Chapter 7: Customer-Driven Marketing Strategy
Marketing segmentation
Segmenting consumer markets
Segmenting business markets
Segmenting international markets
Requirements for effective segmentation
Segmenting consumer markets
Geographic segmentation divides the market into different geographical units such as
nations, regions, states, counties, or cities
Demographic segmentation divides the market into groups based on variables such as age,
gender, family size, family life cycle, income, occupation, education, religion, race, generation,
and nationality
Psychographic segmentation divides a market into different segments based on social class,
lifestyle, or personality characteristics
Behavioral segmentation divides buyers into groups based on their knowledge, attitudes,
uses, or responses to a product
o Occasions
o Benefits sought
o User status
o Usage rate
o Loyalty status
Age and life-cycle stage segmentation is the process of offering different products or using
different marketing approaches for different age and life-cycle groups
Gender segmentation divides the market based on sex (male or female)
Income segmentation divides a market into different income segments.
Segmenting consumer markets using multiple segmentation bases
Multiple (multivariable) segmentation is used to identify smaller, better-defined target groups
Experian’s Mosaic USA system classifies U.S. households into one of the 71 lifestyle segments
and 19 levels of affluence.
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, Segmenting business markets
Consumer and business marketers use many of the same variables to segment their markets.
Additional variables include:
• Customer operating characteristics
• Purchasing approaches
• Situational factors
• Personal characteristics
Intermarket segmentation divides consumers into groups with similar needs and buying behaviors
even though they are located in different countries
Segmenting international markets
• Geographic location involves grouping countries by regions such as Western Europe, the
Pacific Rim, the Middle East, or Africa. Geographic segmentation assumes that nations close
to one another will have many common traits and behaviors, however there are many
exceptions.
• Economic factors involve grouping countries by population income levels or by their overall
level of economic development. A country’s economic structure shapes its population’s
product and service needs and, therefore, the marketing opportunities it offers.
• Political and legal factors involve segmenting by the type and stability of the government,
government receptivity to foreign firms, monetary regulations, and the amount of
bureaucracy.
• Cultural factors involve grouping markets according to common languages, religions, values
and attitudes, customs, and behavioral patterns.
Requirements for effective segmentation
Measurable: The size, purchasing power, and profiles of the segments can be measured.
Accessible: The market segments can be effectively reached and served.
Substantial: The market segments are large or profitable enough to serve.
Differentiable: The segments are conceptually distinguishable and respond differently to
different marketing mix elements and programs.
Actionable: Effective programs can be designed for attracting and serving the segments.
Marketing targeting
Evaluating market segments
• Segment size and growth: Selecting segments that have the right size and growth
characteristics is a relative matter. The largest, fastest-growing segments are not always the
most attractive ones for every company. Smaller companies may target segments that are
smaller and less attractive, in an absolute sense, but that are potentially more profitable for
them.
• Segment structural attractiveness: Structural factors that affect long-run segment
attractiveness include strong and aggressive competitors, new entrants, substitute products,
power of buyers relative to sellers, and powerful suppliers who can control prices, quality, or
quantity of ordered goods and services.
• Company objectives and resources: Some attractive segments can be dismissed quickly
because they do not mesh with the company’s long-run objectives. Or the company may lack
the skills and resources needed to succeed in an attractive segment. A company should only
enter segments in which it can create superior customer value and gain advantages over its
competitors.
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