Steps in Segmenting Markets

Segmenting Criteria Potential for increasing profit Potential for increasing profit Similarity of needs of buyers within a segment Similarity of needs of buyers within a segment Difference of needs of buyers among segments Difference of needs of buyers among segments Potential of a marketing action to reach a segment Potential of a marketing action to reach a segment Simplicity & cost of assigning potential buyers to segments Simplicity & cost of assigning potential buyers to segments

Step 1: Group Potential Buyers into Segments Divide market into 2 categories Divide market into 2 categories Buying situations Buying situations Customer characteristics Customer characteristics

Buying Situations Benefits sought Benefits sought Usage Rate – quantity consumed during a period of time Usage Rate – quantity consumed during a period of time 80/20 Rule – concept that suggests 80% of sales are obtained by 20% of its customers 80/20 Rule – concept that suggests 80% of sales are obtained by 20% of its customers

Customer Characteristics Demographics Demographics Psychographics Psychographics Geographics Geographics

Step 2: Group Products into Categories Grouped so buyers can relate Grouped so buyers can relate Example: Fast Food Breakfast Breakfast Snack Snack Dinner Dinner Desert Desert

Step 3: Develop a Market Product Grid

Step 4: Select Target Markets Criteria: Market size Market size Expected Growth Expected Growth Competitive position Competitive position Cost of reaching segment Cost of reaching segment Compatibility with organization's objectives and action plan Compatibility with organization's objectives and action plan

Step 5: Take Marketing Actions to Reach Target Market Develop and execute an action plan Develop and execute an action plan

Product Positioning How customers perceive the product How customers perceive the product Use a Perceptual Map Use a Perceptual Map