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Principles of Marketing: Module 3: Segmentation and Targeting

Segmentation divides potential customers into groups based on common characteristics to better understand them. Targeting determines which customer segments are most likely to become customers and directing marketing efforts towards satisfying them. Common segmentation approaches include geographic, demographic, psychographic, and behavioral approaches. Businesses select target segments by analyzing which segments are profitable to serve and likely to be receptive to their products. The marketing mix is tailored for each target segment by considering factors like preferred products, promotion channels, ideal distribution methods, and willingness to pay.

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Saeed Almubarak
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147 views

Principles of Marketing: Module 3: Segmentation and Targeting

Segmentation divides potential customers into groups based on common characteristics to better understand them. Targeting determines which customer segments are most likely to become customers and directing marketing efforts towards satisfying them. Common segmentation approaches include geographic, demographic, psychographic, and behavioral approaches. Businesses select target segments by analyzing which segments are profitable to serve and likely to be receptive to their products. The marketing mix is tailored for each target segment by considering factors like preferred products, promotion channels, ideal distribution methods, and willingness to pay.

Uploaded by

Saeed Almubarak
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Principles of Marketing

Module 3: Segmentation and Targeting


Segmentation and Targeting

• Segmentation is the process of dividing


potential customers into groups to better
understand them
• Targeting is determining which segments
are most likely to become customers and
directing marketing efforts to best satisfy
them

Professional tennis players are a specific


segment of the market.
Five Criteria for a Market

1. There must be a true need and/or want for the product, service, or idea; this need may be
recognized, unrecognized, or latent
2. The person/organization must have the ability to pay for the product via means acceptable to
the marketer
3. The person/organization must be willing to buy the product
4. The person/organization must have the authority to buy the product
5. The total number of people/organizations meeting the previous criteria must be large enough
to be profitable for the marketer
Objectives of Segmentation

• To improve an organization’s understanding of who their prospective customers are and how
to serve them
• To reduce risk in deciding where, when, how, and to whom a product, service, or brand will
be marketed
• To increase marketing efficiency by directing effort toward designated segment(s) in ways
that are consistent with that segment’s characteristics
Practice Question

What products or companies would find


this market segmentation by family life
stage useful?
Choosing a Target Market

The target market should include only those


segments of a market that are both:
• Profitable to serve
• Likely to be receptive to the products a
company provides
Common Market Segmentation Approaches

Type of Approach Segmentation Criteria

Geographic Nations, states, regions, cities, neighborhoods, zip codes, etc.

Age, gender, family size, income, occupation, education, religion,


Demographic
ethnicity, and nationality

Psychographic Lifestyle, personality, attitudes, and social class

Behavioral User status, purchase occasion, loyalty, readiness to buy

Decision maker Decision-making role (purchaser, influencer, etc.)


Common Business Segmentation Approaches

• Organization size: by revenue, number of employees, geographic reach, etc.


• Geography
• Industry
• User status: usage frequency, volume used, loyalty, longevity, products already in use,
readiness to buy, etc.
• Benefits sought
• End use
• Purchasing approaches
Combining Bases for Segmentation

• Geo-cluster approach demographic +


geographic data
• Geographic + behavioral data
• Can point companies toward locations where
customers are clustered
• Demographic + lifestyle or behavioral segments
Sample Market Segment Profiles
Ideal Market Segment

1. Can be measured
2. Is profitable
3. Is stable
4. Is reachable
5. Is internally homogeneous
6. Is externally heterogeneous
7. Is responsive
8. Is cost-effective
9. Helps determine the marketing mix
Questions to Consider in Selecting a Target Segment

• Whose needs can you best satisfy?


• Who will be the most profitable customers?
• Can you reach and serve each target segment effectively?
• Are the segments large and profitable enough to support your business?
• Do you have the resources available to effectively reach and serve each target segment?
Targeting Strategy

Concentration Multi-segment
Only one marketing mix is developed Marketing mix for each segment
• Advantage: focus • Advantage: may reach more customers
• Disadvantage if demand in segment declines, company • Disadvantage: Costs of multiple campaigns and
will suffer distribution channels
Targeting Strategies

Strategy Target Market Example

Mass marketing Everybody everywhere Target

Differentiated 
Large groups within the total market Costco, Sam’s Club
marketing

High penetration within smaller,


Niche marketing Trader Joe’s, Whole Foods
specialized segments

Individual customers or localized


Micromarketing Groupon
microsegments
The Marketing Mix
Shaping Marketing Mix for Target Markets
Marketing
Targeting Criteria
Element
Product What would make the ideal product for your target segment?
What special features or capabilities are critical for this segment?
What unique problems does your product help them solve?

Promotion What are the best ways to get your target segment’s attention?
What do you want this segment to remember about your product?

Place / Where does this segment look or shop for your product?
Distribution What is the best way to get your product to your target customers?

Price What price(s) are your target customers willing to pay?


How much is too expensive? How much is too cheap?
Quick Review

• What is the purpose of segmentation and targeting in marketing?


• What are some common segmentation approaches?
• How do businesses select an appropriate segmentation approach and decide which customer
segments to target for marketing activities?
• How does targeting influence each element of the marketing mix?

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