Principles of Marketing

Chapter 7- Market Segmenting,

Targeting, and Positioning

Unfortunate Truth Time

No matter what you produce, no matter how
important you think it is, not everyone wants
your product.

Good News
Probably someone wants said product.
Now it is your job to find a way to reach them
and let you know you have what they are
looking for; via targeting them.

Market Segmentation
Process of breaking down all consumers into
groups of potential buyers with similar
characteristics
Why does it matter?
Rifle versus machine gun

Want to find the right sweet spot of reaching

enough consumers to make the effort worthwhile,
but tailored enough to incite action (generally a
sale)
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Targeted Versus Mass Market

Target marketing (sometimes called
differentiated marketing) is focusing on select
groups to sell to
Mass market (sometimes called
undifferentiated marketing) is selling the same
products to all people

Targeted Versus Mass Market

These can basically be seen as being directly
linked to the times of their popularity
Targeted marketing is the current state simply
because we have the ability to target
effectively
Internet, CRM programs, big data, etc.
Think about buying a car today? It is almost fully
customizable (within reason)
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Targeted Versus Mass Market

Mass marketing (though still a large part of
business) was most popular in the days of
mass production lines.
You can have any color, as long as it is black
Could you imagine how difficult it would have
been just to make one single different colored car
on an assembly line?

Benefits of Segmentation and Targeting

When you segment and target you can:
Avoid head-on competition with other firms trying
to capture the same customers (differentiation)

Anecdotally, how would these items be sold?

Benefits of Segmentation and Targeting

When you segment and target you can:
Develop new offerings and expand profitable
brands and product lines

Benefits of Segmentation and Targeting

When you segment and target you can:
Remarket older, less-profitable products and
brands

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Benefits of Segmentation and Targeting

When you segment and target you can:
Identify early adopters
Early adopters want your products, so targeting them is
a wise idea when you can reach them

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Benefits of Segmentation and Targeting

When you segment and target you can:
Redistribute money and sales efforts to focus on
your most profitable customers
80/20 rule

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Benefits of Segmentation and Targeting

When you segment and target you can:
Retain at-risk customers in danger of defecting
to your competitors
Liquor store wine sales example

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Benefits of Segmentation and Targeting

Market research is the most optimal route to
proper segmenting and targeting be it either
through big data or directly monitoring
customers and anywhere in between.

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Segmenting and Target Current Customers

Retention of customers is much more
important than gaining new customers (80/20
rule again)
Think about some low involvement services and
products that you routinely make
How much do you think those are worth?

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Segmenting and Target Current Customers

Less susceptible to shocks
When recessions hit, people will still frequent
businesses that are their favorites and the firms
should feel less of a shock

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Segmenting and Target Current Customers

Can cater to customers more effectively
With all the data we have, we can serve customers
much better than other firms
This can be aided with loyalty programs (if done
correctly)

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Segmenting and Target Current Customers

Segmentation within segmentation
Even among customers, there are more valuable
customers
Key accounts are very important to businesses,
especially when you are small

At times, it is also quite beneficial to cut customers

loose
Dropping Chuck example

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Segmenting and Target Current Customers

One-to-one marketing
Far end of the targeting scale since you are about
as highly focused as possible

Steps are

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Segmenting and Target Current Customers

Steps in one-to-one marketing
Establish short-term measures to evaluate efforts
Always need to have a measurable goal (sensing a theme)

Identify customers
Find out who would could be the most beneficial to keep in contact with and gather
that information

Differentiate among customers

Determine who is the best customers based on their lifetime value
Find those that spend little with you, but large amounts with competitors

Interact with customers, target the best ones

If they are good, spend time with them and serve them the best you can

Customize products and marketing messages to them

This can be the actual product, its packaging, delivery, etc. The key is that it is
something that makes them feel special
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How to Segment
Focus is again on making sure the targets are
as reachable as possible
Main types of segmentation
Behavioral
Demographic
Geographic
Psychographic

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Behavioral Segmentation
Segmentation based on how people and
organizations behave with or act toward
products
Huh?

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Behavioral Segmentation
Benefits sought by product Facial cream for me
Price is not an issue, my face is my paycheck
I wanted quick dry, not oily, whatever you
want to call it
SPF was not important, but nice
Needed to be natural blah blah blah

All these were the benefits of choosing my

product
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Behavioral Segmentation
How often the product is used (usage rate) Something that needs to have a new feel each time
it is used?
Think: a vacation spot

Usage situation (daily use, holiday, etc.)

Buyer status and loyalty
Is a VIP program necessary? Would it be
beneficial?
Why are nonusers not using the product?
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Demographic Segmentation
Segmentation based on tangible, personal
characteristics
These are generally easy to obtain, but can be
tricky to implement
Some of the types and their benefits are:

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Demographic Segmentation
Age- As previously discussed, age is an
important factor in consumption (Anyone
bought an RV since our class?)
Generations are important age factors as each
group has similarities
Seniors (<1945)- Lived in tough times, so not a lot
of excess spending. Most all spending is on
medical and healthcare

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Demographic Segmentation
Baby Boomers (1946-1964)- 2nd largest
generation
Most prosperous generation in history*
Not averse to new things, but not completely
immersed

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Demographic Segmentation
Generation X (1965-1979) Borrow money, but not easily
Generally tech savvy

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Demographic Segmentation
Generation Y (1980-2000) Largest US generation
Grew up with credit
Technology is a given
Quick to ignore irrelevant information
Greatest amount of customer lifetime value

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Demographic Segmentation
Income Indication of buying power (discretionary income)
Not always aimed at the highest level
More an more businesses are aiming at being more
involved with low income groups (mostly due to
economy)

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Demographic Segmentation
Gender
Different groups purchase differently
Generally gender will always be a factor in
segmentation since it is quite ease to do so

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Demographic Segmentation
Family Life Cycle My wife and I mostly spend money on ourselves
My friends all have kids, so their spending is all on
their kids
My friends parents no longer spend money on their
kids, but on their grandkids and generally more
frequently

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Demographic Segmentation
Ethnicity
The US is diverse, so there is always a way to
segment based on ethnicity
Hispanic food isle in Mississippi

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Geographic Segmentation
Segmentation based on geography
Not always as obvious as it might seem
Asking for zip codes to see where customers come from

Geotargeting is plotting data on a map to try and

observe patterns
Can be simple like a new store in a town or finding
where non-local shoppers come from

Geodemographics is using geography and

demographics to paint a better picture of the
consumer
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Geographic Segmentation
Population density (number of people per
square mile)
McDs versus DQ

Proximity marketing- marketing using digital

geography to target customers within a
distance of the business

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Psychographic Segmentation
Segmentation based on activities, interests,
opinions, attitudes, values, and lifestyles
You can be in the same demographic segment
and have wildly different psychographic
profiles
Common metric for psychographcis is the
VALS (values, attitudes, and lifestyles)

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Psychographic Segmentation
VALS Innovators- successful, sophisticated, take-charge
people with high self-esteem

Always open to new ideas

Always seeking challenges
Variety is the key for their lifestyles
Generally like the finer things in life

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Psychographic Segmentation
VALS Thinkers- motivated by ideas

Mature, satisfied, comfortable, and reflective

Like order, knowledge and responsibility
Well educated and seek information continually
Focus on purchasing for durability, functionality, and
value

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Psychographic Segmentation
VALS Achievers- motivated by achievement
Goal oriented and deeply committed to career and
family
Like predictive, conservative, and following the status
quo lifestlyes
Focus on saving time and being productive

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Psychographic Segmentation
VALS Experiencers- motivated by self expression

Seek variety and new experiences

Like exercise, excitement, and social activities
Enjoy having cool stuff
Spend a large portion of income on appearances

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Psychographic Segmentation
VALS Believers- motivated by ideas
Conservative, conventional, based in tradition
Routinized lifestyles
Loyal customers

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Psychographic Segmentation
VALS Strivers- trendy and fun loving

Concerned with opinions and approval of others

Money defines their success
Shopping is a social activity
Generally impulsive with purchases

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Psychographic Segmentation
VALS Makers- Motivated by self-expression

Like working on things in their lives

Practical people and like self sufficiency
Not fans of big business
Prefer practical purchases over flash
Generally buy basic products

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Psychographic Segmentation
VALS Survivors- focused lives

Think the world changes too quickly

Like familiarity
Cautious consumers
Loyal buyers and prefer sales and deals

*see where you fit in

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Segmentation in B2B
Harrison, Hague, and Hague argue that B2B
only has the behavioral, needs-based segments
of:
Price-focused- small companies with low profit
margins with the good or service being sold as not
being strategically important
Quality and brand-focused segment- firms that
want the best possible products and are willing to
pay for them
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Segmentation in B2B
Harrison, Hague, and Hague argue that B2B
only has the behavioral, needs-based segments
of:
Service-focused- demand high-quality products
and have top-notch delivery and service
requirements
Partnership-focused- firms that seek trust and
reliability on the part of suppliers and see them as
strategic partners
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Selecting Target Markets and Target Market

Strategies
Target Market Selection
Target market should be profitable enough given
an operating cost
Need to make sure you can recoup costs to have a
viable market

Its growing
Would you prefer to open a business that caters to the
middle class of China or India?

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Selecting Target Markets and Target Market

Strategies
Target Market Selection
Its not overcrowded or you are differentiated
How easy would it be to enter the carbonated drink
market?

It is accessible or you can find a way to reach it

Politically or legally, how easy is it to enter a country,
an area, or a group of people?
How beneficial would high technology be for people of
Chad?

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Selecting Target Markets and Target Market

Strategies
Target Market Selection
You have the resources to compete
How easy would it be for us to enter the airline
industry?

It fits within your firms objectives

Would it be a good idea for Patagonia to enter into the
whaling businsess?

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Choosing the Number of Markets to Target

Multisegment marketing- targeting multiple
groups of consumers
Allow users to buy at any* level of your
businesses
Think about hotels and their levels of service

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Concentrated Marketing
Targeting a very select group of customers
Risky since you are very focused

Niche marketing- targeting an extremely

specific group
Microtargeting- gathering as much information
as possible about customers to know the most
information about them

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Global Markets
Generally have a mass market or a customized
strategy
May have the same brand name, but the product is
different (Big Mac)

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Next Time
Chapter 8

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