IDENTIFYING MARKET SEGMENTS AND TARGETS
Introduction
To compete more effectively, many companies are now embracing target marketing. Instead of scattering their
marketing efforts, they’re focusing on those consumers they have the greatest chance of satisfying. Effective target
marketing requires that marketers:
1. Identify and profile distinct groups of buyers who differ in their needs and wants (market segmentation).
2. Select one or more market segments to enter (market targeting).
3. For each target segment, establish and communicate the distinctive benefit(s) of the company’s market
offering (market positioning).
BASES FOR SEGMENTING CONSUMER MARKETS
Market segmentation divides a market into well-defined slices.
A market segment consists of a group of customers who share a similar set of needs and wants. The marketer’s task
is to identify the appropriate number and nature of market segments and decide which one(s) to target.
Other researchers try to define segments by looking at behavioral considerations, such as consumer responses to
benefits, usage occasions, or brands.
Regardless of which type of segmentation scheme we use, the key is adjusting the marketing program to recognize
customer differences. The major segmentation variables—geographic, demographic, psychographic, and behavioral
segmentation.
Geographic Segmentation
Geographic segmentation divides the market into geographical units such as nations, states, regions, counties, cities,
or neighborhoods. The company can operate in one or a few areas, or it can operate in all but pay attention to local
variations. In that way it can tailor marketing programs to the needs and wants of local customer groups in trading
areas, neighborhoods, even individual stores.
Demographic Segmentation
In demographic segmentation, we divide the market on variables such as age, family size, family life cycle, gender,
income, occupation, education, religion, race, generation, nationality, and social class. One reason demographic
variable is so popular with marketers is that they’re often associated with consumer needs and wants.
AGE AND LIFE-CYCLE STAGE: Consumer wants and abilities change with age Under 6, 6–11, 12–17, 18–34,
35–49, 50–64, 64+
LIFE STAGE: People in the same part of the life cycle may still differ in their life stage. Life stage defines a
person’s major concern, such as going through a divorce, going into a second marriage, taking care of an
older parent, deciding to cohabit with another person, deciding to buy a new home, and so on.
INCOME: Income segmentation is a long-standing practice in such categories as automobiles, clothing,
cosmetics, financial services, and travel. However, income does not always predict the best customers for a
given product. Blue-collar workers were among the first purchasers of color television sets; it was cheaper
for them to buy these sets than to go to movies and restaurants.
GENERATION: Each generation or cohort is profoundly influenced by the times in which it grows up—the
music, movies, politics, and defining events of that period. Members share the same major cultural, political,
and economic experiences and have similar outlooks and values.
Generational Birth Range Approximate Defining Features
Cohort Size
Raised with relative affluence, technologically plugged in and
Millennials concerned with the environment and social issues, they also
1979 –1994 78 million
(Gen Y) have a strong sense of independence and a perceived
immunity from marketing.
Sometimes seen as falling between the generational cracks,
Gen X 1964 –1978 50 million they bridge the technological savvy of Gen Y with the adult
realities of the baby boomers.
Still largely in the prime of their consumption cycle, they
Baby Boomers 1946 –1964 76 million embrace products and lifestyles that allow them to turn back
the hands of time.
Silent Defying their advancing age, they maintain
1925 –1945 42 million
Generation
RACE AND CULTURE: (White, Black, Asian, Hispanic) Multicultural marketing is an approach recognizing that
different ethnic and cultural segments have sufficiently different needs and wants to require targeted
marketing activities, and that a mass market approach is not refined enough for the diversity of the
marketplace
PSYCHOGRAPHIC SEGMENTATION
Psychographics is the science of using psychology and demographics to better understand consumers.
In psychographic segmentation, buyers are divided into different groups on the basis of psychological/personality
traits, lifestyle, or values. People within the same demographic group can exhibit very different psychographic
profiles.
The four groups with higher resources are:
1. Innovators—Successful, sophisticated, active, “take-charge” people with high self-esteem. Purchases often
reflect cultivated tastes for relatively upscale, niche-oriented products and services.
2. Thinkers—Mature, satisfied, and reflective people motivated by ideals and who value order, knowledge, and
responsibility. They seek durability, functionality, and value in products.
3. Achievers—Successful, goal-oriented people who focus on career and family. They favor premium products
that demonstrate success to their peers.
4. Experiencers—Young, enthusiastic, impulsive people who seek variety and excitement. They spend a
comparatively high proportion of income on fashion, entertainment, and socializing.
The four groups with lower resources are:
1. Believers—Conservative, conventional, and traditional people with concrete beliefs. They prefer familiar,
U.S.-made products and are loyal to established brands.
2. Strivers—Trendy and fun-loving people who are resource-constrained. They favor stylish products that
emulate the purchases of those with greater material wealth.
3. Makers—Practical, down-to-earth, self-sufficient people who like to work with their hands. They seek U.S.-
made products with a practical or functional purpose.
4. Survivors—Elderly, passive people concerned about change and loyal to their favorite brands.
BEHAVIORAL SEGMENTATION
In behavioral segmentation, marketers divide buyers into groups on the basis of their knowledge of, attitude toward,
use of, or response to a product.
NEEDS AND BENEFITS: Not everyone who buys a product has the same needs or wants the same benefits
from it. Needs-based or benefit-based segmentation is a widely used approach because it identifies distinct
market segments with clear marketing implications. Constellation Brands identified six different benefit
segments in the U.S. premium wine market ($5.50 a bottle and up).50
• Enthusiast (12 percent of the market). Skewing female, their average income is about $76,000 a year.
About 3 percent are “luxury enthusiasts” who skew more male with a higher income.
• Image Seekers (20 percent). The only segment that skews male, with an average age of 35. They use
wine basically as a badge to say who they are, and they’re willing to pay more to make sure they’re
getting the right bottle.
• Savvy Shoppers (15 percent). They love to shop and believe they don’t have to spend a lot to get a good
bottle of wine. Happy to use the bargain bin.
• Traditionalist (16 percent). With very traditional values, they like to buy brands they’ve heard of and
from wineries that have been around a long time. Their average age is 50 and they are 68 percent
female.
• Satisfied Sippers (14 percent). Not knowing much about wine, they tend to buy the same brands. About
half of what they drink is white zinfandel.
• Overwhelmed (23 percent). A potentially attractive target market, they find purchasing wine confusing.
USER AND USAGE—REAL USER AND USAGE-RELATED VARIABLES: Many marketers believe variables related
to various aspects of users or their usage—occasions, user status, usage rate, buyer-readiness stage, and
loyalty status—are good starting points for constructing market segments.
• Occasions Occasions mark a time of day, week, month, year, or other well-defined temporal aspects of a
consumer’s life
• User Status Every product has its nonusers, ex-users, potential users, first-time users, and regular users.
• Usage Rate We can segment markets into light, medium, and heavy product users. Heavy users are
often a small slice but account for a high percentage of total consumption.
• Buyer-Readiness Stage Some people are unaware of the product, some are aware, some are informed,
some are interested, some desire the product, and some intend to buy.
Loyalty Status Marketers usually envision four groups based on brand loyalty status:
1. Hard-core loyals—Consumers who buy only one brand all the time
2. Split loyals—Consumers who are loyal to two or three brands
3. Shifting loyals—Consumers who shift loyalty from one brand to another
4. Switchers—Consumers who show no loyalty to any brand
Market Targeting
There are many statistical techniques for developing market segments. Once the firm has identified its market-
segment 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.
Effective Segmentation Criteria
Not all segmentation schemes are useful. We could divide buyers of table salt into blond and brunette customers,
but hair color is undoubtedly irrelevant to the purchase of salt. Furthermore, if all salt buyers buy the same amount
of salt each month, believe all salt is the same, and would pay only one price for salt, this market is minimally
segmentable from a marketing point of view.
To be useful, market segments must rate favorably on five key criteria:
• Measurable. The size, purchasing power, and characteristics of the segments can be measured.
• Substantial. The segments are large and profitable enough to serve. A segment should be the largest possible
homogeneous group worth going after with a tailored marketing program. It would not pay, for example, for an
automobile manufacturer to develop cars for people who are less than four feet tall.
• Accessible. The segments can be effectively reached and served.
Differentiable. The segments are conceptually distinguishable and respond differently to different marketing-mix
elements and programs. If married and unmarried women respond similarly to a sale on perfume, they do not
constitute separate segments.
• Actionable. Effective programs can be formulated for attracting and serving the segments.
Evaluating and Selecting the Market Segments
In evaluating different market segments, the firm must look at two factors: the segment’s overall attractiveness and
the company’s objectives and resources. How well does a potential segment score on the five criteria? Does it have
characteristics that make it generally attractive, such as size, growth, profitability, scale economies, and low risk?
FULL MARKET COVERAGE With full market coverage, a firm attempts to serve all customer groups with all the
products they might need.
MULTIPLE SEGMENT SPECIALIZATION With selective specialization, a firm selects a subset of all the possible
segments, each objectively attractive and appropriate. There may be little or no synergy among the segments, but
each promise to be a money maker. When Procter & Gamble launched Crest Whites trips, initial target segments
included newly engaged women and brides-to be as well as gay males. The multi segment strategy also has the
advantage of diversifying the firm’s risk.
SINGLE-SEGMENT CONCENTRATION With single-segment concentration, the firm markets to only one particular
segment. Through concentrated marketing, the firm gains deep knowledge of the segment’s needs and achieves a
strong market presence. It also enjoys operating economies by specializing its production, distribution, and
promotion. If it captures segment leadership, the firm can earn a high return on its investment.
