Marketing Management, Millenium Edition - epiheirimatikotita.gr

144 CHAPTER 8 IDENTIFYING MARKET SEGMENTS AND SELECTING TARGET MARKETSUSING MARKET SEGMENTATIONMarket segmentation aims to increase a company’s precision marketing. In contrast,sellers that use mass marketing engage in the mass production, distribution, and promotionof one product for all buyers. Henry Ford epitomized this strategy when heoffered the Model T Ford “in any color, as long as it is black.” Coca-Cola also used massmarketing when it sold only one kind of Coke in a 6.5-ounce bottle.The argument for mass marketing is that it creates the largest potential market,which leads to the lowest costs, which in turn can lead to lower prices or higher margins.However, many critics point to the increasing splintering of the market, which makesmass marketing more difficult. According to Regis McKenna, “[Consumers] have moreways to shop: at giant malls, specialty shops, and superstores; through mail-order catalogs,home shopping networks, and virtual stores on the Internet. And they are bombardedwith messages pitched through a growing number of channels: broadcast andnarrow-cast television, radio, on-line computer networks, the Internet, telephone servicessuch as fax and telemarketing, and niche magazines and other print media.” 1This proliferation of media and distribution channels is making it difficult topractice “one size fits all” marketing. Some observers even claim that mass marketingis dying. Therefore, to stay focused rather than scattering their marketing resources,more marketers are using market segmentation. In this approach, which falls midwaybetween mass marketing and individual marketing, each segment’s buyers areassumed to be quite similar in wants and needs, yet no two buyers are really alike. Touse this technique, a company must understand both the levels and the patterns ofmarket segmentation.Levels of Market SegmentationRegardless of whether they serve the consumer market or the business market—offeringeither goods or services—companies can apply segmentation at one of four levels:segments, niches, local areas, and individuals.Segment MarketingA market segment consists of a large identifiable group within a market, with similarwants, purchasing power, geographical location, buying attitudes, or buying habits.For example, an automaker may identify four broad segments in the car market: buyerswho are primarily seeking (1) basic transportation, (2) high performance, (3) luxury,or (4) safety.Because the needs, preferences, and behavior of segment members are similarbut not identical, Anderson and Narus urge marketers to present flexible market offeringsinstead of one standard offering to all members of a segment. 2 A flexible marketoffering consists of the product and service elements that all segment members value,plus options (for an additional charge) that some segment members value. For example,Delta Airlines offers all economy passengers a seat, food, and soft drinks, but itcharges extra for alcoholic beverages and earphones.Segment marketing allows a firm to create a more fine-tuned product or serviceoffering and price it appropriately for the target audience. The choice of distributionchannels and communications channels becomes much easier, and the firm may findit faces fewer competitors in certain segments.Niche MarketingA niche is a more narrowly defined group, typically a small market whose needs are notbeing well served. Marketers usually identify niches by dividing a segment into subseg-