Identifying

Market Segments
and Targets

kul 11
 Chapter Questions
What are the different levels of
market segmentation?
How can a company divide a market
into segments?
How should a company choose the
most attractive target markets?
What are the requirements for
effective segmentation?
2
 Market Segmentation is not
the same thing as Customer
Segmentation

mmd/UM/Kotler8mmd/August2009 3
 Effective Targeting Requires

Identify and profile distinct groups

of buyers who differ in their needs
and preferences.
Select one or more market
segments to enter.
Establish and communicate the
distinctive benefits of the market
offering.
4
 Steps in Market Segmentation,
Targeting, and Positioning

Market
Market Segmentation
Segmentation
1.
1.Identify
Identifybases
basesfor
for
segmenting
segmentingthethe
market
market
2.
2.Develop
Developsegment
segment
profiles
profiles Market
Market Targeting
Targeting
3.
3.Develop
Developmeasure
measureof of
segment
segmentattractiveness
attractiveness
4.
4.Select
Selecttarget
targetsegments
segments

Market
Market positioning
positioning
5.
5.Develop
Developpositioning
positioning
for
for
target
targetsegments
segments
6.
6.Develop
Developaa 5
marketing
 Four levels of
Micromarketing

Segments Niches

Local areas Individuals

6
Segment Marketing

Targeting a group of customers

who share a similar set of
needs and wants.

7
Basic Market Preference Patterns
 Customerization

Combines operationally driven

mass customization with customized
marketing in a way that empowers
consumers to design the
product and service offering
of their choice.

9
Segmenting Consumer
Markets
Geographic
Geographic

Demographic
Demographic

Psychographic
Psychographic

Behavioural
Behavioural

10
Demographic Segmentation

Age
Age and
and Life
Life Cycle
Cycle
Life
Life Stage
Stage
Gender
Gender
Income
Income
Generation
Generation
Social
Social Class
Class

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The VALS Segmentation System
www.sric-bi.com

12
Behavioural Segmentation
Decision Roles Behavioural
Initiator Variables
Occasions
Influencer
Benefits
Decider
User Status
Buyer
Usage Rate
User Buyer-Readiness
Loyalty Status
Attitude
13
 The Brand Funnel:
Variations in the Buyer-Readiness Stage

Aware
Ever tried
Recent trial
Occasional user
Regular user
Most often used

14
Loyalty Status

Hard-core

Split loyals

Shifting loyals

Switchers

15
Behavioural Segmentation

16
 The Conversion Model

Convertible Shallow Average Entrenched

Users Nonusers

Strongly Weakly
Ambivalent Available
unavailable unavailable

17
Segmenting for Business Markets

Demographic
Demographic

Operating
Operating Variable
Variable

Purchasing
Purchasing Approaches
Approaches

Situational
Situational Factors
Factors
Personal
Personal
Characteristics
Characteristics
18
Segmenting for Business Markets

Demographic segmentation
Industry, company size, location
Operating variables
Technology, usage status, customer
capabilities
Purchasing approaches
Situational factors
Urgency, specific application, size of
order
Personal characteristics
Buyer-seller similarity, attitudes toward
risk, loyalty

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Effective Segmentation
Criteria
Measurable
Measurable

Substantial
Substantial

Accessible
Accessible

Differentiable
Differentiable

Actionable
Actionable

20
Effective Segmentation
Criteria
Measurable
Measurable Size, purchasing power,
profiles
of segments can be
Accessible
Accessible measured.
Segments can be effectively
reached and served.

Substantial
Substantial Segments are large or
profitable enough to serve.
Segments must respond
Differential
Differential differently to different
marketing mix elements &
programs.
Effective programs can be
Actionable
Actionable designed to attract and serve
the segments.
21
 Market Targeting
Evaluating Market Segments

Segment Size and Growth

Analyze current sales, growth rates and expected
profitability for various segments.
Segment Structural Attractiveness
Consider effects of: competitors, availability of
substitute products and, the power of buyers &
suppliers.
Company Objectives and Resources
Company skills & resources needed to succeed in
that segment(s).
Look for Competitive Advantages.
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 Market Targeting
Market Coverage Strategies
Company
Company
Marketing
Marketing Market
Market
Mix
Mix
A. Undifferentiated Marketing
Company
Company
Marketing Segment
Segment11
MarketingMix
Mix11
Company
Company Segment
Segment22
Marketing
MarketingMix
Mix22
Company
Company Segment
Segment33
Marketing
MarketingMix
Mix33
B. Differentiated Marketing
Segment
Segment11
Company
Company
Marketing
Marketing Segment
Mix Segment22
Mix
Segment
Segment33
23
C. Concentrated Marketing
 Figure 8.4 Patterns of
Target Market Selection

24
 Figure 8.4 Patterns of
Target Market Selection

25
 Figure 8.4 Patterns of
Target Market Selection

26
Figure 8.5 Segment-by-Segment
Invasion Plan

27
 The DHL Segmentation
Programme
Course at INSEAD on Advanced
Industrial Market Segmentation (2
weeks)
Adopted Cranfield Model (Prof.
Malcolm MacDonald)
Joint Marketing Team formed
between 2 Countries (ES & UK)
Quant research in the ES & UK

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 DHL Segmentation
Programme
In conjunction with Bain management
consultants we future proofed the
segments
Qualitative research to re-assess relevant
measures
8 Country Quant Validation exercise
Segmentation Toolkit rolled out Worldwide
New Business Unit created for the
Advantage Segment
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