Segmenting markets is a foundation for superior business performance.  Market segmentation is the process of identifying and analyzing subgroups of buyers in a product market with similar response characteristics.
	Segments are determined, customer value opportunities explored in each segment, organizational capabilities matched to promising segment opportunities, market targets selected from the segments of interest and a positioning strategy developed and implemented for each market target.

A)  Market Segmentation and value opportunities

Market segmentation is the process of placing the buyers in a product market into subgroups so that the members of each segment display similar responsiveness to a positioning strategy.

B)  Creating New Market Space

Market analysis may identify segments not recognized or served effectively by competitors.  There may be opportunities to tap into new areas of value and create a unique space in the market

C)  Matching Value Opportunities and Capabilities

Examining specific market segments helps identify how to attain a closer match between buyers' value preferences and the organizations capabilities and compare the orgs strengths and weaknesses to those of key competitors in each segment

D)  Market Targeting and Strategic Positioning 

Market targeting consists of evaluating and selecting one or more segments whose value requirements provide a good match with the company's capabilities.

E)  Selecting the Market to be Segmented

An important consideration in defining the market to be segmented is estimating the variation in buyers' needs and requirements at the different product-market levels and identifying the types of buyers included in the market

F)  Market Segmentation Activities and Decisions 

After the market to be segmented is defined, one or more variables are selected to identify the segments.

A)  Purpose of Segmentation Variables

One or more variables may be used to divide the product market into segments.  i.e., demographics and psychographics, use situations, needs and preferences, purchase behaviosr, etc.

B)  Characteristics of People and Organizations

	Consumer markets:  Can segment on geographic, lifestyle and personality, demographic variables, etc.
	Organizational markets:  Can segment on the type of industry, size of company, stage of industry development, extent of market concentration, degree of product customization, etc.

C)  Product Use Situation Segmentation

Markets can be segmented based on how the product  is used

D) Buyers Needs and Preferences

	Needs and preferences that are specific to products and brands can be used as segmentation bases and segment descriptors
	Consumer needs:  Consumers attempt to match their needs with the products that satisfy those needs
	Attitudes:  Attitudes influence purchase behavior.  They reflect the buyers liking for a brand
	Perceptions:  Perceptions are how buyers select, organize, and interpret marketing stimuli such as advertising

E)  Purchase Behavior 

Consumption variables such as the size and frequency of a purchase are useful in segmenting consumer and business markets

 

A)  Response Differences

Determining differences in the responsiveness of the buyers in the product-market to positioning strategies is a key segment id requirement

B)  Identifiable Segments

It must be possible to id the customer groups that exhibit response differences

C)  Actionable Segments 

A business must be able to aim a marketing program strategy at each segment selected as a market target

D)  Cost/Benefits of Segmentation

Segmentation must be financially attractive in terms of revenues generated and costs incurred

E) Stability Over Time 

The segments must show adequate stability over time so that the firm's marketing efforts will have enough time to produce favorable results

F)  Approaches to Segment Identification 

Segments are formed by two approaches:  Grouping customers using descriptive characteristics and then comparing response differences across the groups or forming groups based on response differences and determining if the groups can be identified based on differences in their characteristics.  (See Exhibit 4-6)

G)  Customer Group Identification

	After the product market of interest is defined, promising segments may be identified using management judgment in combination with analysis of available information
	Cross classification analysis:  Descriptive characteristics such as sales can be used and placed in a table
	Database segmentation:  Computerized data bases offer a wealth of information

H)  Forming Groups Based on Response Differences 

	An alternative to selecting customer groups based on descriptive characteristics is to id groups of buyers by using response differences
	Cluster analysis:  The objective of cluster analysis is to id groups in which the similarity within a group is high and the variation among groups is as great as possible
	Perceptual maps: See the following

A)  Deciding How to Segment 

	The choice of a segmentation method depends on factors such as:  maturity of the market, competitive structure, and the organization's experience in the market
	The segmentation plan should satisfy the responsiveness criterion plus the other criteria

B)  Strategic Analysis of the Market 

	Customer analysis:  When forming segments, it is useful to find out as much as possible about the customers in each segment
	Competitor analysis:  Market analysis considers the set of key competitors currently active in the market in which the segment is located
	Positioning analysis:  The positioning strategy should meet the needs and requirements of the targeted buyers at a cost that yields a profitable margin
	Estimating segment attractiveness:  The financial and market attractiveness of each segments needs to be evaluated
	Segmentation Fit and Implementation:  It is important to be realistic in balancing the attractiveness of segments against the ability of the org to implement appropriate marketing strategies.