Marketing Management

Fifteenth Edition

Chapter 9
Identifying Market
Segments and
Target marketing

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Learning Objectives
9.1 In what ways can a company divide
the consumer market into segments?
9.2 How should business markets be
segmented?
9.3 How should a company choose the
most attractive target markets?
9.4 What are the requirements for
effective segmentation?
9.5 What are the different levels of
market segmentation?

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Bases for Segmenting Consumer
Markets
• Market segment
– A group of customers who share a similar set of needs
and wants
 Geographic segmentation
 Demographic segmentation
 Psychographic segmentation
 Behavioral segmentation

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Major Segmentation Variables for
Consumer Markets (1 of 3)
Table 9.1 Major Segmentation Variables for Consumer Markets
Geographic Pacific Mountain, West North Central, West South Central, East North
region 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
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+

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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
Psychographic Culture-oriented, sports-oriented, outdoor-oriented
lifestyle
Social class Lower lowers, upper lowers, working class, middle class, upper middles,
lower uppers, upper uppers
Personality Compulsive, gregarious, authoritarian, ambitious

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Major Segmentation Variables for
Consumer Markets (3 of 3)
[Table 9.1 continued]
Behavioral Regular occasion, special occasion (soft drink was once an occasional
occasions drink however, now it is considered as a regular drink).
Benefits Quality [iPhone], service [Singapore airlines], economy [Toyota], speed
[sports car]
User status Nonuser, ex-user, potential user, first-time user, regular user
Usage rate Light user [young single segment is a light user of groceries], medium user,
heavy user [large family may have heavy use of groceries]
Loyalty status None, medium, strong, absolute
Readiness stage Unaware, aware, informed interested, desirous, intending to buy
Attitude toward Enthusiastic, positive, indifferent, negative, hostile
product

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Geographic Segmentation (1 of 2)
• Geographical units
– Nations, states, regions,
counties, cities, or
neighborhoods

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Demographic Segmentation (1 of 5)
• Age and life-cycle stage
• Life stage
• Race and culture
• Gender
• Generation
• Income

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Demographic Segmentation (2 of 5)
• Age and life-cycle stage
– Our wants and abilities change with age
• Life stage
– A person’s major concern (e.g., divorce)

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Demographic Segmentation (3 of 5)
• Gender
– Men and women have
different attitudes and
behave differently
• Income
– Income segmentation is
a long-standing practice

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Demographic Segmentation (4 of 5)
• Generation
– Baby Boomers [1946 – 1964]
– Gen X [1964 – 1978]
– Millennials (Gen Y) [1977 – 1994]
– Silent Generation [1925 – 1945]

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Demographic Segmentation (5 of 5)
• Race and culture
– Hispanic Americans
– Asian Americans
– African Americans
– LGBT [Lesbian, Gay, Bi-sexual, Transgenders]

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

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Figure 9.1 VALS Segmentation System

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Behavioral Segmentation (1 of 2)
• 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 (2 of 2)
• Needs and benefits
• Decision roles
– Initiator
– Influencer
– Decider
– Buyer
– User

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User and Usage-Related Variables
• Occasions
• User status
• Attitude
• Usage rate
• Loyalty status
• Buyer-readiness stage

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How Should Business Markets Be
Segmented?
• Demographic Operating variables
• Purchasing approaches
• Purchasing approaches
• Situational factors
• Personal characteristics

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Major Segmentation Variables for
Business Markets (1 of 2)
Table 9.5 Major Segmentation Variables for Business Markets
Demographic
1. Industry: Which industries should we serve?
2. Company size: What size companies should we serve?
3. Location: What geographical areas should we serve?
Operating Variables
4. Technology: What customer technologies should we focus on?
5. User or nonuser status: Should we serve heavy users, medium users, light users, or
nonusers?
6. Customer capabilities: Should we serve customers needing many or few services?
Purchasing Approaches
7. Purchasing-function organization: Should we serve companies with a highly centralized
or decentralized purchasing organization?
8. Power structure: Should we serve companies that are engineering dominated, financially
dominated, and so on?
9. Nature of existing relationship: Should we serve companies with which we have strong
relationships or simply go after the most desirable companies?
10. General purchasing policies: Should we serve companies that prefer leasing? Service
contract? Systems purchases? Sealed bidding?
11. Purchasing criteria: Should we serve companies that are seeking quality? Service?
Price?

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Effective Segmentation Criteria
• Measurable [we must have information to understand
the segment profile]
• Substantial [the segment should be large enough to
make profit]
• Accessible [the marketer should be able to serve the
market in terms of infrastructure, technology, socio-
cultural aspects]
• Differentiable [segment should not overlap with other
segments; e.g., fair & lovely for men and women]
• Actionable [the marketer should have resources to
implement strategic plans in that segment]
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Porter’s Five Forces [competitiveness]
• Threat of Rivalry [too much competition may make the
segment unattractive]
• Threat of New Entrants [High possibility of new competitors
entering the market will make the market segment
unattractive]
• Threat of Substitutes [substitute products increase
competition]
• Threat of Buyer Bargaining Power [in this situation, the
marketer should give extra caution to deliver value to the
customer]
• Threat of Supplier Bargaining Power [It is better to step for
backward integration]
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Five Patterns of Target Market
Selection

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One-To-One Marketing [Based on the AI most of
the companies are heading towards
customization]
• 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

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Legal and Ethical Issues
• Marketers must avoid consumer backlash
– Labeling consumers [Fair & Lovely is targeting customers as
having dark skin and labeling them that way]
– Vulnerable groups [Children]
– Disadvantaged groups [caution should be maintained to include
the disadvantaged groups as well]
– Potentially harmful products [tobacco, soft drinks, frozen
products, energy drinks etc.]

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Copyright © 2016, 2012, 2009 Pearson Education, Inc. All Rights Reserved
Copyright

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