Segmentation and Targeting

Question 1

Segmentation

Answer 1

The division of a marketplace into distinct subjects of consumers having similar needs and wants, each of which can be reached with a different marketing mix.

The goal is to simplify the population.

Question 2

Segmentation criteria

Answer 2

Demographics:

• Age
• Gender
• Income
• Family size
• Education

Bahavioral:

• Past purchases
• Browsing behavior
• Occasion
• Spend

Psychographics:

• Lifestyle
• Personal values

Question 3

Segmentation prediction

Answer 3

Use current customers to predict new ones:

1. Relate demographics to behavior
2. Predict behavior using estimated model

Correlated spatial preferences:

Usually, people do not choose the place they live by accident. People who live near each other tend to be more similar.

Question 4

Desirable properties of segments:

LIDS

Answer 4

• Large: Each segment is large enough to be useful
• Identifiable: Can easily assign customers to their segments
• Distinctive: Segments don’t overlap
• Stable: Minimize changes over time

Question 5

Targeting

Answer 5

A process, following segmentation, whereby a firm determines which segment(s) to serve and which segment(s) to ignore.

Question 6

Desirable properties of targets:

PFD

Answer 6

• Potential: Sizeable and growing
• Fit: Must fit with core competences
• Defensibility: Advantage over competitors