2. © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
Chapter Five
Market Segmentation
Key Words / Outline
Marketing segmentation, Post hoc segmentation, Priori segmentation, Benefit segmentation, Psychographic segmentation, Vertical dimension, Horizontal dimension, Geodemographic segmentation, Positioning map, Marketing mix
© The McGraw-Hill Companies, Inc., All Rights Reserved.
McGraw-Hill/Irwin
Marketing Management, 8e

3. Market Segmentation DETERMINE CONSUMER NEEDS AND WANTS
DIVIDE MARKETS ON RELEVANT DIMENSIONS
DEVELOP PRODUCE POSITIONING
DECIDE SEGMENTATION STRATEGY
DESIGN MARKETING MIX STRATEGY

4. Meeting the Consumer Needs
Successful marketing strategies depend on meeting consumer needs and wants
A firm with a good deal of venture capital may seek to discover broad variety of unmet needs
Operate within your firm’s need satisfaction activities
At a strategic level, need and wants usually are translated into more operational concepts

5. Market Division Three important questions to be considered
Should the segmentation be a priori or a post hoc?
How does one determine the relevant dimensions or bases to use for segmentation?
What are some bases for segmenting consumer and organizational buyer markets?

6. Market Segments for High-Tech Products
The pessimists
Business
Family
Entertainment
Less Affluent
Sidelined citizens
Not interested in technology
More Affluent
Media-junkies
Old consumers
typically managers
who don’t touch
their computers
at work
Willing to use
technology but
slow to upgrade.
Seek entertainment
and can’t find much
of it online. Prefer
TV and other media

7. Market Segments for High-Tech Products
The optimists
Less Affluent
Family
Entertainment
Techno-strivers
Use technology from
cell phones to pagers
to online service
primarily to gain
career edge
Families with limited
budget but still
Interested in new
technology.
Favor online
entertainment but have
less cash to spend
on it
More Affluent
These customers are
the biggest spenders
and they’re early
adopters of new
technology for
personal use
Also big spenders but
focused on technology
for home uses such
as family PC
They like the on-line
world for
entertainment and
are willing to spend
for the latest
technotainment

8. A Priori versus Post Hoc Segmentation
A priori segmentation: An approach where the marketing manager has decided on the appropriate basis for segmentation in advance of doing any research on a market
Post hoc segmentation: An approach in which people are grouped into segments on the basis of findings
Both these approaches are valuable and the question of which to use depends in part how well the firm knows the market

9. Consumer Market Segmentation
Customers can be divided or segmented by using
Geography
Demography
Sociography
Behavior

10. Organizational Buyer Markets
Company size
Purchase quantity
Product application
Organization type
Location
Purchase status
Attribute importance

11. Psychographic Segmentation
VALS 2 (“values and lifestyles”)
Life styles are measured by asking consumers about their
Activities
Interests
Opinions
Segmentation research based on VALS™ is a product of SRI Consulting Business Intelligence

12. VALS 2 - Eight American Lifestyles
Abundant Resources
ACTUALIZERS
Principle Oriented
Status Oriented
Action Oriented
FULFILLEDS
ACHIEVERS
EXPERIENCERS
BELIEVERS
STRIVERS
MAKERS
STRUGGLERS
Minimal Resources

13. Geodemographic Segmentation
PRIZM: Potential Ranking Index by Zip Markets
PRIZM assumes that similar customers live within the same or proximate neighborhood (s)
PRIZM classifies every U.S. neighborhood into one of 62 distinct types or clusters of consumers
PRIZM helps marketers understand customers in selected markets

14. Product Positioning
Positioning can be achieved according to selected attributes or functions
Superiority to competitive products
Positioned by use or application
Positioned in terms of particular types of users
Positioned relative to a product class
Position mapping is a visual depiction of customers perception of competitive products

15. Market Segmentation Strategies
The firm may decide not to enter the market
The firm may not decide to segment but to be a mass marketer if
The market is so small it’s not profitable to market to one portion of it
Heavy users comprise so much of sales they are the only relevant target
Dominant brand does not need segmentation

16. Market Evaluation Measures
3Ms of market evaluation
Measurable – large enough to measure size and characteristics
Meaningful – large enough to deliver sufficient sales and growth potential
Marketable – can be reached and served in an efficient manner

17. Market Evaluation Questions
Measurability questions
What are the appropriate bases for segmenting this market and can they be measured?
Is secondary data available so this can be done inexpensively?
If primary data are needed, will there be a return on investment?
Are specific names/addresses needed?
Can purchases by this segment be measured and tracked?

18. Market Evaluation Questions
Meaningfulness Questions
How many people are in this market and how frequently will they purchase the product?
What market share can we expect?
What is the growth potential?
How strong is the competition and is it likely to change?
How satisfied are the consumers in this market with current offerings?

19. Market Evaluation Questions
Marketability Questions
Can this segment be reached with current channels of distribution?
Can we establish new channels efficiently, if needed?
What promotion media does this segment read, listen to, or watch?
Can we afford to promote to this segment and is there a media to reach them?
Are people in this segment willing to pay a price necessary for profit?
Can we produce a product for this market profitably?

20. Design Marketing Mix
Selection of target market and designing the market should go hand in hand
Marketing mix decisions should have already been carefully considered
Product positioning has many implications for promotion and channel distribution