MARKETING MANAGEMENT12th edition

8 Identifying Market

Segments and Targets

Kotler Keller

8-2

Objectives

Distinction of Mass Marketing Versus Micromarketing

What is Marketing Segmentation and for What Purpose is It Used – Target Marketing

How can a company identify the segments that make up a market?

What criteria can a company use to choose the most attractive target markets?

8-3

Market Segmentation and Target Marketing

Marketing Methodologies■ Mass Marketing: Promotion of a product for all buyers■ Micromarketing: Promotion of a product(s) to buyers grouped by

different collection criteria (segments, niches, local areas, individuals).

Marketing Segmentation■ The process of identifying and profiling buyers grouped by common needs

and preferences that differ from others – supports micromarketing strategy.■ Effective Segmentation: Segments Must be Measurable and Substantial;

Accessible, Differentiable and Actionable.

Target Marketing: Is the selection of specific markets and/or micromarkets (and segments) as the

strategic and primary source(s) of revenue and profits for an enterprise.

Three Steps for Effective Target Marketing:■ Segment the mass market into micromarkets■ Select one or more micormarkets (segments) to enter based on opportunity

and competitive strengths.■ For each target market, establish and communicate the key distinctive

benefit(s) of the company’s market offering (market positioning)

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Four levels of Micromarketing

Segments

Niches

Local Areas

Individuals

Pre

fere

nce

Seg

men

ts

Flexible Offerings

Naked

Solutions

Discretionary

Options

■ Buyers Grouped by Similar Sets of Needs, Wants and Preferences

■ Pursued by Single or Multiple Application Solution Providers – Concentrated Marketing

■ Very Narrowly Defined Customer Groups Seeking a Distinctive Mix of Benefits■ May Be a Subset of a Market Segment (commonly referred to as sectors)■ Pursued by Specialized Solution Providers with in-depth, narrow core competencies

■ Customer Groups Defined by Geographic Areas or Boundaries■ May Include Multiple Market Segments or Micromarkets ■ Pursued by Solution Providers with Geographic Identity

■ The Individual Defines the Market – Segments of One■ May Come from All Needs and Preference Segments Above ■ Offerings Designed by Choiceboards or Custom Specifications - Customerization

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Segmenting Consumer and Business Markets

Basis for Segmenting Consumer Markets■ Geographic Segmentation

• Region, City or Metro Size• Density• Climate

■ Demographic Segmentation• Age • Family Size• Family Life Cycle• Life Stage• Gender• Income• Occupation• Education• Religion• Race• Generation• Nationality• Social Classes

■ Psychographic• Lifestyle• Personality• Values

■ Behavioral• Occasions• Benefits• User Status• Usage Rate• Loyalty Status• Buyer Readiness Stage• Attitude Toward Product

Multi-AttributeSegmentation:Geoclustering

Targeting Multiple Segments

Basis for Segmenting (Small) Business Markets

Demographic

1. Industry: Which industries should we serve?

2. Company size: What size companies should we serve?

3. Location: What geographical areas should we serve?

Operating Variables

4. Technology: What customer technologies should we focus on?

5. User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers?

6. Customer capabilities: Should we serve customers needing many or few services?

Purchasing Approaches

7. Purchasing-function organization: Should we serve companies with highly centralized or decentralized purchasing organizations?

8. Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on?

9. Nature of existing relationships:

10. General purchase policies:

11. Purchasing criteria:

Situational Factors

12. Urgency:

13. Specific applications:

14. Size of order:

Personal Characteristics

15. Buyer-seller similarity:

16. Attitudes towards risk:

17. Loyalty:

Decision R

oles

Variables

Initiator

Influencer

Decider

Buyer

User

Mea

sura

ble

S

ub

stan

tial

A

cces

sib

le

Dif

fere

nti

able

A

ctio

nab

leM

easurab

le Su

bstan

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tiable A

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Market Targeting and Effective Segmentation

Description

1. Needs-Based Segmentation

Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem.

2. Segment Identification

For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable).

3. Segment Attractiveness

Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment.

4. Segment Profitability

Determine segment profitability.

5. Segment Positioning

6. Segment Acid

Test

7. Marketing-Mix

Strategy

For each segment, create a “value proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics.

Create segment storyboards to test the attractiveness of each segment’s positioning

strategy

Expand segment positioning strategy to include all aspects of the marketing mix: product, price, promotion and place

Market Partitioning (Creating Sectors)

Needs-Based Market Segmentation Evaluating and Selecting

Target Markets

Single product family to single market segment Single product family to multiple market segments with no market synergy Single product family to multiple market segments with market synergy Multiple product families to a specific market segment Combination of all above

Undifferentiated Marketing

Company ignores segment

Differences and goes after

Whole market w/ one offer.

Differentiated Marketing

Company ignores segment

Differences and goes after

Whole market w/ one offer.

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CONSUMER INDUSTRIAL GOVERNMENT

INCOME

GENDER

AGES

MFG

PROCESS & SERV.

DISTRBTION

TRAVEL TRANS

TELECOMM.

COMPUTING

UTILITY

HEALTH CARE

FUNCTIONAL APPS

BANK / FINANCE

FEDERAL

STATE

LOCAL

APPLICATIONS / PRICE RANGES / SEGMENT SIZE / GEOGRAPHIES

SERVICES

SUBSETS

LEGAL

LAW ENF

POL / FIRE

EDUCATION

TARGET MARKETS

Sales Specialists Strategic Business Units

Market Strategies Programs / Promotions

MARKET SEGMENTATION - Opportunity - Capitalization - Ease of Market Entry

MARKETSEGMENTATION

MARKETSEGMENTATION

CUSTOMER FOCUS

All Rights Reserved by Steve Corio

Company Size- Revenue- # of Employees

Years- In Business- Profitable

Growth Rate- Revenue- Profits- Market Share

Current Market Share- Leader- Challenger- Niche

Business Strategy- Differentiated (diversified)- Undifferentiated

Competitive Loyalty

Opportunity & Risk

Segmenting Business Markets - Example

8-8

Segment-by-Segment Invasion Plan