int to mktng ch8

Designed by Eric Brengle B-books, Ltd.

CHAPTER

Segmenting and Targeting Markets

Prepared byAmit Shah

Frostburg State University

MarketingLamb, Hair, McDaniel

Learning Outcomes

Describe the characteristics of markets

and market segments

Explain the importance of market segmentation

Discuss criteria for successful market segmentation

Describe the bases commonly used to segment consumer markets

Learning Outcomes

Describe the bases for segmenting business markets

List the steps involved in segmenting markets

Discuss alternative strategies for selecting target markets

Explain one-to-one marketing

Explain how and why firms implement positioning strategies and how product differentiation plays a role

Market Segmentation

Describe the characteristics of markets

and market segments

(1) people or organizations with

(2) needs or wants, and with

(3) the ability and

(4) the willingness to buy.

A group of people that lacks any one of these characteristics is not a market.

A Market Is...

Market Segmentation

MarketMarketPeople or organizations with needs or wants and the ability and willingness to buy.

People or organizations with needs or wants and the ability and willingness to buy.

MarketSegment

A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.

MarketSegmentation

The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.

The Concept of Market Segmentation

The Importance of Market Segmentation

Explain the importance of market segmentation

The Importance of Market Segmentation

Markets have a variety of product needs and preferences.

Marketers can better define customer needs.

Decision makers can define objectives and allocate resources more accurately.

REVIEW LEARNING OUTCOMEThe Importance of Market Segmentation

Marketsegmentation

More precise definition of customers needs and wants

More accurate marketing objectives

Improved resource allocation

Better marketing results

Criteria for Successful Segmentation

Discuss criteria for successful market

segmentation

Criteria for Segmentation

SubstantialitySegment must be large

enough to warrant a special marketing mix.

Identifiabilityand

Measurability

Segments must be identifiable and their size measurable.

AccessibilityMembers of targeted segments

must be reachable with marketing mix.

ResponsivenessUnless segment responds to a marketing mix differently, no separate treatment is needed.

REVIEW LEARNING OUTCOMESuccessful Market Segmentation

Usefulsegment?

Substantial Identifiable and measurable Accessible Responsive

Then, yes: Useful segmentation scheme

Bases for Segmenting Consumer Markets

Describe the bases commonly used to

segment consumer markets

Bases for Segmenting Consumer Markets

SegmentationBases

Characteristics of individuals,

groups, or organizations used

to divide a total market into

segments.

(variables)

Bases for Segmentation

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

Geographic Segmentation

• Region of the country or world

• Market size

• Market density

• Climate

Benefits of Regional Segmentation

• New ways to generate sales in sluggish and competitive markets

• Scanner data allow assessment of best selling brands in region

• Regional brands appeal to local preferences

• Quicker reaction to competition

Demographic Segmentation

AgeAge

GenderGender

IncomeIncome

Ethnic backgroundEthnic background

Family life cycleFamily life cycle

Gender Segmentation

• In U.S., women…– handle 75% of family finances– Influence 80% of consumer purchases – Make purchase decisions about variety of goods

and services• New cars, hardware stores, electronics, etc.

• Other brands that have targeted men are trying to target women– Gillette razors, Rogaine baldness remedy, Nike,

Reebok, etc.

Income Segmentation

• Income – popular demographic variable for segmenting markets

• According to Nielsen study…– Affluent households (earning more than $100k/ year)

twice as likely to shop at warehouses– Lexus catering to wealthy customers

• Price-sensitive consumers– P & G

• Bounty Basic paper towels

• Charmin Basic bath tissue

Ethnic Segmentation

• Largest ethnic markets are:

– Hispanic Americans

– African Americans

– Asian Americans

• Will comprise 1/3 of U.S. population by 2010 with buying power of $1 trillion annually

Family Life Cycle

MaritalStatus Children

Family Life Cycle

Psychographic Segmentation

PsychographicSegmentation

Market segmentation on the

basis of personality,

motives, lifestyles, and

geodemographics.

Bases for Psychographic Segmentation

PersonalityPersonality

MotivesMotives

LifestylesLifestyles

GeodemographicsGeodemographics

Lifestyle Segmentation

• How time is spent

• Importance of things around them

• Beliefs

• Socioeconomic characteristics

Geodemographic Segmentation

GeodemographicSegmentation

Segmenting potential customers

into neighborhood lifestyle

categories.

Combines geographic,

demographic, and lifestyle

segmentation.

Benefit Segmentation

BenefitSegmentation

The process of grouping

customers into market segments

according to the benefits they

seek from the product.

Benefit Segmentation

Usage-RateSegmentation

Dividing a market by the

amount of product bought

or consumed.

Dividing a market by the

amount of product bought

or consumed.

80/20Principle

A principle holding that

20 percent of all customers

generate 80 percent of

the demand.

A principle holding that

20 percent of all customers

generate 80 percent of

the demand.

REVIEW LEARNING OUTCOMEBases for Segmenting Consumer Markets

Geography Demographics Psychographics Benefits Usage Rate

• Region• Market size• Market

density• Climate

• Age• Gender• Income• Race/ethnicity• Family life

• Personality• Motives• Lifestyle• Geodemo-

graphics

• Benefitssought

• Former• Potential• 1st time• Light or

irregular• Medium• Heavy

Bases for Segmenting Business Markets

Describe the bases for segmenting

business markets

CompanyCharacteristics

BuyingProcesses

ProducersProducers

ResellersResellers

GovernmentGovernment

InstitutionsInstitutions

Company Characteristics

Geographic location

Type of company

Company size

Volume of purchase

Product use

Buyer Characteristics

SatisficersSatisficers

Business customers who place

an order with the first familiar

supplier to satisfy product and

delivery requirements.

Business customers who place

an order with the first familiar

supplier to satisfy product and

delivery requirements.

OptimizersOptimizers

Business customers who

consider numerous suppliers,

both familiar and unfamiliar,

solicit bids, and study all

proposals carefully before

selecting one.

Business customers who

consider numerous suppliers,

both familiar and unfamiliar,

solicit bids, and study all

proposals carefully before

selecting one.

Buyer Characteristics

Demographic characteristicsDemographic characteristics

Decision styleDecision style

Tolerance for riskTolerance for risk

Confidence levelConfidence level

Job responsibilitiesJob responsibilities

REVIEW LEARNING OUTCOMESegmenting Business Markets

Producers Resellers

InstitutionsGovernments

Buying Process

Company Characteristics

Steps in Segmenting a Market

List the steps involved in segmenting markets

REVIEW LEARNING OUTCOMESteps in Segmenting Markets

Select a market

for study

Choosebases

for segmen-

tation

Selectdescriptors

Profileand

analyzesegments

Selecttarget

markets

Design,implement,

maintainmarketing

1 53 42 6

Strategies for Selecting Target Markets

Discuss alternative strategies for selecting target markets

TargetMarket

A group of people or

organizations for which an

organization designs,

implements, and maintains a

marketing mix intended to

meet the needs of that group,

resulting in mutually

satisfying exchanges.

ConcentratedStrategy

UndifferentiatedStrategy

MultisegmentStrategy

Undifferentiated Targeting Strategy

UndifferentiatedTargetingStrategy

A marketing approach that

views the market as one big

market with no individual

segments and thus

requires a single

marketing mix.

Undifferentiated Targeting Strategy

UndifferentiatedStrategy

Advantage:

Potential savings on production and marketing costs

Disadvantages:

Unimaginative product offerings

Company more susceptible to competition

Concentrated Targeting Strategy

ConcentratedTargeting Strategy

A strategy used to select one

segment of a market for

targeting marketing efforts.

NicheOne segment of a

market.

Concentrated Targeting Strategy

ConcentratedStrategy

Advantages: Concentration of resources Meets narrowly defined

segment Small firms can compete Strong positioning

Disadvantages: Segments too small, or

changing Large competitors may

market to niche segment

Multisegment Targeting Strategy

MultisegmentTargetingStrategy

A strategy that chooses two or

more well-defined market

segments and develops a

distinct marketing

mix for each.

Multisegment Targeting Strategy

MultisegmentStrategy

Advantages: Greater financial success Economies of scale

Disadvantages: High costs Cannibalization

Costs of Multisegment Targeting

Product design costs

Production costs

Promotion costs

Inventory costs

Marketing research costs

Management costs

Cannibalization

CannibalizationCannibalizationSituation that occurs when

sales of a new product cut into

sales of a firm’s existing

products.

REVIEW LEARNING OUTCOMEAlternatives for Selecting Target Markets

Undifferentiated Multisegment Concentrated

One-to-One Marketing

Explain one-to-one marketing

One-to-OneMarketing

An individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer.

Information-IntensiveInformation-Intensive

Long-TermLong-Term

One-to-OneMarketing is...One-to-One

Marketing is...

IndividualizedIndividualized Cost ReductionCost Reduction

Has a Goal of…Has a Goal of…

Customer LoyaltyCustomer Loyalty

Increased RevenueIncreased Revenue

PersonalizedPersonalized

Customer RetentionCustomer Retention

1. One-size-fits all marketing no longer effective

2. Direct and personal marketing will grow to meet needs of busy consumers.

3. Consumers will be loyal to companies that have earned—and reinforced—their loyalty.

4. Mass-media approaches will decline as technology allows better customer tracking.

Trends

REVIEW LEARNING OUTCOMEOne-to-One Marketing

Positioning

Explain how and why firms implement positioning

strategies and how product differentiation

plays a role

Positioning

PositioningPositioning

Developing a specific marketing

mix to influence potential

customers’ overall perception of a

brand, product line, or

organization in general.

Positioning of Procter & Gamble Detergents

Brand Positioning MarketShare

Tide Tough, powerful cleaning 31.1%

Cheer Tough cleaning, color protection 8.2%

Bold Detergent plus fabric softener 2.9%

Gain Sunshine scent and odor-removing formula 2.6%

Era Stain treatment and stain removal 2.2%

Dash Value brand 1.8%

Oxydol Bleach-boosted formula, whitening 1.4%

Solo Detergent and fabric softener in liquid form 1.2%

Dreft Outstanding cleaning for baby clothes, safe 1.0%

Ivory Snow Fabric & skin safety on baby clothes 0.7%

Ariel Tough cleaner, aimed at Hispanic market 0.1%59

Effective Positioning

1. Assess the positions occupied by competing products

2. Determine the dimensions underlying these positions

3. Choose a market position where marketing efforts will have the greatest impact

Product Differentiation

ProductDifferentiation

A positioning strategy that some firms use to distinguish their products from those of competitors.

Distinctions can be real or perceived.

Perceptual Mapping

PerceptualMapping

A means of displaying or

graphing, in two or more

dimensions, the location of

products, brands, or groups of

products in customers’ minds.

Perceptual Mapping

Positioning Bases

AttributeAttribute

Price and QualityPrice and Quality

Use or ApplicationUse or Application

Product UserProduct User

Product ClassProduct Class

CompetitorCompetitor

EmotionEmotion

Repositioning

RepositioningRepositioning

Changing consumers’

perceptions of a brand in relation

to competing brands.

REVIEW LEARNING OUTCOME Positioning and Product Differentiation

int to mktng ch8

cengage learning

learning outcomesdescribe

rights reserved6

rights reserved10

rights reserved15

learning outcomes lo5describe

market needs

competition copyright

Education

mktng stg ppt

integrfated mktng communications

ambush mktng

branded mktng sem i

edited mktng report

final mktng ppt

experiential mktng

detergent+powder rural+mktng

nature & scopeof mktng 1

int to mktng ch7

int to mktng ch 2

reservation serivice mktng

project mktng

rural service mktng

mktng plan bike

green mktng mr

international mktng env

group-4 service mktng

int to mktng ch9

int to mktng ch1