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1 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Segmenting and Targeting MarketsSegmenting and Targeting Markets
Prepared byPrepared byDeborah BakerDeborah Baker
Texas Christian UniversityTexas Christian University
Chapter 7
2 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning ObjectivesLearning Objectives
1. Describe the characteristics of markets and market segments.
2. Explain the importance of market segmentation.
3. Discuss criteria for successful market segmentation.
3 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objectives Learning Objectives (continued)(continued)
4. Describe the bases commonly used to segment consumer markets.
5. Describe the bases for segmenting business markets.
6. List the steps involved in segmenting markets.
4 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objectives Learning Objectives (continued)(continued)
7. Discuss alternative strategies for selecting target markets.
8. Explain how and why firms implement positioning strategies and how product differentiation plays a role.
9. Discuss global market segmentation and targeting issues.
5 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objective Learning Objective
Describe the characteristics of markets and market segments.
11On Linehttp://www.snipits.comhttp://www.cartoon-cuts.comhttp://www.kidscuts.com
On Linehttp://www.snipits.comhttp://www.cartoon-cuts.comhttp://www.kidscuts.com
6 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Market SegmentationMarket Segmentation
MarketMarket
MarketSegmentMarket
Segment
MarketSegmentation
MarketSegmentation
People or organizations with needs or wants and the ability and
willingness to buy
People or organizations with needs or wants and the ability and
willingness to buy
A subgroup of people or organizations sharing one or more characteristics that cause them to
have similar product needs.
A subgroup of people or organizations sharing one or more characteristics that cause them to
have similar product needs.
The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.
The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.
11
7 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
A Market is...A Market is...
(1) people or organizations with
(2) needs or wants, and with
(3) the ability and
(4) the willingness to buy.
A group of people that lacks any one of these characteristics is not a market.
11
8 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
The Concept of Market The Concept of Market SegmentationSegmentation
11
9 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objective Learning Objective
Explain the importance of market segmentation.
22
10 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
The Importance of The Importance of Market SegmentationMarket Segmentation
Markets have a variety of product needs and preferences
Marketers can better define customer needs
Decision makers can define objectives and allocate resources more accurately
22
11 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objective Learning Objective
Discuss criteria for successful market segmentation.
33
12 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Criteria for SegmentationCriteria for Segmentation
SubstantialitySubstantialitySubstantialitySubstantiality
IdentifiabilityIdentifiabilityMeasurabilityMeasurabilityIdentifiabilityIdentifiabilityMeasurabilityMeasurability
AccessibilityAccessibilityAccessibilityAccessibility
ResponsivenessResponsivenessResponsivenessResponsiveness
Segment must be large enough to warrant a special
marketing mix.
Segment must be large enough to warrant a special
marketing mix.
Segments must be identifiable and their size measurable.
Segments must be identifiable and their size measurable.
Members of targeted segments must be reachable with
marketing mix.
Members of targeted segments must be reachable with
marketing mix.Unless segment responds to a marketing mix differently, no separate treatment is needed.
Unless segment responds to a marketing mix differently, no separate treatment is needed.
33
13 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objective Learning Objective
Describe the bases commonly used to segment consumer markets.
44
14 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Segmentation BasesSegmentation Bases
Characteristics of
individuals, groups,
or organizations used
to divide a total market
into segments.
(variables)
44
15 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Bases for SegmentationBases for Segmentation
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
DemographicsDemographics
GeographyGeography
44
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On Linehttp://www.toofaced.com
16 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Geographic SegmentationGeographic Segmentation
Segmenting markets by
region of the country or
world, market size, market
density, or climate.
44
17 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Geographic SegmentationGeographic Segmentation
Region of the country or world
Market size
Market density
Climate
44
18 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Benefits of Regional Benefits of Regional SegmentationSegmentation
New ways to generate sales in sluggish and competitive markets
Scanner data allow assessment of best selling brands in region
Regional brands appeal to local preferences
React more quickly to competition
44
19 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Demographic SegmentationDemographic Segmentation
Segmenting markets
by age, gender, income,
ethnic background,
and family life cycle
44
20 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Bases for Bases for Demographic SegmentationDemographic Segmentation
Age
Gender
Income
Ethnic background
Family Life Cycle
44
21 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Ethnic BackgroundEthnic Background
Largest ethnic markets are:African-AmericanHispanic-AmericanAsian-American
Will comprise 1/3 of U.S. population by 2010 with buying power of a trillion dollars
44
22 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Family Life CycleFamily Life Cycle
AgeAge
MaritalMaritalStatusStatus
ChildrenChildren
44
23 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
44 Family Life CycleFamily Life Cycle
24 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Psychographic SegmentationPsychographic Segmentation
Market segmentation on
the basis of personality,
motives, lifestyles, and
geodemographics.
44
25 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Bases for Bases for Psychographic SegmentationPsychographic Segmentation
PsychographicPsychographicSegmentationSegmentation
PsychographicPsychographicSegmentationSegmentation
PersonalityPersonality
MotivesMotives
LifestylesLifestyles
GeodemographicsGeodemographics
44On Linehttp://www.marthastewart.comhttp://www.goodhousekeeping.com
On Linehttp://www.marthastewart.comhttp://www.goodhousekeeping.com
26 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Taxonomy of Porsche BuyersTaxonomy of Porsche Buyers44
27 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Lifestyle SegmentationLifestyle Segmentation
How time is spent
Importance of things around them
Beliefs
Socioeconomic characteristics
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28 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Geodemographic Geodemographic SegmentationSegmentation
Segmenting potential
customers into
neighborhood lifestyle
categories.
Combines geographic,
demographic, and lifestyle
segmentation.
44
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On Linehttp://www.redenvelope.com
29 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Benefit SegmentationBenefit Segmentation
The process of grouping
customers into market
segments according to
the benefits they seek
from the product.
44
30 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
44 Benefit Segmentation Benefit Segmentation of the Snack-Food Marketof the Snack-Food Market
31 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Usage-Rate SegmentationUsage-Rate Segmentation
Dividing a market by the
amount of product
bought or consumed.
44
32 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
The 80/20 PrincipleThe 80/20 Principle
A principle holding that
20 percent of all customers
generate 80 percent
of the demand.
44
33 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objective Learning Objective
Describe the bases for segmenting business markets.
55
34 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Business Marketing Business Marketing SegmentationSegmentation
CompanyCharacteristics
CompanyCharacteristics
BuyingProcesses
BuyingProcesses
CustomerRelationshipCustomer
Relationship
Segmentation Bases
Segmentation Bases
55
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On Linehttp://www.homedepot.com
35 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objective Learning Objective
List the steps involved in segmenting markets.
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36 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Steps in Segmenting a MarketSteps in Segmenting a Market
Select a
market for
study
Choosebases
for segmen-
tation
Selectdescrip-
tors
Profileand
analyzesegments
Selecttarget
markets
Design,imple-ment,
maintainmkting
mix
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37 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objective Learning Objective
Discuss alternative strategies for selecting target markets.
77
38 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Target MarketTarget Market
A group of people or
organizations for which an
organization designs,
implements, and maintains a
marketing mix intended to
meet the needs of that
group, resulting in mutually
satisfying exchanges.
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39 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Strategies for SelectingStrategies for SelectingTarget MarketsTarget Markets
ConcentratedStrategy
UndifferentiatedStrategy
MultisegmentStrategy
77On Linehttp://www.charlestongardens.com
On Linehttp://www.charlestongardens.com
40 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Undifferentiated Undifferentiated Targeting StrategyTargeting Strategy
Marketing approach that
views the market as one big
market with no individual
segments and thus requires
a single marketing mix.
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41 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Undifferentiated Undifferentiated Targeting StrategyTargeting Strategy
AdvantagesAdvantages: Potential savings on
production and marketing costs
DisadvantagesDisadvantages: Unimaginative product
offerings Company more
susceptible to competition
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42 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Concentrated Concentrated Targeting StrategyTargeting Strategy
A strategy used to select
one segment of a market for
targeting marketing efforts.
77
43 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
NicheNiche
One segment of
a market.
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44 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Concentrated Concentrated Targeting StrategyTargeting Strategy
AdvantagesAdvantages: Concentration of resources Meets narrowly defined
segment Small firms can compete Strong positioning
DisadvantagesDisadvantages: Segments too small, or
changing Large competitors may
market to niche segment
77
45 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Multisegment Multisegment Targeting StrategyTargeting Strategy
A strategy that chooses
two or more well-defined
market segments and
develops a distinct
marketing mix for each.
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46 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
AdvantagesAdvantages: Greater financial success Economies of scale
DisadvantagesDisadvantages: High costs Cannibalization
Multisegment Multisegment Targeting StrategyTargeting Strategy
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47 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Costs of Multisegment Costs of Multisegment TargetingTargeting
$ Product design costs
$ Production costs
$ Promotion costs
$ Inventory costs
$ Marketing research costs
$ Management costs
$ Cannibalization
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48 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
CannibalizationCannibalization
Situation that occurs when
sales of a new product
cut into sales of a
firm’s existing products.
77
49 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objective Learning Objective
Explain how and why firms implement positioning strategies and how product differentiation plays a role.
88
50 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
PositioningPositioning
Developing a specific
marketing mix to influence
potential customers’ overall
perception of a brand,
product line, or organization
in general.
88
51 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
PositionPosition
The place a product, brand,
or group of products
occupies in consumers’
minds relative to competing
offerings.
88
52 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Positioning of Positioning of Procter & Gamble DetergentsProcter & Gamble Detergents
88
53 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Effective PositioningEffective Positioning
1. Assess the positions of competing products
2. Determine the dimensions of these positions
3. Choose an effective market position
88 On Linehttp://www.pg.com
On Linehttp://www.pg.com
54 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Product DifferentiationProduct Differentiation
A positioning strategy that
some firms use to
distinguish their products
from those of competitors.
88
55 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Perceptual MappingPerceptual Mapping
A means of displaying or
graphing, in two or more
dimensions, the location of
products, brands, or groups
of products in customers’
minds.
88
56 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Perceptual Map and Perceptual Map and Positioning Strategy for Levi Positioning Strategy for Levi
Strauss ProductsStrauss Products
57 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Positioning BasesPositioning Bases
AttributeAttribute
Price and QualityPrice and Quality
Use or ApplicationUse or Application
Product UserProduct User
Product ClassProduct Class
CompetitorCompetitor
Positioning Positioning BasesBases
Positioning Positioning BasesBases
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58 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
RepositioningRepositioning
Changing consumers’
perceptions of a brand
in relation to
competing brands.
88
59 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Learning Objective Learning Objective
Discuss global market segmentation and targeting issues.
99
60 Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Global IssuesGlobal Issues
Global Market Standardization
Target smaller, defined markets
TrendsTrends
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