Three: Market Segmentation and Strategic Targeting

CHAPTER
THREE
Market Segmentation
and Strategic Targeting
Learning Objectives
1. To Understand Why Market Segmentation Is

Essential.
2. To Understand the Criteria for Targeting
Selected Segments Effectively.
3. To Understand the Bases for Segmenting
Consumers.
4. To Understand How Segmentation and
Strategic Targeting Are Carried Out.
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Three Slide 2
What Kind of
Consumer Does This Ad Target?
This Ad Targets Runners Who Are Physically
Active People and Also Relish the Outdoors.
Why Segmentation is Necessary
• Consumer needs
differs
• Differentiation helps
products compete
• Segmentation helps
identify media
Positioning
The value
proposition,
expressed through
promotion, stating
the product’s or
service’s capacity
to deliver specific
benefits.
Which Distinct Benefit Does Each of the
Two Brands Shown in This Figure Deliver?
The Dentyne Ad’s Benefit is Fresh Breath and the
Nicorette Ad is Whitening and Smoking Cessation
Criteria for Effective Targeting
Identifiable Sizeable
Stable Accessible
Congruent with the

company’s objectives
and resources
Segmentation
• Consumer Characteristics
– Facts : Can be determined from direct questioning
and can be characterised by single objective
measure.
– Cognitions: Are abstract and can be determined
only through a more complex questioning.
Contd..
• Consumer Rooted: They stem from

consumers’ physical , social and psychological
characteristics verses consumption specific
usage behaviour (Facts) or attitude and
preference towards specific product or buying
situations( cognitions)- AIOS
Bases for Segmentation
Discussion Questions
• Considering a restaurant in your college’s city

or town:
– How might consumers’ needs differ?
– What types of products might meet their needs?
– What advertising media makes sense for the
different segments of consumers?
Consumer-Rooted Segmentation Bases
Demographics
Geodemographic
Personality Traits
Lifestyles
Sociocultural
Demographic Segmentation
Age Gender
Family Life-
Marital Status
cycle
Income,
Education, and
Occupation
Segmentation- Age
Segmentation
• Gender
• Marital Status: Singles, Divorced, Single
Parent, double income groups.
• Family life cycle: Bachelorhood,
honeymooners, parenthood, postparenthood,
and dissolution
• Income/ education/Occupation
Geodemographic Segmentation
• Based on geography and demographics

• People who live close to one another are
similar
• “Birds of a feather flock together”
One PRIZM Segment - Table 3.4 (excerpt)
MOVERS & SHAKERS
• 1.59 of U.S. households, Median household income: $95,372, Predominant employment:
Professional
• Social group: Elite suburbs, Life stage group: Midlife success, Key education level: College
grad+
• Adult age range: 35–64
CHARACTERISTICS
• Movers & Shakers is home to America’s up-and-coming business class: a wealthy suburban
world of dual-income couples who are highly educated, typically between the ages of 35
and 54 and often with children. Given its high percentage of executives and white-collar
professionals, there’s a decided business bent to this segment: Movers & Shakers rank
number-one for owning a small business and having a home office.
LIFESTYLE TRAITS:
• Go scuba diving/snorkeling, Plan travel on the Internet
• Read PC Magazine, Listen to adult contemporary radio
• Drive a Porsche
NEW EMPTY NESTS
• 1.05% of US households, white collar professionals. Age range: 65+; With
their grownup children recently out of the house. New empty nests is
composed of upscale older Americans who pursue active and activist lifestyle.
They show no interest in a rest-home retirement and choose all inclusive
travel packages
• Median household income $ 65,832
BOOM TOWN SINGLES

• 122% of US households. They are young achievers aged less than 35. They
prefer affordable housing, pursue active life styles.
• Median household income $ 37,407
BEDROCK AMERICA
• 1.79% of US households, young economically challenged families in small
isolated towns with modest education and blue collar jobs, many of these
residents struggle to make ends meet.
• Median household income $ 26, 037
Personality Traits
• People often do not identify these traits

because they are guarded or not consciously
recognized
• Consumer innovators
– Open minded
– Perceive less risk in trying new things
Lifestyles
• Psychographics
• Includes activities,
interests, and
opinions
• They explain buyer’s
purchase decisions
and choices
Discussion Questions
• How might you differ from a person with

similar demographics to yourself?
• How would this be important for marketers?
Four Views of Post-Retirement Lifestyle
Table 3.6 (excerpt)
AS AN OPPORTUNITY TO MAKE A NEW START

• This group regards retirement as an exciting time. Work will have been
largely unrewarding, so the transition is seen as a freedom from the
constraints of their former role. Retirement will invigorate such people
and inspire them toward undertaking activities that work largely
prevented them from pursuing.
AS A CONTINUATION OF THEIR PRE-RETIREMENT LIFESTYLE
• To such people, retirement is not perceived as signaling a drastic change.
Work life has not been as unsatisfying as for others, hence its ending is
not greeted with euphoria. There is, however, some satisfaction that
retirement permits more opportunity to devote time to existing activities
outside of their working role. The future is likely to see an increase in
such activities but no real desire to engage in new ones.
Contd..
Table 3.6 (excerpt)
AS AN UNWELCOME DISRUPTION
• Work is an integral part of life for this group, who feels a part of
their identity is removed when the stage ends.
AS A TRANSITION INTO OLD AGE
• Retirement prompts a sense resignation that old age beckons. It

signals a time to slow down.
Socio-Cultural Values and Beliefs
• Sociological = group
• Anthropological = cultural
• Include segments based on
– Cultural values
– Sub-cultural membership
– Cross-cultural affiliations
Consumption-Specific
Segmentation Bases
Usage rate
Usage situation
Benefit segmentation
Perceived brand
loyalty
Brand relationship
Consumption-Specific Segmentation
Usage-Behavior
• Usage rate
– Awareness status
– Level of involvement
Consumption-Specific Segmentation
Usage-Behavior
• Usage-situation segmentation
– Segmenting on the basis of special occasions or
situations
– Example : When I’m away on business, I try to
stay at a suites hotel.
Which Consumption-Related
Segmentation Is Featured in This Ad?
This is an Example of a Situational
Special Usage Segmentation.
Benefits Segmentation
• Benefits sought represent consumer needs

• Important for positioning
• Benefits of media
• Benefits includes
– Functional benefit
– Value for money
– Social benefit
– Etc
Benefits Visiting Tourists Seek in
National Park – Table 3.13 (excerpt)
Segment Description
Environmentalists Interested in an unpolluted, un-spoilt natural environment
and in conservation. Not interested in socializing,
entertainment, or sports. Desire authenticity
and less man-made structures and vehicles
in the park.
Want-it-all Tourists Value socializing and entertainment more than

conservation. Interested in more activities and
opportunities for meeting other tourists. Do not
mind the “urbanization” of some park sections.
Independent Tourists Looking for calm and unpolluted environment,

exploring the park by themselves, and staying at
a comfortable place to relax. Influenced by word
of mouth in choosing travel destinations.
Brand Loyalty and Relationships
• Brand loyalty
• Frequency award programs are popular
• Customer relationships can be active or passive
• Retail customers seek:
– Personal connections vs. functional features
• Banking customers seek:
– Confidence benefits
– Social benefits
Implementing Segmentation Strategies
• Micro- and behavioral targeting

– Personalized advertising messages
– Narrowcasting
• Email
• Mobile
– Use of many data sources
Implementing Segmentation Strategies
• Concentrated Marketing
– One segment
• Differentiated
– Several segments with individual marketing mixes
• Countersegmentation

Three: Market Segmentation and Strategic Targeting

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CHAPTER

1. To Understand Why Market Segmentation Is

Congruent with the

• Consumer Rooted: They stem from

• Considering a restaurant in your college’s city

• Based on geography and demographics

BOOM TOWN SINGLES

• People often do not identify these traits

• How might you differ from a person with

AS AN OPPORTUNITY TO MAKE A NEW START

AS A TRANSITION INTO OLD AGE

• Retirement prompts a sense resignation that old age beckons. It

• Benefits sought represent consumer needs

Want-it-all Tourists Value socializing and entertainment more than

Independent Tourists Looking for calm and unpolluted environment,

• Micro- and behavioral targeting

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