Chapter 6
Market Segmentation
Chapter 6 Objectives
Understand alternative market segmentation strategies.
Recognize relevant criteria for selecting market segments.
Identify alternative bases for industrial segmentation.
Appreciate the hierarchy of segmentation alternatives.
Learning Objective 1
Mass marketing
Develop marketing mix to appeal to broadest group.
Mass marketing is an undifferentiated approach.
Everyone in the market wants the same product delivered, priced, and promoted the same way.
Cost advantage
Disadvantage—people have different demands, needs, habits; genericism of strategy
3
Discuss each step with the student—see pp. 102–109. Elaborate.
Learning Objective 1
Market segmentation
Grouping into clusters consumers who have similar wants or needs to which an organization can respond by tailoring one or more elements of the marketing mix
Ideal segment is as homogeneous as possible.
Can be accomplished with any element of the marketing mix
Concentration strategies
Multi-segment strategies
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Learning Objective 1
Market segmentation (cont.)
Concentration strategies
Targeting one segment
Majority fallacy
Niche strategy: Target a very narrow segment.
Micromarketing: One-to-one marketing
5
Have students discuss majority fallacy.
Learning Objective 1
Market segmentation (cont.)
Multi-segment strategy
Pursue several market segments with varying mixes.
Product differentiation: Altering one or more elements of the marketing mix
6
Have students discuss majority fallicy.
Learning Objective 1
Market segmentation (cont.)
Selecting market segments, criteria
Identifiable
Accessibility (promotion or distribution)
Members are inclined to buy product/service.
Able to buy
Profitable to serve
Desirability—image of organization
Consistency (with message)
Availability (brand loyal elsewhere?)
7
Have students discuss in more detail, pp. 170–171.
Learning Objective 2
Bases for segmentation
Sociodemographic
Age, gender, ethnicity, income
Geographic
Psychographic
Lifestyles, social class
8
Discuss segmentation criteria, pp. 171–188.
Learning Objective 2
Bases for segmentation (cont.)
Usage
Usage rates
Heavy half consumer: 80/20 Pareto’s rule (“law of maximum ophelimity”)
Type of usage
How it is used
Brand loyalty
Hard core loyal, split loyalist, switchers
Benefit segmentation
9
Discuss segmentation criteria.
Learning Objective 2
Bases for segmentation (cont.)
Cohort segmentation
Group of people bound together in history by a set of events
Depression
WWII
Post-War
Boomers I and II
Generation X
N-Gen (Gen Y)
Millennials
10
Discuss segmentation criteria, pp. 183–185.
Learning Objective 3
Segmenting business markets
Demographics
Size of company, industry type (SIC code), customer location
Operating variables
Technology, product use, customer capabilities
Purchasing approaches
Purchasing procedures, purchasing criteria
Usage segmentation
11
Discuss each, pp. 185–192.
Learning Objective 4
The heuristics of segmentation
Health care marketers are attempting to determine if segmenting and tailoring offerings to a segment is worth the time.
Marketers want to affect the actual purchase, which is the most accurate level of market segmentation.
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See figure 6-2, p. 189.
Conclusions
Health care is acting more like traditional businesses vis-à-vis market segmentation strategies.
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Summary
In a mass marketing strategy, the marketing mix is designed to appeal to the broadest market, while in a market segmentation approach, the marketing mix is designed to appeal to subgroups of consumers.
In following a concentration strategy of targeting only one segment, an organization should not focus only on the largest segment, because competitive intensity can render this segment the least profitable.
Summary (cont.)
In selecting from multiple market segments, there are several criteria to consider: Segments should be identifiable, accessible, inclined to buy, able to buy, profitable, desirable, consistent, and available.
Markets can be segmented sociodemographically, geographically, and psychographically by usage, and recently by cohorts.
Summary (cont.)
In usage segmentation, it is important to identify the heavy half consumer who purchases a disproportionate share of a product, or cho accounts for a disproportionate amount of a service’s volume.
The important aspect of cohort segmentation is to realize that cohorts’ attitudes and value systems stay with them even as they age. Thus a health care organization must develop a strategy to respond to the market.
Summary (cont.)
Business markets can also be segmented by several criteria. The federal government has developed the SIC coding system, which is a common basis for industrial segmentation.
As corporations play an increasingly important role in health care purchases, health care organizations may need to segment them by purchase procedures or purchase criteria.
Summary (cont.)
There is a heuristic method to segmentation that moves from purely descriptive measures (demographics) to actual purchase (usage).
The ultimate purpose of segmentation is to tailor an organization’s marketing mix with the intent of positively affecting consumer behavior. If segmentation does not differentially affect this purpose, there is little value to segmenting the market on that particular criterion.
