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Market Segmentation and Strategic Targeting

LEARNING OBJECTIVES After studying this chapter students should be able to understand: 1. Why market segmentation is essential. 2. The criteria for targeting selected segments effectively. 3. The bases for segmenting consumers. 4. How segmentation and strategic targeting are carried out.

CHAPTER SUMMARY Market segmentation is the opposite of mass marketing and is part of the segmentation, targeting, and positioning framework. Segmentation is defined as the process of dividing a potential market into distinct subsets of consumers with a common need or characteristic and selecting one or more segments to target with a specially designed marketing mix. Besides aiding in the development of new products, segmentation studies assist in the redesign and repositioning of existing products, in the creation of promotional appeals, and the selection of advertising media. In order to be a viable target market, a segment must be identifiable (by some criteria such as demographics, lifestyles, or others), sizeable (i.e., large enough to be profitable), stable or growing, accessible (i.e., can be reached economically), and congruent with the marketer’s objectives and resources. Consumer-rooted behaviors and cognitions as well as consumption-specific facts and attitudes can be used to segment consumers. The most common categories used in segmentation are demographics and psychographics (or lifestyles). However, in most cases, hybrid segmentations are used. The primary examples of hybrid frameworks are VALS™ and the PRIZM™ geodemographic clusters. Other consumer-rooted variables used to segment markets are personality traits and sociocultural values and beliefs. The key consumption-specific segmentation factors are usage behavior (including usage rate and situation), benefit segmentation, and brand loyalty and relationship. Behavioral targeting and microtargeting are emerging techniques rooted in marketers’ abilities to identify and target increasingly smaller segments and even individual buyers with tailor-made messages (i.e., narrowcasting). In conventional segmentation, a company can choose to target several segments (differentiated marketing) or just one segment (concentrated marketing). In certain instances, a company must use countersegmentation and combine two or more segments into a larger one.

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1. Market segmentation is the opposite of mass marketing. 2. Mass marketing is offering the same product and marketing mix to all consumers and was

practiced prior to the development of the marketing concept. 3. The market segmentation and targeting process is the identification of distinct segments

within a given market or population, evaluation of each segment’s marketing potential, selection of the segments to be targeted, and the creation of a marketing mix for each target segment selected. 4. Consumer can be segmented along several factors, including demographics, lifestyles, usage behavior and others. 5. After segmenting a consumer market and selecting one or several target markets, the product or service must be positioned. 6. Positioning is the unifying element of each marketing mix because it expresses the offering’s value proposition which details the product’s or service’s capability to deliver specific benefits corresponding to consumers’ unfulfilled needs. *****Use Discussion Questions #1 and #2 Here; Use Key Terms mass marketing, positioned, and positioning Here; Use Figure #3.1 Here***** WHY IS MARKET SEGMENTATION NECESSARY? 1. Prior to the development of market segmentation, mass marketing was the prevailing method. 2. 3. 4.

5. 6. 7.

The same product and marketing mix were offered to all consumers. Mass (undifferentiated) marketing costs less as a standardized product is offered, backed by a uniform marketing strategy. Most marketers cannot use this...
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