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Chapter
9
Identifying
Market Segments
and Targets

THE MARKETING PROCESS

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

EFFECTIVE TARGETING
REQUIRES…
• To identify and profile distinct groups of
buyers who differ in their needs and
preferences
• Select one or more market segments to
enter
• Establish and communicate the distinctive
benefits of the market offering

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CUSTOMER-DRIVEN
MARKETING STRATEGY

EFFECTIVE TARGETING
REQUIRES…
• Identify and profile distinct groups of
buyers who differ in their needs and
preferences
• Select one or more market segments to
enter
• Establish and communicate the distinctive
benefits of the market offering

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WHAT IS A MARKET
SEGMENT?
• A market segment consists of a group of
customers who share a similar set of
needs and wants.

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STEPS IN SEGMENTATION
PROCESS
1. Need-based segmentation
2. Segment identification
3. Segment attractiveness
4. Segment profitability
5. Segment positioning
6. Segment acid test
(a conclusive test of the success or value of something)

7. Market mix strategy

Market targeting

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STAGE I Identify Bases for

Segmenting markets

STAGE II Develop Relevant market

segment profiles

STAGE III Forecast total market

potential for each segment

Analyze competitive forces Determine marketing program to

within each segment serve each segment

STAGE IV
Forecast own market share
for each segment

Estimate cost benefit for

each segment

Do benefits achieve company goals and

justify development of each segment
STAGE V
Decision on selection of Target market segment (s)

Bases for Segmenting

Consumer Markets
• Market segment
– A group of customers who share a similar set
of needs and wants

Geographic Demographic
segmentation segmentation

Psychographic Behavioral
segmentation segmentation

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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

Demographic Segmentation

Age & life-

Life stage
cycle stage

Race & Gender

culture

Generation Income

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Demographic Segmentation
• Age and life-cycle stage
– Our wants and abilities change with age
• Life stage
– A person’s major concern (e.g., divorce)

Demographic Segmentation
• Gender
– Men and women have
different attitudes and
behave differently
• Income
– Income segmentation is
a long-standing practice

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Demographic Segmentation

• Generation

Millennials (Gen Y) Gen X

1995 – 2000s / (1978-1995) 1960s to 1980s

Baby Boomers Silent Generation

1940s to 1960s 1925 to 1945

Psychographic Segmentation
• Buyers are divided into groups on the
basis of psychological/personality traits,
lifestyle, or values

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VALS
Segmentation System

Based on psychographic
measurements
classifies U.S. adults into eight
primary groups based on responses
to a questionnaire featuring four
demographic and 35 attitudinal
questions
consumer motivation
(the horizontal dimension)
(ideals, achievement, and self-expression)
and consumer resources
(the vertical dimension)
(Different levels of resources enhance or constrain a person’s expression of his or
her primary motivation.)

BEHAVIORAL
SEGMENTATION
• Marketers divide buyers into groups on the
basis of their knowledge of, attitude
toward, use of, or response to a product

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BEHAVIORAL
SEGMENTATION
• Needs and benefits
• Decision roles
– Initiator
– Influencer
– Decider
– Buyer
– User

USER AND USAGE-RELATED

VARIABLES

Occasions User status

Attitude Usage rate

Buyer-
Loyalty
readiness
status
stage

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Behavioral Segmentation
Breakdown

How Should Business Markets

Be Segmented?

 Demographic
 Operating variables
 Purchasing approaches
 Purchasing approaches
 Situational factors
 Personal characteristics

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Effective
Segmentation Criteria

 Measurable
 Substantial
 Accessible
 Differentiable
 Actionable

Targeting
The act of
evaluating and
comparing the
identified groups
and then selecting
one or more of them
as the prospects

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Evaluating & Selecting the

Market Segments
Possible Levels of Segmentation

CHOICE OF TARGET MARKET

STRATEGIES
• Company Resources
• Product Homogeneity
• Stage in the Product Life Cycle
• Market Homogeneity
• Competition

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DIFFERENTIATED
MARKETING APPROACHES

Single segment Market Product Full Market

Concentration Specialization Specialization Coverage

DIFFERENTIATED
MARKETING APPROACHES
E

Selective
Specialization

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