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CHAPTER 8
Market Segmentation
and Targeting
OPENING CASE: MARRIOTT HOTELS, RESORTS, AND SUITES
Chapter Roadmap
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1. Levels of Segmentation – Discrete groups of Ask key questions about market segments 1. The Multifactor Matrix Approach to Targeting
segments
• How many segments? • Market segment attractiveness
2. Developing Market Segments – two approaches:
• Can individual customers be a segment? • Which market segments to target
customer needs or candidate descriptor
• Do market segments evolve? 2. Targeting Market Segments and Company Size
3. Methodological Approaches to Segments –
Qualitative or quantitative • How do customer life cycles affect market
segments?
• Does segment of customers differ from a group?
Six Marketing Imperatives
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Targeting: The process of deciding which segments receive most effort, and
which segments receive little or no effort. Since firms typically have insufficient
resources and/or capabilities to address all segments, they must make choices.
Market Segmentation and Targeting
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Session Roadmap
• The marketing process
• Market segmentation
• Targeting market segments
Market Segmentation and Targeting
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Session Roadmap
• The marketing process
• Market segmentation
• Targeting market segments
The Marketing Process
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Market, customer,
competitor, company, and
complementer insight
Strategic Marketing
Implementing the
market strategy
Market Segmentation and Targeting
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Session Roadmap A
• The marketing process
• Market segmentation
• Targeting market segments
Market Segmentation
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Session Roadmap AA
• Market segment illustrations
• Market segment matrix
• Descriptor (segmentation) variables
• Criteria for good market segments
• Developing market segments
• More market segment illustrations
• Standardized market segment
• Questions about market segments
Market Segmentation
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Illustration: Analgesics
Market Level Pain Market
All tea
hot
warm
cold
Market Segmentation
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All tea
hot
unsweetened
sweetened
cold
Market Segmentation
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Session Roadmap AA
• Market segment illustrations
• Market segment matrix
• Descriptor (segmentation) variables
• Criteria for good market segments
• Developing market segments
• More market segment illustrations
• Standardized market segment
• Questions about market segments
Market Segmentation
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Definition of segments
A B C
Customer needs/ ZZZ 5 2 4
required benefits Priority ordering
YYY 4 1 5
XXX 2 4 1
WWW 1 3 2
VVV 3 5 3
Market Segmentation
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Session Roadmap AA
• Market segment illustrations
• Market segment matrix
• Descriptor (segmentation) variables
• Criteria for good market segments
• Developing market segments
• More market segment illustrations
• Standardized market segment
• Questions about market segments
Market Segmentation
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Class Discussion
• Tune hotels believes mid-range and budget travelers are highly price
sensitive
• Discuss Tune Hotels approach to market segmentation and analyze how
the Internet impacts the segmentation
Market Segmentation
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Male
Gender
Female
20 years 40 years
Age
Market Segmentation
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Male
Gender
Female
20 years 40 years
Age
Market Segmentation
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Male
Gender
Female
20 years 40 years
Age
Market Segmentation
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Customer
Need/Required 14–18 19–29 30–39 40–49 50–64 65 and over
Benefits
Beauty 5 4 1 2 2 3
Confidence 2 2 3 3 3 4
Economy 4 5 7 7 6 5
Health 6 6 4 4 4 2
Sexual Allure 3 1 2 5 5 6
Status 1 3 6 6 7 7
Youthfulness 7 7 5 1 1 1
Market Segmentation
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Session Roadmap AA
• Market segment illustrations
• Market segment matrix
• Descriptor (segmentation) variables
• Criteria for good market segments
• Developing market segments
• More market segment illustrations
• Standardized market segment
• Questions about market segments
Market Segmentation
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Stable
Identifiable
Criteria for
Market
Segments
Accessible
Measurable
Appropriately sized
Market Segmentation
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Session Roadmap AA
• Market segment illustrations
• Market segment matrix
• Descriptor (segmentation) variables
• Criteria for good market segments
• Developing market segments
• More market segment illustrations
• Standardized market segment
• Questions about market segments
Market Segmentation
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Actionable
High Customer needs first
segmentation
Candidate descriptor
Low (segmentation)
variables first
Low High
Identification of Customers
Market Segmentation
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Relies on
scientific Risk taker Hard headed
evidence
Type of Data
Relies on
clinical Path finder Tortoise
experience
Aggressive Conservative
Approach to Treatment
Session Roadmap AA
• Market segment illustrations
• Market segment matrix
• Descriptor (segmentation) variables
• Criteria for good market segments
• Developing market segments
• More market segment illustrations
• Standardized market segment
• Questions about market segments
Market Segmentation
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Road Warriors (10%) True Blues (10%) Generation F3 (27%) Homebodies (21%) Price Shoppers (20%)
Generally higher- Usually men and (Fuel, Food, Fast) Usually housewives who Generally aren’t loyal to
income, middle-aged women with moderate to Upwardly mobile men shuttle their children either a brand or a
men who drive 25,000 high incomes who are and women – half under around during the day particular station, and
to 50,000 miles a loyal to a brand and 25 years of age – who and use whatever rarely buy the premium
year…buy premium with sometimes to a are constantly on the gasoline station is line…frequently on tight
a credit card…purchase particular go…drive a lot and based in town or along budgets…efforts to woo
sandwiches and drinks station…frequently buy snack heavily from the their route of travel. them have been the
from the convenience premium gasoline and convenience store. basis of marketing
store…will sometimes pay in cash. strategies for years.
wash their cars at the
car wash. Source: The Wall Street Journal, January 30, 1995
Market Segmentation
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% of households 17 22 18 25 18
Casual
Emotional bond Love Love Affection Affection
attachment
Nature of Dog as Dog as best Dog for the
Dog as child Dog as dog
relationship grandchild friend family
Attitude
Love/do what’s Health & Cheap/convenie
expressed in dog Indulgence Basic fuel
best nutrition nt fuel
food
• Premium • Complete • Price
Ante • • Price
• Strong dog nutrition • Rationalized
(cost of entry) Health/nutritional • Convenience
appeal • Quality variety
• Health
Driver • Flavor/variety • Professional
performance • Price/emotion • Great price
(of brand choice) • Brand image recommendation
• Variety
Market Segmentation
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Session Roadmap AA
• Market segment illustrations
• Market segment matrix
• Descriptor (segmentation) variables
• Criteria for good market segments
• Developing market segments
• More market segment illustrations
• Standardized market segment
• Questions about market segments
Market Segmentation
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Session Roadmap AA
• Market segment illustrations
• Market segment matrix
• Descriptor (segmentation) variables
• Criteria for good market segments
• Developing market segments
• More market segment illustrations
• Standardized market segment
• Questions about market segments
Market Segmentation
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Session Roadmap
• The marketing process
• Market segmentation
• Targeting market segments
• principle of selectivity and concentration
• targeting illustrations
• targeting matrix
• perceptual maps
Targeting Market Segments
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1000
High G B A
Market Segment Attractiveness
700
Medium D H C
400
Low F E I
100
100 Low 400 Medium 700 High 1000
Business Strengths
Targeting Market Segments
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Little regulation 10 8 80
Weak competition 15 4 60
Fast-moving organization 5 3 15
High-quality service 15 6 90
Low-cost operations 10 4 40
Shifting Position
• left to right – improve business strengths
• bottom to top – conduct finer-level segmentation
1000
High G B A Z
Market Segment Attractiveness
700
Medium D H X C Y
400
Low F E I
100
100 Low 400 Medium 700 High 1000
Business Strengths
Targeting Market Segments
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Cuddly
Brands
1 1 Lankester
A 2 McLean
3 Johnson
4 Tellis
B
Not 2 Realistic
Realistic C
4
3D Market Segments
A perfectionists
E B searchers
C accepters
Not Cuddly D dreamers
E realists
Class Discussion
• Can you think of a small business and a big business which have created
an advantage/disadvantage via market segmentation?
• Large firms and small firms each have advantages in targeting market
segments. Missteps can cause each to lose a strong position.
Market Segmentation and Targeting
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Session Roadmap
• The marketing process
• Market segmentation
• Targeting market segments
© Noel Capon, 2016. All rights reserved. PRESENTATION 8 OF 26 / 57
CHAPTER 8
Market Segmentation
and Targeting