Page 254 - Marketing Management

IDENTIFYING MARKET SEGMENTS AND TARGETS | CHAPTER 8 231

company distinguished among customers buying on price, service, or quality. Because
it had a high-service profile, the firm decided to concentrate on the service-motivated
segment of the market.
Business-to-business marketing experts James C.Anderson and James A. Narus have
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urged marketers to present flexible market offerings to all members of a segment. A
flexible market offering consists of two parts: a naked solution containing the product
and service elements that all segment members value, and discretionary options that
some segment members value. Each option might carry an additional charge. Siemens
Electrical Apparatus Division sells metal-clad boxes to small manufacturers at prices that
include free delivery and a warranty,but it also offers installation,tests,and communica-
tion peripherals as extra-cost options.Delta Airlines offers all economy passengers a seat,
small snack and soft drinks and charges extra for alcoholic beverages and meals.

Market Targeting

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There are many statistical techniques for developing market segments. Once the firm has identified Delta Airlines uses flexible
market offerings; it offers some
its market-segment opportunities, it must decide how many and which ones to target. Marketers are
increasingly combining several variables in an effort to identify smaller, better-defined target groups. products on board for free,
such as soft drinks and small
Thus, a bank may not only identify a group of wealthy retired adults but within that group distinguish
several segments depending on current income, assets, savings, and risk preferences. This has led snacks, but charges for other
some market researchers to advocate a needs-based market segmentation approach, as introduced items, such as meals.
previously. Roger Best proposed the seven-step approach shown in Table 8.6.

Effective Segmentation Criteria
Not all segmentation schemes are useful. We could divide buyers of table salt into blond and
brunette customers, but hair color is undoubtedly irrelevant to the purchase of salt. Furthermore, if
all salt buyers buy the same amount of salt each month, believe all salt is the same, and would pay
only one price for salt, this market is minimally segmentable from a marketing point of view.
To be useful, market segments must rate favorably on five key criteria:
• Measurable. The size, purchasing power, and characteristics of the segments can be measured.
• Substantial. The segments are large and profitable enough to serve. A segment should be the
largest possible homogeneous group worth going after with a tailored marketing program. It
would not pay, for example, for an automobile manufacturer to develop cars for people who
are less than four feet tall.
• Accessible. The segments can be effectively reached and served.

TABLE 8.6 Steps in the Segmentation Process

Description
1. Needs-Based Segmentation Group customers into segments based on similar needs and benefits sought by customers in solving
a particular consumption problem.
2. Segment Identification For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make
the segment distinct and identifiable (actionable).
3. Segment Attractiveness Using predetermined segment attractiveness criteria (such as market growth, competitive intensity,
and market access), determine the overall attractiveness of each segment.
4. Segment Profitability Determine segment profitability.
5. Segment Positioning For each segment, create a “value proposition” and product-price positioning strategy based on that
segment’s unique customer needs and characteristics.
6. Segment “Acid Test” Create “segment storyboard” to test the attractiveness of each segment’s positioning strategy.
7. Marketing-Mix Strategy Expand segment positioning strategy to include all aspects of the marketing mix: product, price,
promotion, and place.
Source: Adapted from Roger J. Best, Market-Based Management, 5th ed. (Upper Saddle River NJ: Prentice Hall, 2009). ©2009. Printed and electronically reproduced by permission of Pearson Education, Inc.
Upper Saddle River, New Jersey.