236 Part 3 Target Market Selection
CHAPTER 9
MARKET SEGMENTATION, TARGETING, AND POSITIONING
CHAPTER OVERVIEW
We are all unique individuals. This is also true of our identity as consumers in the world marketplace. No
one wants to be stereotyped, but marketers do have to look at customers—and potential customers—to
determine their unique characteristics, their lifestyles and values, their tastes and preferences, their
needs and wants.
Chapter 9 focuses on the ways that all of these factors make up a market. A market is composed of
people with sufficient purchasing power, authority, and willingness to buy. Many markets include
consumers with different lifestyles, backgrounds, and income levels. Thus, it’s unusual for a single
marketing mix strategy to attract all sectors of a market. By identifying, evaluating, and selecting a target
market to pursue, marketers are able to develop more efficient and effective marketing strategies. Even
products that are intended for a more specific market need to be understood in terms of these factors.
Changes in the 17th Edition
The chapter has been updated and revised with all new features:
• The Opening Vignette and Evolution of a Brand discuss PepsiCo and how the global giant
targets different markets with its various beverages. PepsiCo has a strong lead in the bottled
water, juices, and sports drinks beverage categories and is not as dependent on the carbonated
soft drink sector as The Cola-Cola Company is when it comes to overall revenues. In fact, the
company’s market segmentation strategy in the beverage business has helped shield PepsiCo
from the declining soft drink segment. Of the 22 PepsiCo brands that top the billion dollar sales
mark on an annual basis, 12 of these brands are beverages. The company’s approach to market
segmentation is discussed in “PepsiCo Brands Target Different Markets.”
• Marketing Success, “Hispanic Consumers Prime Target for Clorox,” illustrates the success of
Clorox Company, which earns revenues of $6 billion a year from sales in over 100 countries. In
the U.S. market, the buying power of the Hispanic market is expected to soon grow to more than
Chapter 9 Market Segmentation, Targeting, and Positioning 237
to $1.5 trillion. Clorox needs to reach the Hispanic consumers in a carefully targeted way. The
company joined Vme, the Spanish-language network, in a marketing campaign to champion germ
prevention, including flu shots, hand washing, and disinfection accomplished with Clorox cleaning
products. With this and other media efforts, Clorox is well positioned to reach the growing
Hispanic market.
• Career Readiness discusses how social media allows for precise targeting of consumer and
other markets more than ever before, in “Using Social Media to Reach Target Markets.”
• Chapter Case 9.1 discusses the myth of the “typical” or standard cruise ship passenger. Whether
cruise ship passengers like to cook, quilt, tango, snorkel, listen to jazz, play baseball, garden,
watch movies, gaze at Impressionist art, explore investment strategies, hold a family reunion, or
• Video Case 9.2 includes an overview of the segmenting and positioning strategies used by
Nederlander Producing Company at theaters around the world.
LECTURE OUTLINE
Opening Vignette and Evolution of a Brand—“PepsiCo Brands Target Different Markets.” How
can PepsiCo lessen its exposure in the declining soft drink market? Do you think its new
premium water product, which is still in the test-market phase, can provide additional exposure to
underserved consumer segments? If so, which ones?
Chapter Objective 1: Identify the two essential components of a market.
Key Terms: market, target market, consumer products, business products
PowerPoint Basic: 5
PowerPoint Expanded: 5-7
1. Markets and target markets
a. A market is composed of people with sufficient purchasing
power, authority, and willingness to buy
b. Many markets include consumers with different lifestyles,
backgrounds, and income levels
c. So it is unusual for a single marketing mix strategy to
attract all sectors of a market
d. By identifying, evaluating, and selecting a target market to
Examples include
food items like
vegetables, fabrics,
grocery items.
Students should be
2. Types of markets
a. Products usually are classified as either consumer
products or business products
b. Consumer products are bought by ultimate consumers for
their personal use—for example, cell phones, sports
are business products because they become part
of another product destined for resale
e. A product that was once a business product might be
modified for consumer use, and vice versa
i. A line of professional cookware sold to
restaurants—a business product—could be
Assessment check questions
1.2. Distinguish between a consumer product and a business product. A
consumer product is purchased by the ultimate buyer for personal use. A
business product is purchased for use directly or indirectly in the
production of other goods and services.
Chapter Objective 2: Outline the role of market segmentation in developing a marketing
strategy.
Key Term: market segmentation
PowerPoint Basic: 6
PowerPoint Expanded: 8
1. The role of market segmentation
a. There are more than 7 billion people in the world today; of
those, over 319 million live in the U.S.
b. In today’s business world, too many variables exist in
Chapter 9 Market Segmentation, Targeting, and Positioning 239
must:
i. Actually change the products
ii. Attempt to identify the factors that affect purchase
decisions and then group consumers according to
the presence or absence of these factors
Assessment check questions
2.1. Define market segmentation. Market segmentation is the process of
dividing a total market into several homogeneous groups.
2.2. Describe the role of market segmentation. The role of market
segmentation is to identify the factors that affect purchase decisions and
then group consumers according to the presence or absence of these
factors.
Chapter Objective 3: Describe the four components necessary for effective segmentation.
Key Terms: None
PowerPoint Basic:
PowerPoint Expanded: 9
1. Criteria for effective segmentation
a. Segmentation does not automatically guarantee success
in the marketing arena; instead it is a tool for marketers to
use
b. Its effectiveness depends on four basic requirements:
i. The market segments must present measurable
purchasing power and size
Assessment check questions
3.1. Identify the four criteria for effective segmentation. The four criteria
for effective segmentation are: (1) the market segment must present
3.2. Give an example of a market segment that meets these criteria.
Examples might include women, teenagers, Hispanics, empty nesters,
and NASCAR enthusiasts.
Chapter Objective 4: Explain the geographic approach to segmenting consumer markets.
Key Terms: geographic segmentation, core based statistical area (CBSA), metropolitan
statistical area (MSA), micropolitan statistical area, consolidated metropolitan statistical area
(CMSA), primary metropolitan statistical area (PMSA), core regions, geographic information
system (GIS)
PowerPoint Basic: 7-8
PowerPoint Expanded: 10–15
Figure 9.1—The Ten
Largest Cities and
Ten Most Populous
States in the United
States
What do these “top
1. Segmenting consumer markets
a. Market segmentation attempts to isolate the traits that
distinguish a certain group of consumers from the overall
market
2. Geographic segmentation
a. Geographic segmentation divides an overall market into
homogeneous groups based on their location
i. Geographic location does not ensure all
consumers in a location will make the same buying
decisions, but this segmentation approach helps
identify some general patterns
Chapter 9 Market Segmentation, Targeting, and Positioning 241
Figure 9.2—The Ten
Largest Metropolitan
Areas in the United
States.
How does each area
define an MSA?
What data would a
Note: The use of
GIS has extended to
consumer
applications like
that cause people to move
ii. Major natural disasters may affect population
migration
f. The move from urban to suburban areas after World War II
created a need to redefine the urban marketplace
g. The government now classifies urban data using the
following categories:
i. The category of core based statistical area (CBSA)
refers collectively to metropolitan and micropolitan
statistical areas
ii. A metropolitan statistical area (MSA) is a
freestanding urban area with a population in the
urban center of at least 50,000 and a total
metropolitan statistical area population of 100,000
or more; buyers in metropolitan statistical areas
exhibit social and economic homogeneity and
usually border on nonurbanized counties
3. Using geographic segmentation
a. Demand for some categories of goods and services can
vary according to geographic region
b. Marketers of major brands are particularly interested in
defining their core regions, the locations where they get 40
to 80 percent of their sales
c. Residence location within a geographic area is an
important segmentation variable
d. Climate is another important segmentation factor
4. Geographic information systems (GIS)
a. Geographic information systems (GIS) are computer
systems that assemble, store, manipulate, and display
data by their location
242 Part 3 Target Market Selection
pizza delivery. Do
you think these “GIS
for pizzas” are more
b. They simplify the job of analyzing marketing information by
relating data to their locations
Assessment check questions
4.1. Under what circumstances are marketers most likely to use
geographic segmentation? Marketers usually use geographic
4.2. What are the five main categories for classifying urban data? The
five categories are core based statistical area (CBSA), metropolitan
statistical area (MSA), micropolitan statistical area, consolidated
metropolitan statistical area (CMSA), and primary metropolitan statistical
area (PMSA).
Chapter Objective 5: Discuss the demographic approach to segmenting consumer
markets.
Key Terms: demographic segmentation, cohort effect, family lifecycle, Engel’s laws
PowerPoint Basic: 9-15
PowerPoint Expanded: 16–31
1. Demographic segmentation
a. Demographic segmentation defines consumer groups
according to demographic variables such as gender, age,
2. Segmenting by gender
a. Gender is an obvious variable that helps define the
3. Segmenting by age
a. Age is another variable marketers use to segment their
markets
Chapter 9 Market Segmentation, Targeting, and Positioning 243
Note: Make a list of
companies for which
children and teens
are the main market.
Companies selling
Johnson, Dove,
Toys R Us.
Solving an Ethical
Controversy—
Should High-
Fructose Corn Syrup
Be Banned?
b. As with gender, age seems an easy distinction to make
c. But the distinctions become blurred as consumers’ roles
and needs change, and as age distribution shifts and
changes in each group take place
d. Age distribution and projected changes in each age group
determine differing consumer needs and wants
i. They also influence billions of dollars’ worth of
purchases made by their families
ii. If marketers could characterize this group with one
word, it would likely be interactive
e. The group born between 1968 and 1979, now generally in
their early 30s to early 40s, often are referred to as
Generation X
i. This group consists of 50 million people
ii. This group is very family oriented, well educated,
optimistic, and more concerned about social issues
and protecting the natural environment
5. The cohort effect: The Millennials
a. Marketers can learn from a sociological concept called the
cohort effect, the tendency of members of a generation
with common characteristics to be influenced and bound
together by significant events occurring during their key
Consumers Prime
Target for Clorox
6. Segmenting by ethnic group
a. According to the Census Bureau, America’s racial and
ethnic makeup is constantly changing
b. The three largest and fastest-growing racial/ethnic groups
are Hispanics, African Americans, and Asian Americans;
other than non-Hispanic white
d. Like Hispanics, who originate from a variety of countries,
the African Americans in the U.S. do not comprise a single
iv. The population is diverse because it represents
numerous cultures and its members speak a wide
variety of languages
f. Another important minority group is Native Americans,
whose current population numbers over 5.2 million, or 2
Note: Family
lifecycle affects an
individual’s purchase
patterns. Suppose
you get a gift coupon
for a large amount.
What would you
purchase or invest
in? Would your
newly married
friends, parents,
grandparents buy
the same items?
What do you think
would be their
choice of products?
$34.4 billion in receipts
iii. Almost a third operated in the construction,
maintenance and repair, retail, and services
industries
7. Segmenting by family lifecycle stages
a. Another form of demographic segmentation employs the
stages of the family lifecycle—the process of family
formation and dissolution
b. The underlying theme of this segmentation approach is
that life stage, not age per se, is the primary determinant
of many consumer purchases
c. As people move from one stage to another, they become
potential consumers for different types of goods and
services
d. An unmarried person setting up an apartment for the first
time is likely a good prospect for inexpensive furniture and
small home appliances
e. The birth or adoption of a first child changes any
consumer’s profile considerably; parents must buy cribs,
changing tables, baby clothes, baby food, car seats, and
similar products
f. Families typically spend the most during the years their
8. Segmenting by household type
a. Today, the average household size is below 3 people; the
first U.S. census in 1790 had found an average household
size of 5.8 people
9. Segmenting by income and expenditure patterns
a. Part of the earlier definition of market described people
with purchasing power
b. Not surprisingly, then, a common basis for segmenting the
consumer market is income
ii. The percentage spent on housing, household
operations, and clothing remains constant
iii. The percentage spent on other items—such as
recreation and education—increases
f. Recent studies say that Engel’s laws are still valid, with a
10. Demographic segmentation abroad
a. Marketers often face a difficult task in obtaining the data
necessary for demographic segmentation abroad because
many countries do not have scheduled census programs
Chapter 9 Market Segmentation, Targeting, and Positioning 247
Assessment check questions
5.1. What is demographic segmentation? Demographic segmentation
5.2. What are the major categories of demographic segmentation? The
major categories of demographic segmentation are gender, age, ethnic
group, family lifecycle, household type, income, and expenditure
patterns.
Chapter Objective 6: Outline the psychographic approach to segmenting consumer
markets.
Key Terms: psychographic segmentation, AIO statements, VALS,
PowerPoint Basic: 16
PowerPoint Expanded: 32-33
1. Psychographic segmentation
a. Marketers have traditionally referred to geographic and
demographic characteristics as the primary bases for
2. What is psychographic segmentation?
a. Psychographic segmentation divides a population into
groups with similar values and lifestyles
b. Lifestyle refers to a person’s mode of living and describes
how an individual operates on a daily basis
c. Consumers’ lifestyles are composites of their individual
psychological profiles, including their needs, motives,
perceptions, and attitudes
category and list the
products and
services that might
be targeted to that
group.
3. VALS
a. Over a quarter-century ago, the research and consulting
firm SRI International developed a psychographic
segmentation system it called VALS, an acronym for
VAlues and LifeStyles
d. The revised VALS system categorizes consumers by
characteristics that correlate with purchase behavior
e. It is based on two key concepts: resources and self-
motivation
f. VALS divides consumers into eight psychographic
categories: innovators, thinkers, achievers, experiencers,
believers, strivers, makers, and survivors
i. Primary motivations divide consumers into three groups:
principle-motivated consumers who have a set of ideas
and morals—principles—they live by; achievement-
motivated consumers, influenced by symbols of success;
and action-motivated consumers who seek physical
activity, variety, and adventure
j. SBI has created several specialized segmentation
4. Using psychographic segmentation
a. No one suggests that psychographic segmentation is an
exact science, but it does help marketers quantify aspects
of consumers’ personalities and lifestyles to create goods
Chapter 9 Market Segmentation, Targeting, and Positioning 249
Assessment check questions
6.1. What is psychographic segmentation? Psychographic segmentation
6.2. Name the eight psychographic categories of the U.S. VALS
framework. The eight categories are innovators, thinkers, achievers,
experiencers, believers, strivers, makers, and survivors.
Chapter Objective 7: Describe product-related segmentation.
Key Terms: product-related segmentation, 80/20 principle
PowerPoint Basic: 17
PowerPoint Expanded: 34-37
1. Product-related segmentation
a. Product-related segmentation involves dividing a
consumer population into homogeneous groups based on
2. Segmenting by benefits sought
a. This approach focuses on attributes people seek and
3. Segmenting by usage rates
a. Marketers may also segment a total market by grouping
people according to the amounts of a product they buy
and use
b. Markets can be divided into heavy-, moderate-, and light-
Note: What are the
products or stores
you are loyal to? Are
you part of any
frequent-purchase
4. Segmenting by brand loyalty
a. This approach groups consumers according to the
strength of the brand loyalty they feel toward a product
b. A classic example of brand loyalty segmentation is the
frequent-purchase programs
c. Other companies attempt to segment their market by
developing brand loyalty over a period of time through
5. Using multiple segmentation bases
a. Segmentation can help marketers increase their accuracy
in reaching the right markets
b. Like other marketing tools, segmentation is probably best
Assessment check questions
7.1. List the three approaches to product-related segmentation. The three
7.2. What is the 80/20 principle? The 80/20 principle states that a big
percentage (80 percent) of a product’s revenues comes from a relatively
small number (20 percent) of loyal customers.
Chapter Objective 8: Identify the four steps in the market segmentation process.
Key Terms: None
PowerPoint Basic: 18
PowerPoint Expanded: 38–39
1. The market segmentation process
a. How do marketers decide on which segmentation base—
or bases—to use?
Chapter 9 Market Segmentation, Targeting, and Positioning 251
different age groups,
cultures. Use this as
an example to
describe the market
segmentation
process. What would
segmentation be
based on? Would it
depend on the genre
of the movie? The
2. Stage 1: Develop a relevant profile for each segment
a. After identifying promising segments, marketers should
understand the customers in each one
b. This in-depth analysis of customers helps managers to
accurately match buyers’ needs with the firm’s marketing
offers
c. The process must identify characteristics that both explain
the similarities among customers within each segment and
account for differences among segments
3. Stage 2: Forecast market potential
a. Market segmentation and market opportunity analysis
combine to produce a forecast of market potential within
each segment
b. Market potential sets the upper limit on the demand
competing firms can expect from a segment
4. Stage 3: Forecast probable market share
a. Competitors’ positions in targeted segments must be
5. Stage 4: Select specific market segments
a. The information, analysis, and forecasts accumulated
throughout the entire market segmentation decision