Segmentation and Targeting Notes

Segmentation and Targeting

Segmentation

• Segmentation is the process of dividing potential customers into groups to better understand them.

Targeting

• Targeting is determining which segments are most likely to become customers and directing marketing efforts to best satisfy them.

Objectives of Segmentation

• To improve an organization’s understanding of who their prospective customers are and how to serve them.
• To reduce risk in deciding where, when, how, and to whom a product, service, or brand will be marketed.
• To increase marketing efficiency by directing effort toward designated segment(s) in ways that are consistent with that segment’s characteristics.

Common Market Segmentation Approaches

• Geographic: Nations, states, regions, cities, neighborhoods, zip codes, etc.
• Demographic: Age, gender, family size, income, occupation, education, religion, ethnicity, and nationality.
• Psychographic: Lifestyle, personality, attitudes, and social class.
• Behavioral: User status, purchase occasion, loyalty, readiness to buy.
• Decision maker: Decision-making role (purchaser, influencer, etc.).

Ideal Market Segment

• Can be measured
• Is profitable
• Is stable
• Is reachable
• Is internally homogeneous
• Is externally heterogeneous
• Is responsive
• Is cost-effective
• Helps determine the marketing mix

Targeting Strategy

Concentration

• Only one marketing mix is developed.
• Advantage: focus
• Disadvantage: If demand in segment declines, company will suffer.

Multi-segment

• Marketing mix for each segment.
• Advantage: May reach more customers.
• Disadvantage: Costs of multiple campaigns and distribution channels.