Page 153 - Foundations of Marketing

120 Part 2 | Marketing Research and Target Markets

For heterogeneous markets, market segmentation is the best approach. Market
segmentation is the process of dividing a total market into groups, or segments, that consist
of people or organizations with relatively similar product needs. The purpose is to enable a
marketer to design a marketing mix that more precisely matches the needs of customers in the
selected market segment. A market segment consists of individuals, groups, or organizations
that share one or more similar characteristics that cause them to have relatively similar prod-
uct needs. The total market for blue jeans is divided into multiple segments. Price-sensitive
customers can buy bargain jeans at Walmart or Ross. Others may need functional jeans, like
Carhartt brand, for work. Still other customers wear jeans as a fashion statement and are will-
ing to spend hundreds of dollars on an exclusive brand such as 7 for All Mankind.
The rationale for segmenting heterogeneous markets is that a company will be most suc-
cessful in developing a satisfying marketing mix for a portion of a total market, since custom-
ers’ needs tend to vary. The majority of organizations use market segmentation to best satisfy
the needs of their customers.
For market segmentation to succeed, fi ve conditions must exist. First, customers’ needs for
the product must be heterogeneous, otherwise there is no reason to waste resources segment-
ing the market. Second, segments must be identifi able and divisible. The company must be
able to fi nd a characteristic, or variable, for effectively separating a total market into groups
comprised of individuals with relatively uniform product needs. Third, the marketer must be
able to compare the different market segments with respect to estimated sales potential, costs,
and profi ts. Fourth, at least one segment must have enough profi t potential to justify develop-
ing and maintaining a special marketing mix for it. Finally, the company must be able to reach
the chosen segment with a particular marketing mix. Some market segments may be diffi cult
or impossible to reach because of legal, social, or distribution constraints. For instance, pro-
ducers of Cuban rum and cigars cannot market to U.S. consumers because of a trade embargo.
When an organization directs its marketing efforts toward a single market segment using
one marketing mix, it is employing a concentrated targeting strategy . Notice in Figure 5.2
that the organization using the concentrated strategy is aiming its marketing mix only at “B”
customers. Take a look at the two advertisements for Mont Blanc and Bic pens. Both of these
brands are using a concentrated marketing strategy to reach a specifi c target market, but are
aiming their advertisements at very different market segments. Mont Blanc is a very high-end
pen company with products that sell for thousands of dollars. The simplicity and elegance
of the advertisement speak to the luxury of the product. Bic, on the other hand, is a brand of
market segmentation The cheap, disposable pens. They come in multipacks, are purchased by people who want a reli-
process of dividing a total
market into groups with able and functional pen but do not care about the experience of writing, and are meant to be
relatively similar product needs used and thrown away, not treasured for generations.
to design a marketing mix that As you can see with the two pen brands, the chief advantage of the concentrated strategy
matches those needs is that it allows a fi rm to specialize. The fi rm analyzes the characteristics and needs of a dis-
market segment Individuals, tinct customer group and then focuses all its energies on satisfying that group’s needs. If the
groups, or organizations group is big enough, a fi rm may generate a large sales volume by reaching a single segment.
sharing one or more similar Concentrating on a single segment can also permit a fi rm with limited resources to compete
characteristics that cause them with larger organizations that have overlooked smaller market segments.
to have similar product needs Specialization, however, means that a company allocates all its resources for one target
concentrated targeting segment, which can be hazardous. If a company’s sales depend on a single segment and the
strategy A market segment’s demand for the product declines, the company’s financial health also deteriorates.
segmentation strategy in which The strategy can also prevent a firm from targeting segments that might be successful, because
an organization targets a single when a firm penetrates one segment, its popularity may keep it from extending its marketing
market segment using one efforts into other segments.
marketing mix
differentiated targeting Differentiated Targeting Strategy through
strategy A strategy in which
an organization targets two or Market Segmentation
more segments by developing
a marketing mix for each With a differentiated targeting strategy , an organization directs its marketing efforts at
segment two or more segments by developing a marketing mix for each segment (see Figure 5.2 ).

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