8
IDENTIFYING MARKET SEGMENTS AND TARGETS

Markets are not homogeneous. A company needs to identify which market segments it can serve effectively. Such decisions require a keen understanding of consumer behavior and careful strategic thinking. To compete more effectively companies are now embracing target marketing. Effective target marketing requires that marketers:

Identify and profile distinct groups of buyers who differ in their needs and preferences.

Select one or more market segments to enter.

For each target market, establish and communicate the distinctive benefit(s) of the company’s market offering.

Levels of Market Segmentation

The starting point for discussing segmentation is mass marketing. In mass marketing, the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers.

A) The argument for mass marketing is that it creates the largest potential market, which leads, to the lowest costs that in turn can lead to lower prices or higher margins.

Segment Marketing

A market segment consists of a group of customers who share a similar set of needs and wants.

A) The marketer does not create the segments.

B) The marketer’s task is to identify the segments and decide which one(s) to target.

C) A flexible market offering consists of two parts:

1) A naked solution containing the product and service elements that all segment member’s value.

2) Discretionary options that some segment member’s value.

D) Market segments can be defined in many different ways:

a. One way to carve up a market is to identify preference segments.

b. Homogeneous preferences.

c. Diffused preferences.

d. Clustered preferences.

Figures 8.1 (a), 8.1 (b), and 8.1 (c) show the differences.

Review Key Definitions here: mass