1. Targeting Attractive Segments
PPT6
Prof. S.Venkat

2. Discussion Questions
1. What’s a market?
2. What’s a market segment?

3. • What’s a market?
• A group of individuals or organizations (i.e.,
buyers) having the willingness and ability to buy
goods and services to satisfy a class of want or
need
• What’s a market segment?
• A group of potential customers in a market who
share similar wants and needs that are different
from the wants and needs of consumers in other
segments

4. Discussion Questions
3. Why should we segment markets and
target certain segments?
Are there benefits in doing so?
Are there drawbacks?

5. Market Segmentation
• Segmentation is important because markets
are rarely homogeneous in benefits wanted,
purchase rates, and price and promotion
elasticities, and their response rates to
products and marketing programs differ.
• Variation among market segments in product
preferences, size and growth in demand, media
habits, and competitive structures further
affect the differences and response rates.

6. Market Segmentation
• Market segmentation has become increasingly
important in setting marketing strategies.
• Population growth has slowed, and more product-markets
are maturing. This sparks more intense competition as firms
seek growth via gains in market share as well as in an
increase in brand extensions.
• Such social and economic forces as expanding disposable
incomes, higher educational levels, and more awareness of
the world have produced customers with more varied and
sophisticated needs, tastes, and lifestyles than ever before.
This has led to an outpouring of goods and services that
compete with one another for the opportunity of satisfying
some group of consumers.

7. Market Segmentation
• Market segmentation has become increasingly
important in setting marketing strategies.
• There is an increasingly important trend toward
microsegmentation, in which extremely small segments
are targeted.
• Many marketing organizations have made it easier to
implement sharply focused marketing programs by more
sharply targeting their own services.

8. Market Segmentation
• Benefits of market segmentation:
• It identifies opportunities for new product development.
• It helps in the design of marketing programs that are
most effective for reaching homogeneous groups of
customers.
• It improves the strategic allocation of marketing
resources.
• Drawbacks of market segmentation:
• Potential customers who do not fit into the target
segment are missed.
• Marketers may misjudge who their target market is,
which could result in product failure or poor sales.

9. Objectives of Market Segmentation
• Identify a homogeneous segment that
differs from other segments
• Specify criteria that define the
segment
• Determine segment size and potential

10. Discussion Question
4. How should market segments be
defined?
Three good ways to do it.
• Who the customers are
• Where they are
• How they behave

11. Ask, for each approach, “What tools do we have to define
segments this way?
Can you think of examples of markets typically segmented
this way?”
Who?
•Tools: demographic descriptors (age, income, gender,
education, etc.): cereal, clothing, cosmetics, some magazines
Where?
•Tools: geographic descriptors: (location) suntan lotion, snow blowers, trade areas for retail
stores
How they behave?
Tools:
•Benefits sought: bicycles of various types, computers of
various types
•Product usage: key accounts among organizational buyers
•Lifestyle/psychographics: health clubs, automobiles/SUVs
•Social class: jewelry, automobiles

12. Discussion Question
5.What are some commonly used
demographic, geographic and behavioral
descriptors?

13. Segmentation basis Typical market segments
Geographic:
Region
City or MSA size
Urban-rural
Climate
Demographic:
Income
Age
Gender
Family life cycle
Social class
New England, Middle Atlantic, and other
census regions
Under 25,000; 25,001-100,000; 100,001500,000; 500,001-1,000,000; etc.
Urban, suburban, rural
Hot, cold, sunny, rainy, cloudy
Under $10,000; $10,001-$25,000; $25,001$35,000; $35,001-$50,000; over $50,000
Under 6, 6-12, 13-19, 20-34, 35-49,
50-64, 65 and over
Male, female
Young, single; young, married, no
children, etc.
Upper class, upper middle, lower middle,
upper lower, etc.

14. Segmentation basis Typical market segments (cont.)
Demographic (cont.):
Education
Occupation
Ethnic background
Psychographic:
Personality
Life-style
Values
Grade school only, high school graduate,
college graduate
Professional, manager, clerical, sales,
student, homemaker, unemployed
African, Asian, European, Hispanic, Middle
Eastern, etc.
Ambitious, self-confident, aggressive,
introverted, extroverted, sociable
Activities (golf, travel); interests (politics,
modern art); opinions (conservation,
capitalism)
Values and Life-Styles 2 (VALS2), List of
Values (LOV)

15. Segmentation basis Typical market segments (cont.)
Behavioral:
Benefits desired
Usage rate
Examples vary widely depending on
product: appliance — cost, quality,
operating life; toothpaste — no cavities,
plaque control, bright teeth, good taste,
low price
Nonuser, light user, heavy user

16. A SEGMENTATION EXAMPLE
Female department store shoppers have been classified into 5 types, based
on demographics, values, and attitudes. The groups and their descriptive
names are:
•
•
•
•
•
1. Fashion Statements—most affluent and educated, use credit cards,
expect to be treated well by retail personnel.
2. Wanna-buys—similar to Fashion Statements but with less income.
Enjoy buying on impulse.
3. Family Values—represent large families, often are professionals,
buying focuses on children or the home.
4. Down to Basics—most likely to have children, not college educated,
careful spenders, prefer not to use credit, like coupons.
5. Matriarchs—older, often retired, they like department stores but are
risk averse and have few purchase plans.

17. Discussion Question
6. Do these same approaches apply to
organizational markets?
Examples?

18. Who?
•Demographic descriptors: company age, size, etc.
Example: different software versions for small and large
businesses.
Where?
•Geographic descriptors: Example: B2B Websites in different
languages to reach different geographical markets.
How they behave?
•Benefits sought by different industries: Example: software
tailored to different vertical markets.
•Product usage: Example: treating key accounts among
organizational buyers differently
•Lifestyle/psychographics: Example: marketing corporate
wellness programs/corporate health club memberships to
different kinds of firms
•Social class: Example: company vehicles differ for different
job levels

19. BUSINESS MARKETS ARE OFTEN SEGMENTED
ON THE BASIS OF:
• Customer location.
• Type of business customer, including:
– Size
– Industry
– Purchase organization
– Purchase criteria
• Transaction conditions, including:
– Type of buying situation
• Straight rebuy
• Modified rebuy
• New buy
– Usage rate—heavy, light, nonusers.
– Purchase procedure.

20. Segmentation basis Typical market segments
Customer location:
Region
Locations
Customer type:
Size
Industry
Organization structure
Southeast Asia, Central America, Upper
Midwest, Atlantic Seaboard
Single buying site, multiple buying sites
Purchase criteria
Type of use
Sales volume, number of employees
SIC code, NAICS code
Centralized or decentralized; group or
individual decision
Quality, price, durability, lead time
Resale, component part, ornamental
Transaction conditions:
Buying situation
Usage rate
Purchasing procedure
Order size
Service requirements
Straight rebuy, modified rebuy, new buy
Nonuser, light user, heavy user
Competitive bidding, lease, svc. contracts
Small, medium, large
Light, moderate, heavy

21. How should we Decide Which Segments to
Target? - Steps in Constructing a Market-Attractiveness/CompetitivePosition Matrix (Exhibit 6.7)
1. Choose criteria to measure market
attractiveness and competitive position.
2. Weigh market attractiveness and competitive position
factors to reflect their relative importance.
3. Assess the current position of each potential target
market on each factor.
4. Project the future position of each market based on expected
environmental, customer, and competitive trends
5. Evaluate implications of possible future changes for business
strategies and resources requirements.

22. A Useful Tool for Assessing Market
Segments: Segment Rating Chart
WEIGHT
RATING
(0-10)
TOTAL
Customer needs and behavior
.5
10
5.0
Segment size and growth rate
.3
7
2.1
Macro trends
.2
8
1.6
Total: Market attractiveness
1.0
Market attractiveness factors
8.7
Competitive position factors
Opportunity for competitive
advantage
.6
7
4.2
Capabilities and resources
.2
5
1.0
Industry attractiveness
.2
7
1.4
Total: Competitive position
1.0
6.6

23. The Market Attractiveness/
Competitive Position Matrix Exhibit 6.10
Market
Attractiveness
High
(8-10)
l
Moderate
(4-7)
Low
(0-3)
Low
Moderate
High
(0-3)
(4-7)
(8-10)
Company’s Competitive Position
l = Market attractiveness and competitive position of distance runners segment

25. Implications of Alternative Positions
Within the Market-Attractiveness/
Competitive-Position Matrix Exhibit 6.11
Competitive Position
Weak
Market Attractiveness
High
Med.
Low
Build selectively:
• Spec. in limited strengths
• Seek to overcome weak.
• Withdraw if indications of
sustainable growth are
lacking
Limited expansion or
harvest:
• Look for ways to expand
w/out high risk; otherwise
min. invest. and focus
operations
Medium
Strong
Desirable Potential Target
Protect position:
• Invest to grow at max.
digestible rate
• Concentrate on maintaining
strength
Desirable Potential Target
Manage for earnings:
Build selectively:
• Protect existing strengths
• Invest to improve position only • Emphasize profitability by
increasing productivity
in areas where risk is low
• Build up ability to counter
competition
Desirable Potential Target
Invest to build:
• Challenge for leadership
• Build selectively on strengths
• Reinforce vulnerable areas
Divest:
Manage for earnings:
• Sell when possible to maximize • Protect position
cash value
• Minimize investment
• Meantime, cut fixed costs &
avoid further investment
Protect and refocus:
• Defend strengths
• Seek ways to increase current
earnings without speeding
market’s decline
Sources: Adapted from George S. Day, Analysis for Strategic Market Decisions (St. Paul: West, 1986), p. 204; D. F. Abell and J. S. Hammond, Strategic Market Planning Problems and
Analytical Approaches (Englewood Cliffs, NJ: Prentice Hall, 1979); and S. J. Robinson, R. E. Hitchens, and D. P. Wade, “The Directional Policy Matrix: Tool for Strategic Planning,” Long
Range Planning 11 (1978), pp. 8-15.

26. Discussion Questions
7. What targeting strategies are available?
When should each be used?

27. Niche-market strategy
•One or more segments with substantial number of customers
seeking somewhat specialized benefits from a product or service
•Strategy is designed to avoid direct competition with larger firms that are
pursuing bigger segments
Mass-market strategy
•Ignore any segment differences and design a single product-and-marketing
program that will appeal to the largest number of consumers
(undifferentiated marketing)
•Objective of strategy is to capture sufficient volume to gain economies of
scale and a cost advantage
•Favored by larger business units or by those whose parent corporation
provides substantial support
•A second approach to the mass market is to design separate products and
marketing programs for the differing segments (differentiated marketing)

28. Growth-market strategy
•Often target one or more fast-growth segments
•A strategy often favored by smaller competitors to avoid direct confrontations with
larger firms while building volume and share