Marketing Management

Sixteenth Edition

Chapter 6
Identifying Market
Segments and Target
Customers

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Identifying Target Customers
• Targeting
– The process of identifying customers for whom the
company will optimize its offering

– Once the firm has identified its market opportunities, it

must decide how many and which ones to target.
Marketers are increasingly combining several
variables in an effort to identify smaller, better-defined
target groups in order to develop an offering that can
fulfill these customers’ needs better than the
competition.

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The Logic of Targeting (1 of 3)
• Mass marketing
– the firm ignores segment differences and goes after
the whole market with one offer

– The argument for mass marketing is that it creates

the largest potential market, which leads to the lowest
costs, which in turn can lead to lower prices or higher
margins.

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The Logic of Targeting (2 of 3)
• Targeted marketing
– Sell different products to all the different segments of
the market
– When different groups of consumers have different
needs and wants, marketers can define multiple
segments.

▪ One-to-one approach
▪ The ultimate level of targeting is the one-to-one
approach in which each market segment
comprises a single customer.
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The Logic of Targeting (3 of 3)
• Mass customization
– The ability of a company to
meet each customer’s
requirements—to prepare
on a mass basis individually
designed products,
services, programs, and
communications

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Strategic v s Tactical Targeting (1 of 2)
ersu

• Strategic targeting
– Focuses on customers whose needs the company
can fulfill by ensuring that its offerings are customized
to their needs

– Strategic targeting calls for a trading market size that

yields a better fit between the offering’s benefits and
the customers’ needs.

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Strategic v s Tactical Targeting (2 of 2)
ersu

• Tactical targeting
– identifies the ways in which the company can reach
these strategically important customers

– Rather than excluding any potential customers,

tactical targeting strives to reach all strategically
important customers in an effective and cost-efficient
manner.

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Single-Segment Targeting
• Niche marketing

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Targeting Multiple Segments
• Product specialization
• Market specialization

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Segmenting Consumer Markets
• Market segmentation
– Divides a market into well-defined slices

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Demographic Segmentation (1 of 4)
• Age
• Life-cycle stage
• Gender
• Income
• Race and culture

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Demographic Segmentation (2 of 4)
• Age
– Our wants and abilities change with age
• Life cycle stage
– A person’s major concern (e.g., divorce)

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Demographic Segmentation (3 of 4)
• Gender
– Men and women have
different attitudes and
behave differently

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Demographic Segmentation (4 of 4)
• Income
– Income segmentation is a long-standing practice
• Race and culture
– Hispanic Americans
– Asian Americans
– African Americans

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Geographic Segmentation (1 of 2)
• Geographical segmentation
– Divides the market into geographic units such as
nations, states, regions, counties, cities, or
neighborhoods

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

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Developing a Value Proposition (1 of 5)
• Create value across three domains:
– Functional value
– Psychological value
– Monetary value

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Developing a Value Proposition (2 of 5)
• Total customer benefit
– The perceived value of the bundle of functional,
psychological, and monetary benefits customers
expect from a given market offering because of the
product, service, and image

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Developing a Value Proposition (3 of 5)
• Total customer cost
– The perceived bundle of functional, psychological,
and monetary costs customers will incur in evaluating,
obtaining, using, and disposing of the given market
offering

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Developing a Value Proposition (4 of 5)
• Customer value proposition
– Based on the difference between benefits the
customer gets and the costs he or she assumes for
different choices

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Developing a Value Proposition (5 of 5)
• Customer value analysis
– Reveals the company’s strengths and weaknesses
relative to those of various competitors

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Points of Difference and Points of
Parity (1 of 5)
• Points of difference (PODs)
– Attributes/benefits that consumers strongly associate
with a brand, positively evaluate, and believe they
could not find to the same extent with a competitive
brand

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Points of Difference and Points of
Parity (2 of 5)
• POD criteria
– Desirable
– Deliverable
– Differentiating

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Points of Difference and Points of
Parity (3 of 5)
• Points of parity (POPs)
– Attribute/benefit associations that are not necessarily
unique to the brand but may in fact be shared with
other brands

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Product Differentiation (1 of 2)
• Core functionality
• Features
• Performance quality
• Conformance quality

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Product Differentiation (2 of 2)
• Durability
• Reliability
• Form
• Style customization

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Product Design (1 of 4)
• Design
– The totality of features that affect the way a product
looks, feels, and functions to a consumer

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Product Design (2 of 4)
• Power of design

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Product Design (3 of 4)
• Is emotionally powerful
• Transmits brand meaning/positioning
• Is important with durable goods
• Makes brand experiences rewarding
• Can transform an entire enterprise
• Facilitates manufacturing/distribution
• Can take on various approaches

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Product Design (4 of 4)
• Approaches to design
– Design thinking
▪ Observation
▪ Ideation
▪ implementation

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Product Portfolio Design (1 of 2)
• Product portfolio
– Encompasses all products offered by a company,
including various product categories and product lines

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 Product Portfolio Design (2 of 2)
• Product portfolio
– Width
▪ the number of different product lines company carries.
– Length
▪ the total number of items in the mix.
– Depth
▪ number of variants offered for each product in the line.
– Consistency
▪ how closely related the various product lines are in end
use

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Product Line Analysis (1 of 2)
• Product line
– A group of related products sold by the same
company

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Product Line Analysis (2 of 2)
• Product map
– Allows a company to
see its main
competitors at a
glance
– Helps planners to
identify market
segments and spot
market opportunities

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Product Line Length
• Line stretching
– Down-market stretch
– Up-market stretch
– Two-way stretch
• Line filling
• Line modernization

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Managing Warranties and Guarantees
• Guarantee
– If a product fails to function as promised by the
company or as customers expect, the company will
provide some type of compensation to the purchaser
• Warranties
– Cover the repair or replacement of the purchased
item and usually do not allow the customer to return
the product for a refund

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