Chapter 8 ♦ Segmenting and Targeting Markets 8-1
CHAPTER 8 Segmenting and Targeting Markets
CHAPTER FEATURES
Chapter Features
Key Points
✓ Marketing & You
Students are given a survey to determine their financial lifestyle.
✓ Marketing Metrics
To determine her market for a new food service truck, Anne Johnson
uses category incidence, a measure of the frequency that a person
purchases from a product category.
✓ Case Study
The Coca-Cola company used creative marketing to promote Coke
Zero as the hip, new alternative to Diet Coke for men. Despite early
disappointment, the company reintroduced and reinvested in the
product, hoping it will someday be a megabrand alongside Coca–
Cola Classic and Diet Coke.
USING THIS MANUAL
Chapter eight includes nine learning outcomes that help students become more familiar with segmenting and targeting
✓ Application Exercise
would be of interest to residents of various zip codes.
8-2 Chapter 8 ♦ Segmenting and Targeting Markets
LEARNING OUTCOMES
1 Describe the characteristics of markets and market segments
A market is composed of individuals or organizations with the ability and willingness to make purchases to fulfill their
2 Explain the importance of market segmentation
Before the 1960s, few businesses targeted specific market segments. Today, segmentation is a crucial marketing strategy
3 Discuss criteria for successful market segmentation
Successful market segmentation depends on four basic criteria: (1) a market segment must be substantial and have
4 Describe the bases commonly used to segment consumer markets
Five bases are commonly used to segment consumer markets. Geographic segmentation is based on region, size, density,
5 Describe the bases for segmenting business markets
Business markets can be segmented on two general bases. First, businesses segment markets based on company
6 List the steps involved in segmenting markets
Six steps are involved when segmenting markets: (1) selecting a market or product category for study; (2) choosing a
7 Discuss alternative strategies for selecting target markets
Marketers select target markets using three different strategies: undifferentiated targeting, concentrated targeting,
8 Explain one–to-one marketing
One-to-one marketing is an individualized marketing method that utilizes customer information to build long-term,
Chapter 8 ♦ Segmenting and Targeting Markets 8-3
9 Explain how and why firms implement positioning strategies and how product
differentiation plays a role
Positioning is used to influence consumer perceptions of a particular brand, product line, or organization in relation to
CHAPTER OUTLINE
1 Describe the characteristics of markets and market segments
I. Market Segmentation
A market is people or organizations with needs or wants and with the ability
PowerPoint 8-8:
The Importance of Market
Segmentation
2 Explain the importance of market segmentation
II. The Importance of Market Segmentation
Market segmentation developed in the 1960s in response to growing markets with
PowerPoint 8–11:
Criteria for Segmentation
3 Discuss criteria for successful market segmentation
III. Criteria for Successful Segmentation
Review Question 3.1
A. Substantiality: A selected segment must be large enough to justify the
development and maintenance of a special marketing mix.
8-4 Chapter 8 ♦ Segmenting and Targeting Markets
of the marketing mix than do other segments.
PowerPoint 8–14:
Bases for Segmentation
4 Describe the bases commonly used to segment consumer
markets
IV. Bases for Segmenting Consumer Markets
A segmentation base (or variable) is a characteristic of individuals, groups, or
PowerPoint 8-15:
Geographic Segmentation
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Demographic
Segmentation
Review Question 4.1
A. Geographic Segmentation
1. Geographic segmentation is a method of dividing markets based on
the region of the country or world, market size, market density, or
climate.
3. Consumer goods companies take a regional approach to marketing for
four principal reasons:
• Intense competition
B. Demographic Segmentation
Demographic segmentation is the method of dividing markets on the basis
of demographic variables, such as age, gender, income, ethnic background,
and family life cycle.
PowerPoint 8–18:
Gender Segmentation
2. Marketers of many items, such as clothes, footwear, personal care
items, magazines, and cosmetics, commonly segment by gender.
Chapter 8 ♦ Segmenting and Targeting Markets 8-5
PowerPoint 8–19:
Income Segmentation
3. Income level influences consumers‘ wants and determines their buying
power.
Review Question 4.3
PowerPoint 8-23:
Bases for Psychographic
Segmentation
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Geodemographic
Segmentation
C. Psychographic Segmentation
Psychographic segmentation is the method of dividing markets based on
personality, motives, lifestyle, and geodemographics.
1. Personality: Individual characteristics reflect traits, attitudes, and
habits.
4. Geodemographics: Geodemographic segmentation is the method of
dividing markets on the basis of neighborhood lifestyle categories and
is a combination of geographic, demographic, and lifestyle
segmentation.
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Benefit Segmentation
5. The Nielsen Claritas lifestyle software program divides Americans
D. Benefit Segmentation
Benefit segmentation is the method of dividing markets on the basis of
benefits consumers seek from the product.
1. Benefit segmentation groups potential customers on the basis of needs
or wants rather than on other characteristics like age or gender.
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PowerPoint 8–27:
Usage-Rate Segmentation
Review Question 4.2
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Bases for Segmenting
Business Markets
E. Usage Rate Segmentation
Usage rate segmentation is the method of dividing a market based on the
amount of product purchased or consumed.
1. The most common usage-rate categories are former users, potential
5 Describe the bases for segmenting business markets
V. Bases for Segmenting Business Markets
The business market consists of producers, resellers, institutions, and
government. Further market segmentation offers just as many benefits to business
marketers as it does to consumer-product marketers.
Review Question 5.1
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Buyer Characteristics
A. Company Characteristics
1. Company characteristics, such as geographic location, type of
B. Buying Processes
1. Business markets can also be segmented on the basis of how they buy.
2. Two purchasing strategies include:
3. Buyer characteristics include:
• Demographic characteristics
Chapter 8 ♦ Segmenting and Targeting Markets 8-7
6 List the steps involved in segmenting markets
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Steps in Segmenting a
Market
Review Question 6.1
VI. Steps in Segmenting a Market
The purpose of market segmentation is to identify marketing opportunities.
Select a market or product category for study. It may be an existing, related, or
new market.
Design, implement, and maintain appropriate marketing mixes. The marketing mix is
product, place (distribution), promotion, and pricing strategies intended to bring about
mutually satisfying exchange relationships with target markets.
7 Discuss alternative strategies for selecting target markets
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Strategies for Selecting
Target Markets
Class Activity: Asks
students to define and
select target markets for
VII. Strategies for Selecting Target Markets
A target market is a group of people or organizations for which an organization
designs, implements, and maintains a marketing mix to fit the needs of that group
or groups, resulting in mutually satisfying exchanges.
A. Undifferentiated Targeting
The undifferentiated targeting strategy is a marketing approach based on
8-8 Chapter 8 ♦ Segmenting and Targeting Markets
PowerPoint 8–39:
Concentrated Targeting
Strategy
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Multisegment Targeting
Strategy
4. With this strategy, production and marketing costs are often at their
lowest.
B. Concentrated Targeting
The concentrated targeting strategy is a marketing approach based on
appealing to a single segment of a market.
1. It focuses a firm’s marketing efforts on a single segment or market
niche.
C. Multisegment Targeting
The multisegment targeting strategy is a marketing approach based on
serving two or more well-defined market segments, with a distinct
marketing mix for each.
Review Question 7.1, 7.2
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Costs of Multisegment
1. Some companies have very specialized marketing mixes for each
segment, including a specialized product; other companies may only
3. This strategy also includes many extra costs, such as:
• Product design costs
4. Cannibalization occurs when sales of a new product cut into sales of
a firm’s existing products.
Chapter 8 ♦ Segmenting and Targeting Markets 8-9
To determine her market for a new food service truck, Anne Johnson uses category
incidence, a measure of the frequency that a person purchases from a product
8 Explain one-to-one marketing
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One-to-One Marketing
Review Question 8.1
VIII. One-To–One Marketing
One-to-one marketing is an individualized marketing method that utilizes
customer information to build long-term, personalized, and profitable
relationships with each customer.
One-to-One Marketing uses a “rifle” approach rather than the “shotgun”
approach of mass marketing. It helps marketers understand customers as
individuals instead of as fitting a mass profile.
Several factors suggest that personalized communications and product
customization will continue to expand. At least four trends will lead to its
continued growth:
1. The one-size-fits-all marketing is no longer relevant.
2. Direct and personal marketing efforts will continue to grow to meet
Ethics in Marketing
Aiming for the Advertising Sweet Spot: Cookies and Online Privacy
Websites use cookies to recognize users and store their preferences, shopping
9 Explain how and why firms implement positioning strategies
and how product differentiation plays a role
PowerPoint 8–48:
Positioning
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IX. Positioning
Positioning is the development of a specific marketing mix to influence potential
customers’ overall perception of a brand, product line, or organization.
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Perpetual Mapping
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Positioning Bases
A. Perceptual Mapping
Perceptual mapping is a means of displaying or graphing, in two or more
dimensions, the location of products, brands, or groups of products in the
minds of present or potential customers.
B. Positioning Bases
1. Attribute: A product is associated with an attribute, product feature, or
customer benefit.
2. Price and Quality: The position may stress high price as a symbol of
quality or low price as an indicator of value.
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Repositioning
C. Repositioning
Repositioning is changing consumers’ perceptions of a brand in relation to
competing brands.
TERMS
80/20 principle
market segment
product differentiation
benefit segmentation
market segmentation
psychographic segmentation
cannibalization
multisegment targeting strategy
repositioning
concentrated targeting strategy
niche
satisficers
demographic segmentation
segmentation bases (variables)
family life cycle (FLC)
optimizers
target market
geodemographic segmentation
perceptual mapping
undifferentiated targeting strategy
market
positioning
Chapter 8 ♦ Segmenting and Targeting Markets 8-11
Suggested Homework:
• The end of each chapter contains numerous questions that can be assigned or used as the basis for longer
investigations into marketing.
REVIEW AND APPLICATIONS
1.1 Mercedes-Benz is thinking about advertising its cars to college students. Do you think that college
students are a viable potential market for Mercedes? Why or why not?
Why college students WOULD be a viable market: A large percentage of college students today work full– or
part-time and make a lot more money than college students of yesteryear. Thus, they have more disposable
1.2 Go to the Web site www.careermag.com. How are visitors to the following Web site segmented when seeking
relevant job openings? Report your results.
The Web site uses both consumer and business target markets and segments the market in several different
ways, mostly by benefit and geographic segmentation. For benefit segmentation, the Web site allows users to
2.1 Describe market segmentation in terms of the historical evolution of marketing.
Students’ answers should address some of these points. Following the production and sales eras, U.S. businesses in
the 1950s began to adopt a marketing orientation, which focuses on customer satisfaction. By the 1960s, some
3.1 As a marketing consultant for a chain of hair salons, you have been asked to evaluate the kids’ market as
a potential segment for the chain to target. Write a memo to your client showing your evaluation of the
kids’ segment against the four criteria for successful market segmentation.
The criteria for successful market segmentation that should appear in students’ answers are: 1) Substantiality