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Marketing Management

Fifteenth Edition

Chapter 9

Identifying Market

Segments and

Targets

Where Are We?

Collaborator

Company

Competitor

Consumer

Context

Understanding

Marketplace

By what value?

Positioning

Designing a Customer-

Driven Marketing

Strategy

Value Delivery

by Place

Value Creation

by Product

Value Comm.

by Promotion

Value

Captuer

by Price

Brand Equity

Customer Equity

Developing &

Implementing Marketing

Programs

Managing Marketing

Assets

To whom?

Segmentation & Targeting

Learning Objectives

9.1 In what ways can a company divide

the consumer market into segments?

9.2 How should a company choose the

most attractive target markets?

9.3 What are the requirements for

effective segmentation?

Bases for Segmenting Consumer

Markets

• Market segment

– A group of customers who share a similar set of needs

and wants

1. Geographic segmentation

2. Demographic segmentation

3. Psychographic segmentation

4. Behavioral segmentation

Major Segmentation Variables for

Consumer Markets (1 of 3) Table 9.1 Major Segmentation Variables for Consumer Markets

1. Geographic

region

Pacific Mountain, West North Central, West South Central, East North

Central, East South Central, South Atlantic, Middle Atlantic, New England

City or metro size Under 5,000; 5,000–20,000; 20,000–50,000; 50,000–100,000; 100,000–

250,000; 250,000–500,000; 500,000–1,000,000; 1,000,000–4,000,000;

4,000,000+

Density Urban, suburban, rural

Climate Northern, southern

2. Demographic

age

Under 6, 6–11, 12–17, 18–34, 35–49, 50–64, 64+

Family size 1–2, 3–4, 5+

Family life cycle Young, single; young, married, no children; young, married, youngest child

under 6; young; married, youngest child 6 or older; older, married, with

children; older, married, no children under 18; older, single; other

Gender Male, female

Income Under $10,000; $10,000–$15,000; $15,000–$20,000; $20,000–$30,000;

$30,000–$50,000; $50,000–$100,000; $100,000+

Major Segmentation Variables for

Consumer Markets (2 of 3) [Table 9.1 continued]

Occupation Professional and technical; managers, officials, and proprietors; clerical

sales; craftspeople; forepersons; operatives; farmers; retired; students;

homemakers; unemployed

Education Grade school or less; some high school; high school graduate; some

college; college graduate; post college

Religion Catholic, Protestant, Jewish, Muslim, Hindu, Other

Race White, Black, Asian, Hispanic, Other

Generation Silent Generation, Baby Boomers, Gen X, Millennials (Gen Y)

Nationality North American, Latin American, British, French, German, Italian, Chinese,

Indian, Japanese

Social class Lower lowers, upper lowers, working class, middle class, upper middles,

lower uppers, upper uppers

3. Psychographic

lifestyle

Culture-oriented, sports-oriented, outdoor-oriented

Personality Compulsive, gregarious, authoritarian, ambitious

Major Segmentation Variables for

Consumer Markets (3 of 3) [Table 9.1 continued]

4. Behavioral

occasions

Regular occasion, special occasion

Benefits Quality, service, economy, speed

User status Nonuser, ex-user, potential user, first-time user, regular user

Usage rate Light user, medium user, heavy user

Loyalty status None, medium, strong, absolute

Readiness stage Unaware, aware, informed interested, desirous, intending to buy

Attitude toward

product

Enthusiastic, positive, indifferent, negative, hostile

1. Geographic Segmentation

• Geographical units

– Nations, states, regions,

counties, cities, or

neighborhoods

• Nielsen Claritas’ PRIZM

– Education and affluence

– Family life cycle

– Urbanization

– Race and ethnicity

– Mobility

Geographic Segmentation (PRIZM)

Table 9.2 Examples of PRIZM Clusters

• Young Digerati. Young Digerati are the nation’s tech-savvy singles and couples

living in fashionable neighbor-hoods on the urban fringe. Affluent, highly educated,

and ethnically mixed, they live in areas typically filled with trendy apartments and

condos, fitness clubs and clothing boutiques, casual restaurants, and all types of

bars—from juice to coffee to microbrew.

• Beltway Boomers. One segment of the huge baby boomer cohort—college-

educated, upper-middle-class, and home-owning—is Beltway Boomers. Like many

of their peers who married late, these boomers are still raising children in

comfortable suburban subdivisions and pursuing kid-centered lifestyles.

• The Cosmopolitans. Educated, midscale, and multiethnic, the Cosmopolitans are

urbane couples in America’s fast-growing cities. Concentrated in a handful of

metros—such as Las Vegas, Miami, and Albuquerque—these households feature

older homeowners, empty nesters, and college graduates. A vibrant social scene

surrounds their older homes and apartments, and residents love the nightlife and

enjoy leisure-intensive lifestyles.

2. Demographic Segmentation

• Age and life-cycle stage

• Life stage

• Race and culture

• Gender

• Generation

• Income

Demographic Segmentation

• Age and life-cycle stage

– Our wants and abilities change with age

• Life stage

– A person’s major concern (e.g., divorce)

• Gender

– Men and women have different attitudes and behave differently

• Income

– Income segmentation is a long-standing practice

• Generation

– Millennials (Gen Y)

– Gen X

– Baby Boomers

– Silent Generation

Demographic Segmentation

• Race and culture

– Hispanic Americans

– Asian Americans

– African Americans

– LGBT

3. Psychographic Segmentation

• Buyers are divided into groups on the basis of

psychological/personality traits, lifestyle, or values

Figure 9.1 VALS Segmentation System

4. Behavioral Segmentation

• Marketers divide buyers into groups on the basis of

their knowledge of, attitude toward, use of, or response

to a product

User and Usage-Related Variables

• Occasions

• User status

• Attitude

• Usage rate

• Loyalty status

• Buyer-readiness stage

Figure 9.2 Marketing Funnel

only 46 percent convert for Brand A compared with 61 percent for Brand B

Figure 9.3 Behavioral Segmentation

Breakdown

Market Targeting Table 9.6 Steps in the Segmentation Process

blank Description

1. Needs-Based Segmentation Group customers into segments based on similar needs and benefits

sought by customers 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 For each segment, create a “value proposition” and product-price

positioning strategy based on that segment’s unique customer needs

and characteristics.

6. Segment “Acid Test” Create “segment storyboard” to test the attractiveness of each

segment’s positioning strategy.

7. Marketing-Mix Strategy Expand segment positioning strategy to include all aspects of the

marketing mix: product, price, promotion, and place.

Effective Segmentation Criteria

• Measurable

• Substantial

• Accessible

• Differentiable

• Actionable

Figure 9.4 Evaluating and Selecting

the Market Segments

• Possible Levels of Segmentation

One-To-One Marketing

• Identify your prospects and customers

• Differentiate customers in terms of their needs and

value to your company

• Interact to improve your knowledge about customers’

needs and to build relationships

• Customize products, services, and messages to

each customer