Marketing Management
Sixteenth Edition
Chapter 6
Identifying Market
Segments and Target
Customers
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“Apple phones appeal to people who want
someone smart to make choices for them;
Android phones appeal to people who can't stand
that.” (WSJ, 9/17/14)
Core Demographics (buildfire 2022)
• iOS users: loyal to the consistent experience; higher
income; male; prefer spending money; higher in-app
shopping
• Android users: value freedom and customizability; less
extroverted and perceived to be more honest; prefer
saving money
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HW Airline customer segmentation
❑ Business travelers make up 12% of
airline passengers but contribute 75% of
profits
❑ Price discrimination: Saturday night stay
for a cheaper fare?
❑ Airline seat classes (most have four: Economy,
Premium Economy, Business, and First class)
❑ Cattle class flights
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LinkedIn Segmentation
❑ Against Competition (target)
o vs. Facebook?
❑ Customer segments (solutions)
o Job seekers
o Advertisers
o Corporate recruiters
o Professionals
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Key Chapter Topics
❑ Segmentation
❑ Targeting
❑ Positioning (Ch 7)
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The Logic of Targeting
▪ Mass marketing
▪ the firm ignores segment differences and goes after
the whole market with one offer
▪ Targeted marketing
▪ Sell different products to all the different segments of
the market
▪ Mass customization
▪ The ability of a company to meet each customer’s
requirements—to prepare on a mass basis
individually designed products, services, programs,
and communications
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Ford’s Model T Followed a Mass
Market Approach
15 million cars between 1909-27
Mass marketing: largest potential market,
mass production, lower cost, lower price,
higher volume.
BUT: The market is becoming more
fragmented. (Competition, Information,
Innovation of media and distribution
channels)
vs.
Micromarketing
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Web site
Segment of one
• “Consumers put more value on being treated as individuals”
• Until now, only the very wealthy could afford them
Inc: (Amazon learns individual purchase behavior) (McDonald’s)
• Traditional segmentation ➔ targeting and positioning
• Segment of one ➔ individualized offering (Amazon)
Forbes:
• AI, facial recognition, location, biometrics, combined with social media
and mobile data ➔ personalized experiences through customer’s
buying journey (McKinsey)
• “Hyper personalization”: customers now expect it
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Effective Targeting Requires…
❑ Identify and profile distinct groups of buyers
(Segmentation)
❑ Select one or more market segments to enter
(Targeting)
❑ Establish and communicate the distinctive
benefits of the market offering (Positioning)
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What is a Market Segment?
❑ A market segment consists of a group of
customers who share similar set of
needs and wants
❑ Example: Airline passenger market?
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Major Segmentation Variables
❑ Descriptive variables:
o Geographic (region, density),
o Demographic (age, family life cycle, gender,
income),
o Psychographic (life style, personality)
❑ Behavioral variables:
o Occasions, Benefits, Usage rate, Loyalty,
Readiness, Attitudes
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1. Descriptive Variables
• Demographic (age, family life cycle, gender, income),
• Geographic (region, density),
• Psychographic (lifestyle, personality)
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Demographic Segmentation
❑ Age, Family life cycle
❑ Life stage (major concerns)
❑ Gender
❑ Income
❑ Generation
❑ Social class
❑ Race and Culture
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Demographic: Age and Life Stage
Life stage and income-producing assets
Clarits P$YCLE (financial market; 58 segs in 12
groups)
Age
• Targeted college students: Dorm on the wheels,
minimalist, practicality
• But Age was not a good variable (average buyer
age=42)
• EVs target younger generations: Environmentally
conscious & technology adoption
• Sleek, modern design & adv. tech features
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Demographic: Gender, Income, Generation
Dove evolution
Venus razor: pink tax?
Generation
Gen Z: 1995/6 - ?
Digital tech since young
Millennials (Gen Y): ~ 1981-1996
Children of Baby Boomers
Coming of age in the information age
Avocado toast? Millennials have killed…
Gen X: ~ 1965-1980
Latchkey generation: reduced adult supervision due to increased maternal
participation in workforce
Baby Boomers: ~ 1946-1964
Wealthier and more active than older gen
How to Market New Products to Baby Boomers (WSJ 7/16/14)
Boomers vs. Millennials (MarketWatch 2/5/14)
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Geographic Segmentation
Example: Claritas (Zip code lookup)
Prizm: shopping patterns, media preferences, tech habits
P$ycle: financial investment behaviors, individual wealth
ConneXions: predict adoption rates for technology
Prizm: 39 Factors in Categories ➔ 68 segs (14 Groups)
▪ Education and affluence
▪ Family life cycle
▪ Urbanization
▪ Race and ethnicity
▪ Mobility
ESRI Zip code lookup: 67 segments
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Psychographic: The VALS Framework
Primary Motivation
• Ideals: principle
• Achievements:
demonstrate success
• Self-Exp: variety, risky
Resources
• Demographic +
psychological
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2. Behavioral Segmentation
❑ Occasions Rental cars
❑ Benefits Pain reliever
Fitness club
❑ User Status
❑ Usage Rate Starbucks
❑ Buyer-Readiness Go Daddy (Mktg Funnel)
❑ Loyalty Status Airlines
❑ Attitude Android vs. iOS
❑ Decision Roles Toys
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Marketing Funnel
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Effective Segmentation Criteria
❑ Measurable
❑ Substantial
❑ Accessible
❑ Differentiable
❑ Actionable
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Identifying Target Customers
▪ Targeting
▪ The process of identifying customers for whom the
company will optimize its offering
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Criteria to Use in Picking the Target Segments
❑ Attractiveness of the segment
o Substantial size
o High growth rate
o Competitive position
o Lack of strong competition
❑ Compatibility with the company’s resources and
objectives
o Can the company create superior value for target
customers?
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