketing
By concentra�ng on even smaller segments of the market, niche marke�ng allows the organiza�on to create more narrowly focused marke�ng plans for its brands than segment marke�ng approaches. Niche marke�ng is also known as concentrated marke�ng. At this level of segmenta�on, marketers use a narrower range of distribu�on channels and media op�ons to reach a smaller market containing fewer direct compe�tors.
O�en, the mo�va�on for targe�ng these narrowly defined niche markets is the recogni�on that buyers' needs are not being met by exis�ng product and brand alterna�ves. If the group described by this gap is large enough to be sufficiently profitable, the opportunity can be pursued by either small or large firms within the industry. However, rela�vely small organiza�ons require less poten�al profit to make these types of new opportuni�es worthwhile. In addi�on, the lack of direct compe��on from large firms may make these niche markets especially a�rac�ve to smaller compe�tors.
This reality has given rise to ventures in virtually every sector of the economy. Many of the fastest- growing adver�sing agencies in the United States are small, specialized "bou�que" firms that focus on serving the unique needs of a limited client base. The success of microbreweries and cra� breweries such as the New Belgium Brewing Company, which sells the Fat Tire brand, also reflects the profit poten�al in niche marke�ng. The Internet has enabled the prolifera�on of companies serving unique product and service niches ranging from home-delivered gourmet pretzels to accoun�ng services for small business payrolls.
In some instances, very large organiza�ons may create fairly autonomous SBUs to independently sell to niche markets to defend the firm from losing market share on a piece-by-piece basis. Consider the strategy pursued by Birds Eye frozen foods group. Brands such as Freshlike, Voila!, and Steamfresh enable it to pursue segment marke�ng strategies to compete effec�vely in large segments of the market. However, it also appeals to a narrow market niche with its McKenzie's brand, by reaching buyers who want vegetables used primarily in the southern U.S. subculture. These include speckled bu�er beans, collard greens, okra, turnip greens, black-eyed peas, field peas, and purple hull peas.
Customized Marketing
Customized marke�ng, or micromarke�ng, represents the most extreme form of market segmenta�on insofar as each prospec�ve buyer is treated as a separate segment for marke�ng purposes. In contrast to the previous levels of market segmenta�on, the marke�ng plan for each customer is fi�ed to his or her own unique needs and preferences. Within consumer markets, this approach can most commonly be seen in the sale of custom-tailored clothing and shoes. Other examples are o�en seen in the high-priced end of consumer goods markets where one-of-a-kind homes, interior furnishings, jewelry, musical instruments, boats, and designer cars can be custom ordered for clients with the ability to pay. In fact, tailor-made products that convey significant pres�ge to their purchasers are available in almost every consumer product market.
Customized marke�ng is more prevalent in business-to-business market transac�ons than in consumer markets. In B2B exchanges, product specifica�ons, terms of sale, and distribu�on are o�en nego�ated on a one-to-one basis. Prime examples of customized marke�ng are found whenever products are built to the buyer's unique specifica�ons (e.g., manufacturing equipment, enterprise applica�on so�ware) and the price is nego�ated. The primary advantage to customized marke�ng is the seller's ability to precisely meet the buyer's needs. When financially feasible, this level of market segmenta�on provides the best opportunity to fulfill the marke�ng concept's promise.
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Colgate "Simply White" toothpaste targets the "whiter teeth" benefit segment.
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6.3 Procedure for Segmenting Markets As noted previously, the essen�al ra�onale for segmen�ng markets is to create clusters of prospec�ve buyers that will yield the best opportuni�es for profits and compe��ve leverage. These posi�ve outcomes stem from delivering the highest possible levels of customer sa�sfac�on by selling into discrete segments or clusters of buyers within a given product market.
Think About It
It can be a chicken-and-egg problem. The founda�on principles and overriding philosophy of marke�ng maintain that products should be developed based on a prior understanding of prospec�ve customers' needs. However, is it possible to segment a product market in a strategically meaningful way before you have a product to sell?
How can you reconcile the necessity of having a product before segmen�ng a market based on buyers' characteris�cs with the need to understand the buyer before developing a product?
Neither the academic discipline of marke�ng nor professional prac�ce has established a set of procedures for segmen�ng markets that is best in all situa�ons. In fact, many managers develop their segmenta�on schemes on a purely intui�ve level of analysis, based exclusively on their unique and in�mate knowledge of the product and prospec�ve clusters of buyers. However, a wide variety of more systema�c approaches to segmen�ng markets can be applied according to the unique demands of the task (Foedermayr and Diamantopoulos, 2008). The market segmenta�on process model presented here provides a flexible four-step approach that can be applied across a fairly broad range of situa�ons.
Step One: Identify Primary Segmentation Bases
A large number of customer-related variables can be applied to the process of construc�ng a market segmenta�on plan. Many of these are discussed in detail in the sec�on that follows. However, most ini�al efforts at market segmenta�on begin with an understanding of the product-related benefits sought by buyers. This reflects what we've discussed previously regarding the func�onal value of the marke�ng concept as a compe��ve philosophy, the mo�va�onal roots of buyer behavior, and the primary importance of customer sa�sfac�on in the design and execu�on of marke�ng programs.
Consider the toothpaste market example that we first encountered in the discussion of market segments in Chapter 2. Based on product benefits, you can ini�ally iden�fy several poten�al segments. These benefits include hygiene-related factors such as the ability to fight cavi�es and prevent plaque buildup and gingivi�s. They also include aesthe�c/cosme�c benefits such as the ability to whiten teeth and freshen breath. Other benefits include sensory features such as flavor, appearance, and texture. Addi�onally, there is almost always a price-sensi�ve branch in consumer product markets that seek the lowest possible cost.
Using a benefit segmenta�on approach, the preliminary division of the market could iden�fy four primary benefit classes: hygiene, aesthe�cs, sensory, and price. Each of the subdivisions within the four, however, could be further delineated and treated as a separate, discrete segment unto itself. For example, "whitens teeth" and "freshens breath" could be treated as independent segments. In most situa�ons, the ini�al tendency should be to break the market into as many meaningful and unique benefit-driven segments as possible. If subsequent analysis determines that a segment is too small to financially jus�fy being recognized as a separate cluster of buyers, it can be absorbed into the next-most-closely related segment.
Recall that each benefit segment may recognize more than one set of poten�al benefits from using toothpaste. Those who seek whiter teeth are not indifferent to either the taste of compe�ng brands or their ability to fight cavi�es. However, this segment can be uniquely iden�fied as the group whose highest priority is whiter teeth. In fact, all segments within this par�cular product market may value all four basic classes of product benefits. However, they will differ from each other in the rela�ve importance a�ached to each.
Not all market segmenta�on efforts need to begin with a study of product benefits. Selec�on of other segmenta�on bases or variables may stem from the specific objec�ves of the analyst. Market geography, for example, may be a primary concern for retailers that overrides other considera�ons in some instances. At �mes, marke�ng managers may develop specialized segmenta�on models based on either their unique experience and intui�on or a systema�c study of exis�ng customer data. Alterna�vely, the efforts of a compe�tor to redefine the market through changes in its marke�ng mix may also prompt a reevalua�on of exis�ng market segment schemes. In each of these instances, however, remaining mindful of the essen�al benefits that a buyer is seeking from the brand must remain one of the primary considera�ons. In this sense, all market segmenta�on plans should be developed as benefit-segment plans to some degree.
Step Two: Name Segments and Develop Profiles
The second step in the process is to name each segment and develop a detailed profile for each. This involves iden�fying those characteris�cs that are most closely related to each segment's purchase behavior. Managers should recognize at the outset of this stage that the inten�on is to simply describe those who buy in response to specific benefits. The purpose is not to isolate the mo�ves for their behavior.
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For example, managers might name those customers who place the highest value on the aesthe�c benefits of toothpaste The Sociables (Haley, 1995). As illustrated in Table 6.1, the segment profile might include demographic descriptors (teens, young adults, unmarried), lifestyle characteris�cs (socially ac�ve, health-conscious), personality traits (outgoing, independent-minded), and other descrip�ve factors.
Table 6.1: The segment profile
Segment Name
The Sensory Segment The Sociables The Workers The Independent Segment
Principle benefit sought Flavor, texture, appearance Brightness of teeth Decay preven�on Price
Demographic strengths Children Teens, young people Large families Men
Special behavioral characteris�cs User of spearmint-flavored toothpaste Smokers Heavy users Heavy users
Brands dispropor�onately favored SeaFresh, Aim Stripe Aquafresh, Ultra Brite Crest, Colgate Brands on sale
Personality characteris�cs High self-involvement High sociability High hypochondriasis High autonomy
Lifestyle characteris�cs Hedonis�c Ac�ve Conserva�ve Value-oriented
The value in crea�ng detailed profiles of market segments is twofold. Ini�ally, it provides details that can improve the precision of market poten�al es�mates. As market- and product-related research databases have grown in their depth of detail and sophis�ca�on, the availability of nondemographic informa�on on prospec�ve buyers has grown exponen�ally. This enables managers to create es�mates of segment poten�al based on an ever-growing set of descrip�ve variables.
The second set of uses for segment profiles relates to the marke�ng mix. The choice of distribu�on channels, promo�onal messages, and product pricing strategies is o�en directed by segment profiles. Knowing the lifestyle and personality of the target market, for example, will shape the choice of adver�sing media, spokespersons, and message se�ngs. Knowing who your target market is will also drive decisions about where and how to distribute the products you sell.
Step Three: Evaluate Financial Potential
This stage combines two closely related parts: evalua�ng the market poten�al for each alterna�ve segment and es�ma�ng the cost-benefit trade-offs associated with pursuing each segment as a target market. This process is some�mes referred to as qualifying market segments.
The poten�al profitability of any given market segment depends on several factors. These include the current size of the segment, projected rates of sales growth, and the costs of accessing or reaching the segment. The ques�on of access can refer to physical barriers such as distance and topographical obstacles (e.g., rivers, mountains). However, it also refers to the availability of cost-effec�ve distribu�on channels and efficient media to reach the segment with promo�onal messages. Other considera�ons include the number and size of entrenched compe�tors, the costs associated with changes required to meet the needs of these buyers, and the fit between segment demands and the current business model.
In some circumstances, companies will undertake a process called market mapping at this stage of the process. This requires decision makers to iden�fy all of the addi�onal marke�ng mix ac�vi�es, investments, and financial consequences associated with ac�vely targe�ng a segment-specific opportunity. Though every situa�on will differ, the ul�mate goal at this stage of the process is to determine the financial a�rac�veness of each market segment. Organiza�ons base such determina�ons on their compe��ve strengths rela�ve to compe�tors and customer needs.
Think About It
Imagine yourself as the marke�ng manager of a company that sells travel luggage. Your current product line includes hard-sided and so�-sided suitcases, rolling luggage, and garment bags. A�er extensive research, you have iden�fied a new product opportunity in the travel duffle bag product segment.
How would you go about construc�ng a market map to iden�fy all of the addi�onal marke�ng mix ac�vi�es, investments, and financial consequences associated with pursuing this opportunity?
If you need informa�on on the range of products available within the category, go to h�p://www.luggage.com (h�p://www.luggage.com) .
Step Four: Select Target Market(s)
The final stage in the market segmenta�on process is to select the specific market segment or segments to target. The criteria driving this choice are not exclusively financial. As marke�ng managers consider their op�ons, they need to be cognizant of those features that make a financially viable segment a good fit for the organiza�on. These factors may include the opportunity to reach new types of customers, a dis�nct compe��ve advantage within this segment, and a close correspondence between the firm's core competencies and the new market opportunity. We address the specific criteria for evalua�ng alterna�ve segments and target market strategies in the closing sec�ons of this chapter.
This stage of the process will typically include dra�ing a preliminary marke�ng plan to rough out the primary features of the marke�ng mix strategy. This provides an interac�ve opportunity to revise both the target segment defini�on and the intended product strategy. Similarly, this part of the process can also iden�fy the
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need to engage in more market research before proceeding to product development or a product launch.
Market segmenta�on is a cri�cal component of the process of marke�ng management. It helps organiza�ons sharpen their focus and improve the fit of their product offering to target customers. It can be effec�ve in improving profit margins and reducing the intensity of direct compe��on with other brands. Managers develop useful market segments on the basis of a wide range of buyer characteris�cs. We will discuss in detail the specific factors or bases that are most o�en used to construct segments in the sec�ons that follow.
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Animated adver�sements are o�en targe�ng households with children.
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6.4 Bases for Segmenting Consumer Markets A characteris�c or factor that varies between groups, but which is rela�vely constant within groups, is a useful basis for segmen�ng markets. Marketers use four primary bases or classes of variables to segment consumer markets. These include geographic, demographic, psychographic, and behavioral bases.
Geographic Segmentation Bases
Geographic segmenta�on reflects the importance of understanding the features that define where prospec�ve buyers live. The guiding principle is that tastes and preferences vary according to one's geographic se�ng. Geographic market segmenta�on factors of importance include country, region, climate, popula�on density, and popula�on growth rates. How people live is impacted by their geographic surroundings, and this can have substan�al effects on their consump�on pa�erns and habits. Knowing where people live within an urban market can also provide informa�on about income levels and the character of their retail surroundings. Similarly, climate affects primary demand for many products (e.g., snowmobiles) and shapes preferences for several consumer goods (e.g., clothing). Immigra�on and migra�on pa�erns are also of importance to marketers seeking to understand the influence of subcultures on brand choice.
Geographic segmenta�on is not intended to suggest that all prospec�ve customers within a given loca�on will make iden�cal brand choices. For most consumer packaged goods, however, brand-specific demand does vary by geographic region. Regional trends of sales for fruit-flavored sodas—Vernors, Pibb Xtra, and Dr. Pepper, for example—reflect differences in regional tastes. Category demand may also shi� according to regional tastes and varia�ons in climate as it does for salsa, barbeque sauce, and iced tea sales. Perhaps more than any other group, retailers need to understand geographic segmenta�on as a cri�cal factor in evalua�ng new store loca�ons.
Demographic Segmentation Bases
Demographic segmenta�on relies on using popula�on sta�s�cs to effec�vely differen�ate between buyers with different brand preferences. These variables include income, age, sex, ethnicity, educa�on, occupa�on, home ownership, religion, social class, and family status. Demographic segmenta�on is the most common approach to market segmenta�on. This is due to the ready availability of market-specific demographic data and the prevalence of age and sex as the primary descriptors of media audiences. For this reason, demographic descriptors play a unique role in assessing the financial viability of segments. A primary source for demographic data and analysis in the United States is the Census Bureau.
Sex or gender is frequently used as a star�ng point to define market segments since so many products, such as clothing, magazines, and health care items, are gender-specific. Age is also used in the ini�al stages since it readily discriminates between users and non-users for many product categories such as toys or denture adhesive. Consump�on pa�erns for products like milk also shi� as consumers age. Marketers design and promote products differently to meet the wants of different age groups. Gradual changes over �me in other demographic variables also relate to changes in purchasing pa�erns. Stages in the family life cycle and consequent changes in the size of family units impact demand for many types of household products.
Income has historically been regarded as the most important basis for dis�nguishing between groups of consumers. Ernst Engel, a 19th century sta�s�cian, was the first to inves�gate the rela�onship between changes in household income and consump�on behavior. Engel's law states that as income increases, the propor�on of income spent on food falls. This empirical principle has remained unchanged over the years. This has implica�ons for strategic planning, as marke�ng managers an�cipate how an economic recession would impact spending pa�erns within segments. In recent genera�ons, however, economists have also observed that an increasing por�on of household income is allocated to both recrea�on and educa�on expenditures as household incomes increase.
Psychographic Segmentation Bases
In psychographic segmenta�on, managers use characteris�cs such as lifestyle, personality, values, and a�tudes to define the preferences of clusters of similar consumers. Using these segmenta�on bases, the focus is primarily on applying the
psychological and lifestyle a�ributes of buyers to iden�fy the behavioral profiles of different customer groups. For example, psychographic analysis may determine that people who like classical music and believe in tradi�onal social values will prefer drinking wine to beer.
In contrast to demographic profiles, managers must collect data that are specific to the task in order to develop psychographic profiles. Survey research and focus groups are typically used to collect informa�on about subjects' a�tudes, interests, and ac�vi�es.
Psychographic segmenta�on is of par�cular importance to the posi�oning and promo�on of high involvement products. Since, by defini�on, consumers' experiences with these types of goods have rela�vely great personal importance to them, marketers must understand the psychology and lifestyles of the segments they wish to serve. By dividing a product market into segments with similar psychological characteris�cs, values, and lifestyles, marke�ng managers can posi�on brands to sa�sfy the psychological and emo�onal needs of consumers. Further, psychographic profiles enable marketers to portray their brands as being compa�ble with, if not essen�al to, daily lifestyle decisions.
Think About It
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Automakers use psychographic segmenta�on when planning the introduc�on of new models. Iden�fy three models that were introduced to the North American car market over the past five years. Use the carmakers' websites to do a li�le research on the features and op�ons available. Check online sources for copies of past or current adver�sements.
Star�ng with the name chosen for the brand, build a psychographic profile of the intended target market for each. Enhance your descrip�on by providing a demographic descrip�on as well. Once you have completed the three profiles, check your work by comparing it against the informa�on provided by online sources such as motortrend.com, caranddriver.com, and edmunds.com. They do not report specifically on demographics and psychographics, but you can glean a great deal of informa�on about the intended buyer that will either support or refute your analysis.
Lifestyle Segmenta�on of the Organic Food Market
Consumer demand for organically produced foods has grown drama�cally since the mid-1990s. What began as an industry at the margins of the economy, targe�ng a small market niche, has bloomed into an industry with $24 billion in annual sales in 2009, accoun�ng for nearly 4 percent of total U.S. food retail sales (Organic Trade Associa�on, 2010). Market growth is expected to con�nue in a range between 25 percent (Finch, 2005) and 40 percent (NPD Group, 2009) over the next decade. The popularity of organic and local foods reflects something more than simply the consequences of evolving consumer preferences. Consumers are expressing their iden��es and consump�on values through these purchases (Finch, 2005; Senauer, 2001).
Segmenta�on is an important tool for marke�ng managers seeking to understand the a�tudes and mo�va�ons of specific customer groups rather than focusing on how an "average" consumer thinks and behaves. Lifestyle segmenta�on aims to profile buying groups on the basis of psychographic variables such as values and a�tudes. One of the primary purposes behind focusing on psychographic factors rather than demographics is that it helps marketers to develop adver�sing strategies that tap into buyers' mo�va�ons for choosing one brand or type of product over another.
A research study by Cong Nie and Lydia Zepeda (2011) iden�fied four dis�nct groups or clusters of organic food consumers: ra�onal, adventurous, careless, and conserva�ve uninvolved consumers.
In the study's na�onwide sample of 956 U.S. food consumers, 29 percent were iden�fied as ra�onal consumers. Ra�onal consumers were ac�ve organic and local food shoppers. Approximately 18 percent shopped regularly at farmers' markets, 10 percent were regular organic food shoppers, and 56 percent were occasional organic food shoppers. This group tended to have rela�vely low brand awareness and high price sensi�vity. They valued the healthfulness and safety of food, and many reported following special diets. An above-average propor�on of this segment (24 percent) belonged to a fitness club. They were also more knowledgeable about organic agriculture than average consumers and more likely to be involved in environmental protec�on.
Adventurous consumers composed 24 percent of the sample. Members of this group enjoyed cooking and were the ones most likely to pay close a�en�on to label informa�on. Approximately 16 percent of them were regular organic shoppers, and 65 percent were occasional organic shoppers. They visited farmers' markets more frequently than other segments.
Careless consumers (18 percent of the sample) were generally the least interested in food-related issues, and none had ever been to a farmers' market. Health- and nutri�on-related food issues were not priori�es for this cluster of buyers. They valued convenience more highly than other segments and indicated that they did not enjoy cooking. None of the buyers in this segment was a vegetarian, and most had never inten�onally bought an organic food item. Their level of environmental concern was the lowest among the four groups.
Conserva�ve uninvolved consumers made up 29 percent of the sample. This group also placed a high priority on convenience in buying and preparing foods. They were less likely than the average consumer to buy organic foods, but they were the group most concerned about brand names. Less than 2 percent of this segment was likely to shop regularly for organic food. Rela�vely few of them belonged to a fitness club, and only 2 percent belonged to an organized environmental group of any kind.
This lifestyle approach to profiling segments is significantly different from a demographic-based approach. It provides much more informa�on on the values and priori�es that mo�vate behaviors rather than simply describing the age, sex, and income of each group. Nonetheless, the study described here does report on these demographic factors. Based only on the lifestyle descrip�ons of these four segments, what would you guess about their demographic profiles? If you are interested in checking your intui�on against the actual data, the full ar�cle includes informa�on about each segment's average age, income, household size, educa�onal a�ainment, race, and region.
Behavioral Segmentation Bases
Behavioral segmenta�on focuses on how consumers relate to the product being marketed. The brand preferences and product choice behavior of consumers within target segments can be readily influenced by some psychological variables and purchase situa�ons. The relevant variables include purchase occasion, product usage rates, brand loyalty status, a�tude toward the product, and benefits sought from purchase of the product. Marketers usually cite benefits sought as the best star�ng point from which to segment product markets. However, a�tude toward the product and usage traits are some�mes preferred if brand preferences are well established.
The key difference between behavioral bases and the previous classes of segmenta�on factors is the emphasis on the rela�onship of the consumer to the product being sold. Differences in usage rates between segments, for example, are o�en used to iden�fy heavy-user, moderate-user, and light-user market segments. This can be a very useful approach to market segmenta�on in light of the Pareto principle, or 80-20 rule, introduced in Chapter 2. Recall that 80 percent of profits
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typically come from 20 percent of customers. As such, iden�fying the heavy-user segment will enable marke�ng managers to direct their marke�ng programs toward buyers who can contribute the most to the firm's financial success.
Selec�ng target segments based on high levels of exis�ng brand loyalty can provide similar advantages for the firm. This is the opera�ve principle behind the reward programs offered by many airlines. However, both light-user and low–brand loyalty market segments s�ll have value. They may represent opportuni�es to build greater sales volume by encouraging more consump�on by light-user segments and reinforcing brand preference among low loyalty segments.
Understanding the occasions that prompt consumers to purchase a product can be useful in some circumstances. Knowing that many college students eat breakfast cereal as a snack food has led some sellers to offer varie�es that are intended to be eaten without milk. Many charter airlines segment markets according to the occasions that prompt passengers to fly (e.g., business, vaca�on). Each occasion is accompanied by different service expecta�ons. Knowing what customers prefer enables the companies to be�er sa�sfy customer needs.
Benefit segmenta�on and a�tude segmenta�on are two very important and closely related approaches to grouping customers. Benefit segmenta�on focuses on the product a�ributes that buyers seek and the corresponding benefits that they expect to receive from the purchase. Buyers' a�tudes toward brands provide an assessment of how effec�vely the purchased product delivers the benefits promised. Understanding these rela�onships is usually an essen�al star�ng point to effec�vely segmen�ng markets.
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Where do you think oil pumping units like this one are usually located, and why do you think that is?
Associated Press
6.5 Bases for Segmenting Business Markets Some of the market segmenta�on bases used in consumer products markets can be applied to business-to-business markets as well. These include geographic, demographic, and behavioral factors. However, differences in the nature of both the products sold and customers served allow for the applica�on of some addi�onal bases as well.
Geographic B2B Segmentation Bases
Business-to-business markets are characterized by a smaller number of poten�al buyers than consumer markets. Buyers tend to be rela�vely large and more geographically concentrated as well. Geographic segmenta�on focuses on the loca�on, concentra�on, and distribu�on of customers. Companies purchasing oil drilling equipment, for example, are clustered in a rela�vely small number of loca�ons worldwide; buyers of aircra� engines are clustered near assembly plants. Regional geographic variables related to rates of economic and industry-specific growth are o�en incorporated when considering how to segment B2B markets on a global basis.
Demographic B2B Segmentation Bases
Demographic segmenta�on tends to focus on bases that reflect the size of the account, such as number of employees and sales revenues. It also tends to focus on those bases that directly impact poten�al for sales growth, such as derived demand based on projected growth in the sale of final products. How buyers will use the product they are purchasing is another common approach to segmen�ng B2B markets since it directly impacts the nature of the sales task. For example, companies that purchase paint pigments for applica�on to their own products will have different requirements than companies simply intending to sell paint to retailers under their own label.
Behavioral B2B Segmentation Bases
Marketers o�en use behavioral factors such as loyalty to the seller, past usage pa�erns, and average order size to enhance a segment profile and qualify prospec�ve buyers. In some instances, markets can also be segmented according to how buyers make purchase decisions. Knowing whether decision making authority rests with a solitary purchasing agent or relies on a complex buying process can impact the alloca�on of the seller's sales force across a market. Similarly, knowing where a prospec�ve buyer is in the buying process for a complex purchase will dictate the type of personnel deployed to call on an account.
As with B2C markets, segments can be constructed based on whether buyers are heavy users, medium users, light users, or nonusers. This is essen�al to understanding the level of effort and service required to make sales. Similarly, rela�vely new companies typically require more �me and higher levels of personal a�en�on to facilitate transac�ons and close sales than long-established firms.
North American Industry Classification System
Since the focus of much B2B marke�ng is to sell goods and services that facilitate other organiza�ons' business opera�ons, segmenta�on by account type is a common, intui�ve first step. Account categories could include distributors, wholesalers, and retailers since buyers within these clusters are likely to share some needs. The logic behind this approach can be extended to using the North American Industry Classifica�on System (NAICS) to segment business markets.
The NAICS classifica�on system was created in 1997. It is a collabora�ve effort by Mexico, Canada, and the United States to classify businesses by the type of ac�vity in which they are primarily engaged. NAICS industries are iden�fied by a 6-digit code that designates a company as belonging to one of 20 broad sector categories, shown in Table 6.2, based on the first two digits. The third digit designates the subsector, the fourth iden�fies industry group, and the fi�h digit indicates par�cular industries. The final digit designates na�onal industries.
Table 6.2: North American Industry Classifica�on System
Code NAICS Sectors Count
11 Agriculture, Forestry, Fishing, and Hun�ng 485,049
21 Mining 30,000
22 U�li�es 28,128
23 Construc�on 1,466,475
31–33 Manufacturing 639,802
42 Wholesale Trade 726,617
44–45 Retail Trade 1,759,455
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48–49 Transporta�on and Warehousing 409,355
51 Informa�on 257,500
52 Finance and Insurance 607,795
53 Real Estate Rental and Leasing 692,527
54 Professional, Scien�fic, and Technical Services 3,682,218
55 Management of Companies and Enterprises 34,297
56 Administra�ve Support; Waste Management and Remedia�on Services 1,142,973
61 Educa�onal Services 301,099
62 Health Care and Social Assistance 1,172,862
71 Arts, Entertainment, and Recrea�on 290,976
72 Accommoda�on and Food Services 654,017
81 Other Services (except Public Administra�on) 1,662,196
92 Public Administra�on 203,073
The informa�on conveyed by a company's NAICS code is, for B2B markets, comparable in many ways to the demographic profile of target segments developed by B2C firms. It can be used to iden�fy the number of poten�al customers in a given region, their size, and poten�al applica�ons for a given seller's products. Commercially available databases can be used to translate a target segment NAICS code into the names of prospec�ve buyers, and very specific profiles of the prospects can be readily developed from these same sources.
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John Deere's product-centered specializa�on features a broad array of branded equipment within the grass- mowing product market.
PR Newswire/Associated Press
6.6 Evaluating Segments and Selecting Target Market Strategies The segmenta�on of B2C and B2B markets is not possible in all cases. To develop effec�ve market plans, target market segments must sa�sfy three basic requirements. They must be measurable, accessible, and substan�al.
Requirements for Target Market Segments
To be measurable, segments must be iden�fiable by marke�ng metrics for which data are readily available. This could include measures of sales poten�al, market size, purchasing power, and customer profiles.
Segments are considered accessible if they can be effec�vely reached and served through exis�ng marke�ng channels. That is, the implementa�on of marke�ng plans specific to the target segment can be effec�vely delivered via the media and channels of distribu�on that are currently available.
Substan�al refers to the ques�on of whether or not the market segments are sufficiently large and profitable enough to pursue. When evalua�ng the range of alterna�ve segments available to the firm, only those recognized as large enough to warrant the crea�on and delivery of a unique marke�ng mix need be considered.
By defini�on, target market segments are relevant only when members of one target segment respond to a given firm's marke�ng programs differently than members of other segments. The a�rac�veness of each target market segment can be impacted by many consumer, compe�tor, and company considera�ons. The factors that impact the appropriateness and financial viability of alterna�ve target markets are iden�fied in Table 6.3.
Table 6.3: Factors impac�ng appropriateness and financial viability of alterna�ve target markets
Consumer Characteris�cs Compe�tors Within Segment Correspondence With Company
Number of buyers Number Strengths/resources
Growth poten�al Size Strategic objec�ves
Sales poten�al Rela�ve strength Exis�ng channels
Profit poten�al Resources Dis�nc�ve competences
Target Market Strategies
Once the evalua�on of the alterna�ve segments is finalized, marke�ng managers can select from among a number of strategies to reach their chosen target market. The determina�on of the best possible op�on will be influenced by many factors. These include market dynamics, the pa�ern of consumer demand, the intensity of compe��on, the size of the firm, and its pricing structure for related products. However, all target market strategies fit within at least one of four strategy pa�erns.
Single-segment concentra�on strategies emerge when managers opt to focus their marke�ng resources on serving one segment exclusively. This op�on may be preferred by default within rela�vely small or newly launched companies due to limited resources. It has the advantage of permi�ng the company to focus on serving the needs of the most a�rac�ve market segment exclusively. Properly executed, this should translate into compe��ve advantages arising from the execu�on of an unambiguous posi�oning strategy and sharply focused marke�ng plan. The exclusive appeal to plus-sized women allowed the Just My Size brand to build a valuable franchise with a very loyal market segment. Its ini�al success with hosiery created subsequent opportuni�es to sell casual clothing, swimwear, and sleepwear to this customer base.
Mul�ple segment specializa�on is a more challenging and more complex response to the set of alterna�ve buying clusters iden�fied during the process of segmen�ng the product market. Firms that possess the required resources may opt to target several of the most a�rac�ve segments with either a solitary brand or mul�ple brands. Many large consumer packaged goods companies, such as Procter & Gamble and Kra�, use this strategy to create a web of brands that provides total market coverage across mul�ple product categories. Alterna�ve execu�ons of mul�ple segment specializa�on include product-centered and market-centered specializa�on.
Product-centered specializa�on is a company's planned strategy to sell across several segments within a single product market. Consider John Deere's array of branded equipment within the grass-mowing product market. The company markets models suited to every applica�on and segment, ranging from small residen�al yards to the needs of large commercial landscapers. Product-centered specializa�on strategies some�mes correspond closely to the strategy of market development, which focuses on the introduc�on of exis�ng products to new markets as a means of increasing sales.
Market-centered specializa�on is a strategy that concentrates on responding to the specific needs and preferences of a par�cular segment of consumers across mul�ple product categories. An example of this strategy is provided by Sears. It targets the same middle-class, homeowner segment of consumers across product categories such as kitchen appliances,
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water heaters, air condi�oners, sewing machines, outdoor grills, and vacuum cleaners with the Kenmore brand. Such strategies may correspond to the product market development strategies that build sales by introducing new brands to exis�ng market segments to be�er serve exis�ng buyers.
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Ch. 6 Conclusion In the final analysis, all market segmenta�on schemes depend on an understanding of the benefits that buyers seek from the products they purchase. In some instances, segment profiles will be defined by the careful and analy�c applica�on of research to describe each benefit cluster in greater detail. At other �mes, segment profiles are largely an intui�ve outcome based on marke�ng managers' understanding of the demographic and behavioral characteris�cs of their customers. In either case, the value of developing specific segment profiles and strategies can be judged by its contribu�on to the success of brands and products. In short, the best segments and segmenta�on strategies are those that work best.
Consider the MicroFridge story that was introduced at the beginning of this chapter. The origin of the company and its subsequent success relied on understanding the needs of different market segments, and this is clearly evident from the different types of informa�on provided to each prospec�ve purchasing group. Its products deliver safety, convenience, and value in different propor�ons based on segment-specific characteris�cs. Recently introduced models for the home user segment, for example, are available in a wider array of sizes and include features such as charging sta�ons for personal electronic devices. Addi�onally, the company recently introduced a model specifically designed for use in garage and workshop spaces. The con�nued success of the company into the future will remain dependent on finding innova�ve ways to meet the evolving needs of its target markets.
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Ch. 6 Learning Resources
Key Ideas
Cri�cal Thinking Ques�ons
1. Why is market segmenta�on an essen�al part of developing an overall marke�ng strategy? Should segmen�ng the market into smaller groups of buyers always be the first step in devising a strategic plan for a brand?
2. What is the difference between product-level and brand-level segmenta�on? When does it make sense to do one rather than the other? 3. What is the likely consequence for a brand manager who decides to ignore or skip over the ques�on of segmenta�on and iden�fying a specific target? 4. Brand extensions can be tricky. Consider the following brands of consumer goods: Apple, Levi's, Marlboro, Chevrolet, and Purina. What types of brand extensions
could capitalize on the posi�ve image and impressions associated with each of them? Name some that obviously would not work. 5. Explain the concept of mass marke�ng to someone outside your class and ask him or her to iden�fy five products that are mass marketed. Consider the list. How
many of them truly fit the defini�on of mass marke�ng? Can you think of any brand for which different consumer segments don't actually exist? 6. Will successful niche marke�ng inevitably expand the size of the targeted segment to a point where it is no longer just a niche? Provide examples to support your
posi�on. 7. Why does the customized marke�ng level of market segmenta�on represent the epitome of what the marke�ng concept is all about? 8. Could you devise a plan to segment the market for audio books without doing any research? Why might the process of market segmenta�on seem so natural?
What are the advantages and disadvantages to following a formal step-by-step approach to the process? 9. Consider a favorite television sitcom or novel with which you are very familiar. Chances are that you know enough about each fic�onal primary and secondary
character to make some educated guesses about their brand preferences. Now, develop a market segmenta�on plan for cars or restaurants using each character as a representa�ve of one par�cular market segment. Provide a segment profile that includes geographic, demographic, psychographic, and behavioral bases.
10. To be useful as target markets, segments must be measurable, accessible, and substan�al. If you developed a new line of clothing for recently divorced men who had been previously married for 15-plus years, would this target market meet the three criteria for "good" segments?
Key Terms
Click on each key term to see the defini�on.
accessible (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
To be effec�ve target markets, segments must be able to be effec�vely reached and served through exis�ng marke�ng channels.
behavioral segmenta�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Dividing markets based on how consumers relate to the product being marketed in different circumstances. Common behavioral variables include purchase occasion, product usage rates, brand loyalty status, a�tude toward the product, and benefits sought from purchase of the product.
brand extensions (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
New products or services introduced under the same brand name as exis�ng goods in an effort to capitalize on the posi�ve image or values associated with the exis�ng brand name.
customized marke�ng (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
The most extreme level of market segmenta�on that treats each prospec�ve buyer as a separate segment. Customized marke�ng is also known as micromarke�ng.
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demographic segmenta�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Dividing markets by using iden�fiable social characteris�cs of individuals and groups that have been shown to effec�vely differen�ate between buyers with different brand preferences. These variables include income, age, sex, ethnicity, educa�on, occupa�on, home ownership, religion, social class, and family status.
geographic segmenta�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Dividing markets with an emphasis on the importance of understanding where prospec�ve buyers live and how this impacts their brand preferences.
heterogeneous (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Composed of individuals with dissimilar product-related wants and needs.
homogeneous (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Composed of individuals with very similar product-related wants and needs.
market-centered specializa�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Concentra�ng on the specific needs and preferences of a par�cular segment of consumers across mul�ple product categories.
market mapping (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
The process of iden�fying the addi�onal marke�ng mix ac�vi�es, investments, and financial consequences associated with ac�vely targe�ng a new segment-specific opportunity.
market segmenta�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
The process and strategy by which the total market for a product is divided into smaller parts or segments of customers that have similar wants and needs with respect to a specific product.
mass marke�ng (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
The level of market segmenta�on that does not discriminate or differen�ate between prospec�ve groups or segments of buyers. Mass marke�ng is also known as undifferen�ated marke�ng.
measurable (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Effec�ve target segments must be iden�fiable by marke�ng metrics for which data are readily available. This could include measures of sales poten�al, market size, purchasing power, and customer profiles.
mul�ple segment specializa�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Targe�ng several segments with either a solitary brand or mul�ple brands.
niche marke�ng (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
The level of market segmenta�on where an organiza�on creates narrowly focused marke�ng plans for very small segments. Niche marke�ng is also known as concentrated marke�ng.
North American Industry Classifica�on System (NAICS) (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
A coding system created by Mexico, Canada, and the United States to classify businesses by the type of ac�vity in which they are primarily engaged. It is frequently used to analyze and segment business-to-business markets.
product-centered specializa�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Selling across several segments within a single product market.
4/10/2019 Print
https://content.ashford.edu/print/AUBUS620.12.1?sections=ch06,ch06introduction,sec6.1,sec6.2,sec6.3,sec6.4,sec6.5,sec6.6,ch06conclusion,ch06… 20/20
psychographic segmenta�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Dividing markets based on the psychological and lifestyle a�ributes of buyers such as personality, values, and a�tudes.
qualifying market segments (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
The process of evalua�ng the market poten�al for each alterna�ve segment and es�ma�ng the cost-benefit trade-offs associated with pursuing each segment as a target market.
segment marke�ng (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
The level of market segmenta�on that differen�ates between customer groups within a product market by execu�ng separate marke�ng plans for individual brands. Segment marke�ng is also known as differen�ated marke�ng.
single-segment concentra�on strategies (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
Focusing marke�ng resources on serving one segment exclusively.
substan�al (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12
To serve as effec�ve target markets, segments must be sufficiently large and profitable enough to pursue.
Web Resources
This is a site developed by professionals in the field of market research to provide both basic and advanced content on the topic of market segmenta�on. It includes a substan�al amount of useful material, but the specific segmenta�on examples are among the most prac�cal entries. h�p://www.market-segmenta�on-market-research.com (h�p://www.market-segmenta�on-market-research.com)