Identifying Market Segments and Targets

Identifying Market Segments and Targets

1. Bases for Segmenting Consumer Markets

   • Market segment: consists of a group of customers who share a similar set of needs and wants
   • Major Segmentation Variables: Geographic, Demographic, Psychographic, Behavioral
     • Geographic: marketers concentrate on making such activities as personally relevant to individual customers as possible
       • Customer Cloning assuming the best prospects live where most of the customers already come from.
     • Demographic: Age and Life, Cycle Stage, Life Stage, Gender, Income, Generation
       • -Generation Y (Millennials) -Generation X -Baby Boomers -Silent Generation
     • Psychographic: the science of using psychology and demographics to better understand consumers. buyers are divided into groups on the basis of psychological/personality traits, lifestyle, or values.
     • Behavioral: buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or response to a product

2. How Should Business Markets Be Segmented?

   • The demographic variables are the most important, followed by the operating variables—down to the personal characteristics of the buyer.
   • Flexible Market Offering: 1. a naked solution containing the product and service elements that all segment members value 2. discretionary options that some segment members value.

3. Market Targeting

   • 7 steps in segmentation process: Needs, Segment Identification, Segment Attractiveness, Segment Profitability, Segment Positioning, Segment "Acid Test", Marketing-Mix Strategy.

4. Effective Segmentation Criteria

   • Useful Market Segments:
     • -Measurable (can be measured) -Substantial (large and profitable enough) -Accessible (can be reached and served) -Differentiable (conceptually distinguishable) -Actionable (effective programs can be formulated).
   • Five Forces that Determine Market Attractiveness
     • 1. Treat of intense segment rivalry 2. Threat of new entrants 3. Threat of substitute products 4. Threat of buyers' growing bargaining power 5. Threat of suppliers' growing bargaining power
   • Possible Levels of Segmentation: -Full Market Coverage -Multiple Segments -Single Segments -Individuals as Segments
   • One-to-One Marketing Framework:
     • 1. Identify your prospects and customers. 2. Differentiate customers in terms of (1) their needs and (2) their value to your company. 3. Interact with individual customers to improve your knowledge about their individual needs and to build stronger relationships. 4. Customize products, services, and messages to each customer.