The Segmented Market

The Segmented Market

While product differentiation is an effective strategy to distinguish your brand from competitors, it also differentiates your own products from one another. For example, a company such as Franco-American Spaghetti has differentiated its basic product by offering various sizes, flavors, and shapes. The objective is to sell more product, to more people, more often. Kraft has done the same with their salad dressings; Xerox with its multitude of office products. The problem is not competition; the problem is the acknowledgment that people within markets are different and that successful marketers must respond to these differences (see for a recap of the different market approaches).

This premise of segmenting the market theorizes that people and/or organizations can be most effectively approached by recognizing their differences and adjusting accordingly. By emphasizing a segmentation approach, the exchange process should be enhanced, since a company can more precisely match the needs and wants of the customer.

While it is relatively easy to identify segments of consumers, most firms do not have the capabilities or the need to effectively market their product to all of the segments that can be identified. Rather, one or more target markets (segments) must be selected. In reality, market segmentation is both a disaggregation and aggregation process. While the market is initially reduced to its smallest homogeneous components (perhaps a single individual), business in practice requires the marketer to find common dimensions that will allow him to view these individuals as larger, profitable segments. Thus, market segmentation is a twofold process that includes: (1) Identifying and classifying people into homogeneous groupings, called segments, and (2) Determining which of these segments are viable target markets. In essence, the marketing objectives of segmentation analysis are:

1. To reduce risk in deciding where, when, how, and to whom a product, service, or brand will be marketed
2. To increase marketing efficiency by directing effort specifically toward the designated segment in a manner consistent with that segment's characteristics.

 This text was adapted by Saylor Academy under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License without attribution as requested by the work's original creator or licensor.

Segmentation Strategies

There are two major segmentation strategies followed by marketing organizations: a concentration strategy and a multisegment strategy.

An organization that adopts a concentration strategy chooses to focus its marketing efforts on only one market segment. Thus, only one marketing mix is developed. An organization that adopts a concentration strategy gains an advantage by being able to analyze the needs and wants of only one segment and then focusing all its efforts on that segment. This can provide a differential advantage over other organizations that market to this segment but do not concentrate all their efforts on it. The primary disadvantage of concentration is related to the demand of the segment. As long as demand is strong, the organization's financial position will be strong. If demand declines, the organization's financial position will also decline.

The other segmentation strategy is a multisegment strategy. When an organization adopts this strategy, it focuses its marketing efforts on two or more distinct market segments. The organization does so by developing a distinct marketing mix for each segment. They then develop marketing programs tailored to each of these segments. Organizations that follow a multisegment strategy usually realize an increase in total sales as more marketing programs are focused at more customers. However, the organization will most likely experience higher costs because of the need for more than one marketing program.

Bases of Segmentation

There are many different ways by which a company can segment its market, and the chosen process varies from one product to another (see). Also, since markets are very dynamic, and products change over time, the bases for segmentation must likewise change. (See Figure 2.2).

FIGURE 2.2 Bases for Segmenting Markets: Consumer and Industrial Markets

In line with these basic differences we will first discuss the bases for segmenting ultimate consumers followed by a discussion of the factors used to segment industrial users.

Segmenting Ultimate Consumers

Geographic segments. Geography probably represents the oldest basis for segmentation. Regional differences in consumer tastes for products as a whole are well-known. Markets according to location are easily identified and large amounts of data are usually available. Many companies simply do not have the resources to expand beyond local or regional levels; thus, they must focus on one geographic segment only. Domestic and foreign segments are the broadest type of geographical segment.

Closely associated with geographic location are inherent characteristics of that location: weather, topography, and physical factors such as rivers, mountains, or ocean proximity. Conditions of high humidity, excessive rain or draught, snow or cold all influence the purchase of a wide spectrum of products. While marketers no longer segment markets as being east or west of the Mississippi River in the US, people living near the Mississippi river may constitute a viable segment for several products, such as flood insurance, fishing equipment, and dredging machinery.

Population density can also place people in unique market segments. High-density states in the US such as California and New York and cities such as New York City, Hong Kong, and London create the need for products such as security systems. fast-food restaurant and public transportation.

Geographic segmentation offers some important advantages. There is very little waste in the marketing effort, in that the product and supporting activities such as advertising, physical distribution, and repair can all be directed at the customer. Further, geography provides a convenient organizational framework. Products, salespeople, and distribution networks can all be organized around a central, specific location.

The drawbacks in using a geographic basis of segmentation are also notable. There is always the obvious possibility that consumer preferences may (unexpectedly) bear no relationship to location. Other factors, such as ethnic origin or income, may overshadow location. The stereotypical Texan from the USA, for example, is hard to find in Houston, where one-third of the population has immigrated from other states. Another problem is that most geographic areas are very large, regional locations. It is evident that the Eastern seaboard market in the US contains many subsegments. Members of a geographic segment often tend to be too heterogeneous to qualify as a meaningful target for marketing action.

Demographic segments. Several demographic characteristics have proven to be particularly relevant when marketing to ultimate consumers. Segmenting the consumer market by age groups has been quite useful for several products. For example, the youth market (approximately 5 to 13) not only influences how their parents spend money, but also when they make purchases of their own. Manufacturers of products such as toys, records, snack foods, and video games have designed promotional efforts directed at this group. More recently, the elderly market (age 65 and over) has grown in importance for producers of products such as low-cost housing, cruises, hobbies, and health care.

AD 2.3 The focus is on the pre-teen to young adult segment, assuming they will test product features at the store. 

 

Another demographic trait closely associated with age and sex is the family life cycle. There is evidence that, based on family structure (i.e. number of adults and children), families go through very predictable behavioral patterns. For example, a young couple who have one young child will have far different purchasing needs than a couple in their late fifties whose children have moved out. In a similar way, the types of products purchased by a newly married couple will differ from those of a couple with older children.

Income is perhaps the most common demographic oasis for segmenting a market. This may be partly because income often dictates who can or cannot afford a particular product. It is quite reasonable, for example, to assume that individuals earning minimum wage could not easily purchase a $25,000 sports car. Income tends to be a better basis for segmenting markets as the price tag for a product increases. Income may not be quite as valuable for products such as bread, cigarettes, and motor oil. Income may also be helpful in examining certain types of buying behavior. For example, individuals in the lower-middle income group are prone to use coupons. Playboy recently announced the introduction of a special edition aimed at the subscribers with annual incomes over $45,000.

Several other demographic characteristics can influence various of consumer activities. Education, for example, affects product preferences as well as characteristics demanded for certain products. Occupation can also be important. Individuals who work in hard physical labor occupations (e.g. coal mining) may demand an entirely different set of products than a person employed as a teacher or bank teller, even though their incomes are the same. Geographic mobility is somewhat related to occupation, in that certain occupations (e.g. military, corporate executives) require a high level of mobility. High geographic mobility necessitates that a person (or family) acquire new shopping habits, seek new sources of products and services, and possibly develop new brand preferences. Finally, race and national origin have been associated with product preferences and media preferences. African Americans have exhibited preferences in respect to food, transportation, and entertainment, to name a few. Hispanics tend to prefer radio and television over newspapers and magazines as a means for learning about products. The following integrated marketing box discusses how race may be an overlooked segment.

Even religion is used as a basis for segmentation. Several interesting findings have arisen from the limited research in this area. Aside from the obvious higher demands for Christian-oriented magazines, books, music, entertainment, jewelry, educational institutions, and counseling services, differences in demand for secular products and services have been identified as well. For example, the Christian consumer attends movies less frequently than consumers in general and spends more time in volunteer, even non-church-related, activities.

Notwithstanding its apparent advantages (i.e., low cost and ease of implementation), considerable uncertainty exists about demographic segmentation. The method is often misused. A typical misuse of the approach has been to construct "profiles" of product users. For example, it might be said that the typical consumer of Mexican food is under 35 years of age, has a college education, earns more than $10,000 a year, lives in a Suburban fringe of a moderate-size urban community, and resides in the West. True, these characteristics do describe a typical consumer of Mexican food, but they also describe a lot of other consumers as well, and may paint an inaccurate portrait of many other consumers.

Usage segments. In 1964, Twedt made one of the earliest departures from demographic segmentation when he suggested that the heavy user, or frequent consumer, was an important basis for segmentation. He proposed that consumption should be measured directly, and that promotion should be aimed directly at the heavy user. This approach has become very popular, particularly in the beverage industry (e.g. beer, soft drinks, and spirits). Considerable research has been conducted with this particular group and the results suggest that finding other characteristics that correlate with usage rate often greatly enhances marketing efforts.

Four other bases for market segmentation have evolved from the usage-level criteria. The first is purchase occasion. Determining the reason for an airline passenger's trip, for instance, may be the most relevant criteria for segmenting airline consumers. The same may be true for products such as long-distance calling or the purchase of snack foods. The second basis is user status. It seems apparent that communication strategies must differ if they are directed at different use patterns, such as nonusers versus ex-users, or one-time users versus regular users. New car producers have become very sensitive to the need to provide new car buyers with a great deal of supportive information after the sale in order to minimize unhappiness after the purchase. However, determining how long this information is necessary or effective is still anybody's guess. The third basis is loyalty. This approach places consumers into loyalty categories based on their purchase patterns of particular brands. A key category is the brand-loyal consumer. Companies have assumed that if they can identify individuals who are brand loyal to their brand, and then delineate other characteristics these people have in common, they will locate the ideal target market. There is still a great deal of uncertainty as to how to correctly measure brand loyalty. The final characteristic is stage of readiness. It is proposed that potential customers can be segmented as follows: unaware, aware, informed, interested, desirous, and intend to buy. Thus if a marketing manager is aware of where the specific segment of potential customers is, he/she can design the appropriate market strategy to move them through the various stages of readiness. Again, these stages of readiness are rather vague and difficult to accurately measure.

Psychological segments. Research results show that the concept of segmentation should recognize psychological as well as demographic influences. For example, Phillip Morris has segmented the market for cigarette brands by appealing psychologically to consumers in the following way:

Evidence suggests that attitudes of prospective buyers towards certain products influence their subsequent purchase or non-purchase of them. If persons with similar attitudes can be isolated, they represent an important psychological segment. Attitudes can be defined as predispositions to behave in certain ways in response to given stimulus.

Personality is defined as the long-lasting characteristics and behaviors of a person that allow them to cope and respond to their environment. Very early on, marketers were examining personality traits as a means for segmenting consumers. None of these early studies suggest that measurable personality traits offer much prospect of market segmentation. However, an almost inescapable logic seems to dictate that consumption of particular products or brands must be meaningfully related to consumer personality. It is frequently noted that the elderly drive big cars, that the new rich spend disproportionately more on housing and other visible symbols of success, and that extroverts dress conspicuously.

Motives are closely related to attitudes. A motive is a reason for behavior. A buying motive triggers purchasing activity. The latter is general, the former more specific. In theory this is what market segmentation is all about. Measurements of demographic, personality, and attitudinal variables are really convenient measurements of less conspicuous motivational factors. People with similar physical and psychological characteristics are presumed to be similarly motivated. Motives can be positive (convenience), or negative (fear of pain). The question logically arises: why not observe motivation directly and classify market segments accordingly?

Lifestyle refers to the orientation that an individual or a group has toward consumption, work, and play and can be defined as a pattern of attitudes, interests, and opinions held by a person. Lifestyle segmentation has become very popular with marketers, because of the availability of measurement devices and instruments, and the intuitive categories that result from this process. As a result, producers are targeting versions of their products and their promotions to various lifestyle segments. Thus, US companies like All State Insurance are designing special programs for the good driver, who has been extensively characterized through a lifestyle segmentation approach.

Lifestyle analysis begins by asking questions about the consumer's activities, interests, and opinions. If a man earns $40,000-$50,000 per year as an executive, with a wife and four children, what does he think of his role as provider versus father? How does he spend his spare time? To what clubs and groups does he belong? Does he hunt? What are his toward advertising? What does he read?

AIO (activities, interests, opinions) inventories, as they are called, reveal vast amounts of information concerning attitudes toward product categories, brands within product categories, and user and non-user characteristics. Lifestyle studies tend to focus upon how people spend their money; their patterns of work and leisure; their major interests; and their opinions of social and political issues, institutions, and themselves. The popularity of lifestyles as a basis for market segmentation has prompted several research firms to specialize in this area. However, few have achieved the success of VALS and VALS 2 developed by SRI International.

Introduced in 1978, the original VALS (Values, Attitudes, and Lifestyle) divided the American population into nine segments, organized along a hierarchy of needs. After several years of use, it was determined that the nine segments reflected a population dominated by people in their 20s and 30s, as the US was ten years ago. Moreover, businesses found it difficult to use the segments to predict buying behavior or target consumers. For these reasons, SRl developed an all-new system, VALS 2. It dropped values and lifestyles as its primary basis for its psychographic segmentation scheme. Instead, the 43 questions ask about unchanging psychological stances rather than shifting values and lifestyles.

The psychographic groups in VALS 2 are arranged in a rectangle (see Figure 2.3). They are stacked vertically by their resources (minimal to abundant) an horizontally by their self-orientation (principle, status, or action-oriented).

An annual subscription to VALS 2 provides businesses with a range of products and services. Businesses doing market research can include the VALS questions in their questionnaire. SRl will analyze the data and VALS-type the respondents.

SEEKING THE AFRICAN-AMERICAN WEB COMMUNITY

Silas Myers is a new millennium African-American. He is 31, holds an MBA from Harvard University, works as an investment analyst for money manager Hotchkeo & Wiley, and pulls in a salary close to six figures. He spends about 10 hours a week online, buying everything from a JVC portable radio to Arm & Hammer deodorant. "Maybe I am nuts," he says, "but shopping online is so much easier to me".

Millions of African-Americans are online. They are younger, more affluent, and better educated than their offline kin. And they're not tiptoeing onto the Internet. They are right at home. Five million blacks now cruise through cyberspace, nearly equaling the combined number of Hispanic, Asian, and Native American surfers, according to researcher Cyber Dialogue.

True, Internet use among African-Americans continues to lag behind the online white population: 28 per cent of blacks as opposed to 37 per cent for whites. It is time to take a closer look at the digital divide. While those who do not have Internet access tend to be poor and undereducated, there is a large group of African Americans who are spending aggressively on the Web. "We are looking at a tidal wave coming of African-American-focused content and online consumers," says Omar J. Wasow, executive director of BlackPlanet.com, a black-oriented online community. "You ignore it at your peril".

With good reason, African-Americans have become smitten with the ability to compare prices and find bargains online. Melvin Crenshaw, manager of Kidpreneurs magazine, recently used the Travelocity Web site to save $300 on a ski trip to Denver. "I really liked the value," he says.

It's a shame, then, that so few sites market to such an attractive group. Almost every bookstore on the street has a section in African-American or ethnic literature. So it is shocking that e-commerce giants like Amazon.com do not have ethnic book sections. The solution is easy. Web merchants can create what the National Urban League's B. Keith Fulton calls "micro bundles", -Web categories within a site's merchandise that resemble the inner-city black bookstore or clothier. "You want blacks to click on a button and feel like they are in virtual Africa or virtual Harlem," says Fulton, the Urban League's director of Technology programs and policy. To attract blacks, he recommends decorating that corner of the site in kinte cloth patterns.

Segmenting Organizational Markets

It is also important for the marketing manager to understand how business or organization customers can be segmented. Many firms sell not to ultimate consumers but to other businesses. Although there are many similarities between how consumers and businesses behave, there are also several differences, as mentioned earlier. Recall that business buyers differ as follows: (1) most business buyers view their function as a rational (problem-solving) approach; (2) the development of formal procedures, or routines, typifies most business buying; (3) there tend to be multiple purchase influences; (4) in industrial buying it is necessary to maintain the correct assortment of goods in inventory; and (5) it is often the responsibility of the purchasing executive to dispose of waste and scrap.

A number of basic approaches to segmenting organizational markets exist. An industrial marketing firm must be able to distinguish between the industries it sells to and the different market segments that exist in each of those industries. There are several basic approaches to segmenting organizational markets: (a) types of customers; (b) the Standard Industrial Classification; (c) end use; (d) common buying factors; and (e) buyer size and geography.

Type of customer. Industrial customers, both present and potential, can be classified into one of three groups,

Similarly, industrial products can be classified into one of three categories, each of which is typically sold to only certain types of customers:

FIGURE 2.3 VALS and VALS2 are two segmentation techniques.

The Standard Industrial Classification (SIC) A second industrial segmentation approach employs the Standard Industrial Classification (SIC) codes published by the US Government. The SIC classifies business firms by the main product or service provided. Firms are classified into one of ten basic STC industries. Within each classification, the major groups of industries can be identified by the first two numbers of the SIC code. For example, SIC number 22 are textile mills, SIC number 34 are manufacturers of fabricated metals, and so on. An industrial producer would attempt to identify the manufacturing groups that represent potential users of the products it produces and sells. Figure 2.6 takes the two-digit classification and converts it to three-, four-, five-, and seven-digit codes. As you can see in Figure 2.6, use of the SIC code allows the industrial manufacturer to identify the organizations whose principal request is, in this case, pliers. Based upon this list of construction machinery and equipment products, it is possible to determine what products are produced by what manufacturers by consulting one of the following sources:

1. Dun's Market Identifiers - computer-based records of three million United States and Canadian business establishments by four-digit SIC.
2. Metalworking Directory - a comprehensive list of metalworking plants with 20 or more employees, as well as metal distributors, by four-digit SIC.
3. Thomas Register of American Manufacturers - a directory of manufacturers, classified by products, enabling the researcher to identify most or all of the manufacturers of any given product.
4. Survey of Industrial Purchasing Power - an annual survey of manufacturing activity in the United States by geographic areas and four-digit SIC industry groups; reports the number of plants with 20 or more and 100 or more employees, as well as total shipment value.

End uses Sometimes industrial marketers segment markets by looking at how a product is used in different situations. When employing end-use segmentation, the industrial marketer typically conducts a cost/benefit analysis for each end-use application. The manufacturer must ask: What benefits does the customer want from this product? For example, an electric motor manufacturer learned that customers operated motors at different speeds. After making field visits to gain insight into the situation, he divided the market into slow speed and high speed segments. In the slow-speed segment, the manufacturer emphasized a competitively priced product with a maintenance advantage, while in the high-speed market product, superiority was stressed.

Common buying factors. Some industrial marketers segment markets by identifying groups of customers who consider the same buying factors important. Five buying factors are important in most industrial buying situations: (1) product performance, (2) product quality, (3) service, (4) delivery, and (5) price. Identifying a group of customers who value the same buying factors as important is difficult, as industrial organizations' and resellers' priorities often change.

Buyer size and geography If organizations' markets cannot be easily segmented by one of the previous approaches, market advantages may still be realized by segmenting based on account size or geographic boundaries. Sales managers have done this for years, but only recently have organizations learned to develop several pricing strategies for customers that are both close and far away geographically. Similarly, different strategies can be developed for large, medium, and small customers.

Single-Base and Multi-Base Segmentation

So far, we have talked about the use of individual bases for market segmentation. The use of a single-base segmentation strategy is a simple way to segment markets, and is often very effective. Clearly, the use of bases such as sex (cosmetics), or age (health care products, music), or income (automobiles), provides valuable insights into who uses what products. But the use of a single base may not be precise enough in identifying a segment for which a marketing program can be designed. Therefore, many organizations employ multibase segmentation strategies, using several bases to segment a total market. For example, the housing market might be segmented by family size, income, and age.

American Log Home, for example, offers a wide variety of packages and options to its customers based on their needs, incomes, skills, family size, and usage. Packages range from one-room shelters designed primarily for hunters to a 4,000 square-foot unit complete with hot tub, chandeliers, and three decks. Customers can select to finish part of the interior, part of the exterior, or to have the entire structure finished by American Log Home.

The resulting huge array of products is a disadvantage of multi-base segmentation as a strategy. Using several bases that vary in importance, considering all to be equal, could produce misdirected efforts.

Qualifying Customers in Market Segments

Clearly, it is important to employ appropriate factors to identify market segments. Equally important is qualifying the customers who make up those segments. Qualifications involve judgment. Marketers must be able to differentiate between real prospects and individuals or firms who have some similar characteristics but cannot be converted to purchasers.

It should be clear that not all market segments present desirable marketing opportunities. Traditionally, five criteria have been employed to gauge the relative worth of a market segment:

The Strategy of Market Segmentation

During the last two decades, a more complete and concise understanding of market segmentation has emerged. This is not to say that there are not still unsettled issues, measurement problems, and other issues to consider. The most severe problem remains the difficulty of defining precisely the basis for segmentation. A great deal of knowledge about the market and considerable experience with it are highly desirable. Research into consumer motivation is essential. This does not mean that historical, descriptive data about consumers are no longer important. Nevertheless, the ultimate purpose of going through the process of delineating market segments is to select a target market or markets: otherwise, the segmentation process is worthless.

The segmental approach will be described throughout the text in greater detail. At this point, it is sufficient to know that the segmentation strategy is the primary marketing approach used by a majority of producers. Combined with product differentiation, it is the essence of a contemporary marketing strategy. The activity of selecting a target market involves five steps:

1. Identify relevant person/organization and purchase situation variables beyond the core product variable. (For Minolta's Maxxum SLR Camera, the core product variable would be fool-proof photographs, and other relevant variables might be age, income, family composition, occasion for use, and photographic experience).
2. Collect and analyze other related data about potential segments (e.g. characteristics of neophyte camera users, price perceptions of these potential users, size of group, trends, minimum product features).
3. Apply criteria of a good segment.
4. Select one or more segments as target markets (e.g. neophyte photographers, frustrated with necessary adjustments for a 35mm camera, income of $35,000 or more, family, between 25-45 years of age, male).
5. Develop appropriate action programs to reach target segment(s) (e.g., price at $350; distribute through discount stores, camera stores, and department stores; promote through TV and magazine ads). This type of effective action program is demonstrated in the Newsline that follows.

The Concept o f Positioning

Both product differentiation and market segmentation result in a perceived position for the company or organization. From the intelligent marketing organization, there should be an attempt to create the desired position, rather than wait for it to be created by customers, the public, or even competitors. Positioning is defined as the act of designing the company's offering and image to occupy a distinctive place in the target market's mind. The end result of positioning is the successful creation of a market-focused value proposition, a cogent reason why the target market should buy the product.

Since positioning is a strategy that starts with the product, we expand our discussion of positioning in the Product chapter.

The Future of the Marketplace

As the spread of the global marketplace continues, aided by satellites, the World Wide Web, and universal problems, it will also become increasingly difficult to effectively assess the market. In fact, there is solid evidence that the market will often consist of a single person or company. Customized product design, relationship marketing, and one-on-one marketing suggests that marketing has gone full circle. Like the first half of the twentieth century, when the corner grocer knew all of his customers personally, marketing in the rest of the twenty-first century may look very similar.

Review

Bases of segmentation

1. ultimate consumers

1. geographic
2. demographics
3. usage
4. psychological

2. organizations

1. type of customer
2. end uses
3. common buying factors
4. size and geography

3. single-base versus multi-base
   
   
4. qualify people into segments

1. clarity of identification
2. actual or potential need
3. effective demand
4. economic accessibility
5. positive response

5. segmentation process

The Wall Street Journal

What is the market? It depends on your product but , generally, all markets possess similar, basic characteristics. The market is people , either individuals or groups, businesses or institutions. The market is also a place, as in marketplace, where transactions take place. Finally, the m ark et is an economic entity, influenced by financial pressures and government regulations.

In order to sell a product , marketers must know their market and know it well. Four primary markets exist, but they are not mutually exclusive. Consumer, industrial, institutional, and reseller markets all have characteristics specific to their consumers, but they also overlap in many instances. As a result, most successful companies segment their markets. By segmenting markets, a company can match the needs and wants of consumers to its product.

Print magazines and their online counterparts are excellent examples of market segmenting. The Interactive Journal targets the business community, while Out side Magazine (www.outsidemag.com) clearly targets outdoor enthusiasts.

You are able to customize the Interactive Journal to your personal preferences. On the Front Section, click on Personal Journal on the main menu. From here you will be directed to the Setup Center. Here, you can create folders in three separate areas:

1. News
   
2. Favorites
   
3. Portfolio
   

In the News section, you can search for news items in the Interactive

Journal using key words, company names, and industry type. Articles meeting the criteria you specify will be listed automatically on a daily basis. Set up your own News folder now.

In the Favorites section, you can track regularly running columns and features in the major sections such as Marketplace and Tech Center. Create your own Favorites folder now.

In the Portfolio section, you can track your purchases and sales of specific stocks.

DELIVERABLE

Identify three to five companies with segmented markets. Visit their websites for specific information about the companies and their products. Also search the interactive Journal for more information about the companies you have identified. For each company, identify the segmented market and list specific characteristics about that market.

DISCUSSION QUESTIONS

1. What are the advantages of identifying and selling to segmented markets versus broader, general markets?
2. How do companies identify the market most likely to buy their products?
   
3. Describe why market segmenting helps the companies sell their products.
   
4. How can you use the interactive journal to learn more about markets?
   

Summary

The concept of a market was examined in this chapter. It was defined from three perspectives: people, place, and economic activity. In addition, the four types of markets were discussed. The bulk of this chapter dealt with the two general marketing approaches toward the market: undifferentiated (aggregated) and segmental. The former was defined as the assumption that the market is homogeneous and developing separate strategies is unnecessary. The latter was defined as the acknowledgement that markets contain sub-markets known as segments, which must be evaluated as potential target markets. The remainder of the chapter highlighted various bases for segmenting markets and delineating the criteria employed in assessing the value of a segment.

Marketer's Vocabulary

Market aggregation
(undifferentiated marketing) Treating an entire market uniformly, making little or no attempt to differentiate marketing effort.

Product differentiation
A marketing strategy that emphasizes distinctive product features with- out recognizing diversity of consumer needs.

Market segmentation
Dividing a total market into several submarkets or segments, each of which is homogeneous in all significant aspects, for the purpose of selecting one or more target markets on which to concentrate marketing effort.

Concentration strategy
Used by an organization that chooses to focus its marketing efforts on only one market segment.

Multi-segment strategy
Used by an organization that chooses to focus its marketing effort on two or more distinct segments.

Ultimate user
An individual or organization that buys and/or uses products or services for their own person al consumption.

Industrial user
An organization that buys products or services for use in their own businesses, or to make other products.

Demographic characteristics
Statistical characteristics of a population often used to segment markets, such as age, sex, family lifecycle, income, or education.

Usage rate
A segmentation base that identifies customers on the basis of the frequency of use of a product.

Purchase occasion
A segmentation base that identifies when they use the product.

User status
A segmentation base that identifies customers on the basis of patterns of use, such as one-time or regular use.

Loyalty
A segmentation base that identifies customers on the basis of purchase patterns of particular brands.

Stage of readiness
A segmentation base that identifies customers on the basis of how ready a customer is to buy.

Psychological segmentation
The use of attitudes, personality, motives, and lifestyle to identify customers.

Attitude
A predisposition to behave in a certain way to a given stimuli.

Personality
All the traits of a person that make him/her unique.