Download - Segmenting & Targeting Markets
Segmenting & Targeting MarketsStrategic MarketingChapter 7210 - 234
Characteristics of Markets & Market Segments A Market is
Comprised of people or organizations (Consumer or Business) Have needs, abilities, and willingness to buy
Markets have market segments
A Market Segment consists of a subgroup of people who share one or more common characteristic that causes them to have similar product needs Theoretically anything can be grouped together Market segmentation is only valuable if the group is meaningful to the marketer
The marketing mix is tailored to the market segment defined
Copyright ©2009, Cengage Learning. All rights reserved Chapter 7
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LOIThe Concept of Market Segmentation
Market Segmentation Market Segmentation helps marketers define customer needs and wants
more precisely
Segments differ in size & potential so companies look at particular segments and determine more accurate marketing objectives
Accurate marketing objectives lead to: Improved allocation of resources Better marketing results
Market Segmentation Review Market Segmentation accomplishes the following:
Identify specific groups that you can analyze characteristics & buying behavior of
Design marketing mixes specific to segmented groups
Allows you to meet customer needs & wants while meeting company objectives
Market Segmentation To be useful, a segmentation scheme must produce segments that meet four basic
criteria:
Sustainability Needs to be large enough to matter. Not enough potential; it wont last.
Identifiability & Measurability Need to be able to identify the group being targeted & its size Easy to determine amount of people in certain subgroups; not easy to determine willingness or interest
Accessibility Important to devise marketing mixes that allow your segments to access your product Seniors citizens, Disabled, Language deficient, etc…don’t access information or products as easily as everyone
else
Responsiveness If the majority of customers respond positively to a marketing mix; then creating a separate marketing mix
strategy for “unresponsive” group may not be necessary
Market Segmentation Bases Segmentation Bases (Variables)
Characteristics of individuals, groups, or organizations used to divide a total market into segments
Marketers choose “bases” that are Substantial Identifiable Measurable Accessible Responsive
Market Segmentation One Base or Variable is not as precise but is simple and easy
Multiple variables allows for precision but Is Harder to use Usable secondary resources are less likely The size of group gets smaller
Current trend is to use more variables then less variables
Market Segmentation Examples One Variable
Segment a population based on gender
Multiple Variable Gender Age Race Education Marital status Geographics Interests
Market Segmentation Most Common Variables used to segment markets
Geography Demographics Psychographics Benefits Sought Usage Rate(s)
Geographics Segment by:
Region Country World Market size Market density
# of people within a unit of land
Climate Important because purchasing needs vary based on weather conditions
Why Segment with Geographics? 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
Examples of Geogrpahic Marketing
Restaurants offering menu items that reflect local taste interest Cracker Barrel & McDonald’s alters menu to
reflect local tastes Menu in south is different than menu in Northeast
Miller Lite developed a True to Texas Marketing Campaign
Magazines like Midwest or Southwest Living
Pepsi packaging products based on NFL Cities
Examples of Geogrpahics: Local Retailers
Demographic Segmentation Demographic Segmentation
Easy to obtain demographic information
Correlates to consumer buying Age Gender Income Ethnic Background Family Life Cycle
Age Demographics
Gender Segmentation Facts About Female Consumers
75% of Family Finances 51% of new electronics sold 75% over-the-counter drugs 65% of new cars
Companies are realizing that women buy more than packaged goods
Ace Hardware: 42% of customers are female who spend 30% -
40% more than men per visit Wider, well-lit aisles, clear signage, instructions on
product use.
Gender Segmentation
Income Segmentation Income segmentation tells
marketers what consumers can afford
Segment by wants & buying power
Examples: Housing Clothing Automobiles Food
Income
Ethnic Segmentation In the past marketers would present ads as anglo-centric
White all-American family Mass marketing approach
In large part this occurred because the majority of the population fit this mold
1970’s a shift in culture started Ethnic Foods started to be introduced into stores Roles in music, movies, & politics became more prominent
As population of minorities increases so does marketing efforts towards them A lot of marketers are choosing to target urban areas versus specific ethnic groups
LaRaza:
Hispanic Rights
Organization
Ethnic Segmentation AdsGeely Automobile Holdings Ltd Pantene Pro-V
Family Life-Cycle Segmentation Family Life Cycle is a series of stages determined by a combination of age,
marital status, & presence or absence of children
46% of households are maintained by unmarried men or women
102 unmarried Americans over the age of 18 240.144 million people living in the United States over the age of 18
A families needs, income, resources, & expenditures differ at each stage of the life cycle
Copyright ©2009, Cengage Learning. All rights reserved Chapter 7
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LO4 Family Life Cycle
Life Cycle Buying Habits
Targeting Age, Marital Status & Children Factor
Psychographic Factors
Psychographic Segmentation Psychographics is segmenting based on
Personality Motives
Emotional: Caring for others Rational: Appeals to economy, Reliability, & Dependability Status-Related: Customers want to look a certain way
Lifestyle: Way consumers spend their time Importance of things around them Beliefs Socioeconomic Factors: Income & Education
Explorers, Achievers, Builders, & Masters Geodemographics: Combines geographic, demographic, & lifestyle segments
Claritas PRIZM Lifestyle Softwarehttp://
www.claritas.com/MyBestSegments/Default.jsp?ID=30&pageName=Segment%2BExplorer
28277: Market Segmentation
85365: Market Segmentation
Psychographic Ads
Benefit Segmentation Benefit Segmentation:
Process of grouping customers into market segments according to the benefits they seek from a product
Segmentation typically connects variables to needs If you are this age, living in this city, & you like to do….then this is the product you want
Benefit segmentation is different because it is based on their needs and wants Advertises the benefit of a product
Start with a product and break it down into the benefits it offers Healthy product, Better tasting, Low price, etc….
Low Carb v. High Protein v. Energy
Usage-Rate Segmentation Usage-Rate Segmentation:
Dividing a market by the amount of product bought or consumed. Examples of markets:
Former users Potential users First-time users Light or irregular users Medium users Heavy users
Heavy users are the group most commonly marketed towards
Useage Rate Segmentation80/20 Principle
A principle holding that 20 percent of all customers generate 80 percent of the demand.
Time Warner Cable Example Fewer than 10% of its subscribers consume 75% of its bandwidth
The goal is to turn customers into heavy users Frequency & customer loyalty programs are designed around this concept
Useage Rate Ads
Cell Phone Use Useage Rate Ads
Bases for Segmenting Business Markets
Business Markets Business Market consists of four broad segments:
Producers Profit-oriented individuals & organizations that use purchased goods to produce other
products Examples: Construction, Manufacturing, Transportation, Finance, Real Estate, & Food Services
Resellers Wholesalers & Retailers Buy & resell products
Government Selling to Federal, Municipal, & Local officials. Most lucrative industry. Usually requires bids
Institutions Schools, churches, civic clubs, hospitals, unions, colleges, nonbusiness organizations, etc..
Business Market Segmentation The four types of business segments that are marketed towards are broken down by Company
Characteristics & Buying Process
Company Characteristics Geographic location
Vendors close by may have advantage because it is usually cheaper Type of company
Target companies specifically based on a company's particular need Company size
Larger companies may get different opportunities because they buy more Volume of purchase
Heavy, Moderate, or light users of a product Product use
Targeting a company based on what they are producing, purchasing & using
Business Buyer Characterisitcs Buying Process deals with how a company purchases products
Two main purchasing profiles that have been identified are:
Satisficers:Choosing what company to place an order with based on their ability to satisfy product & delivery requirements
Optimizers:Consider numerous suppliers (both familiar and unfamiliar), solicit bids, & study all proposals carefully before selecting one.
Buyer Characteristics Buyer characteristics can also be determined by
Demographic Characteristics
Decision-Style
Tolerance for risk
Confidence Level
Job responsibilities
Steps in Segmenting a Market
Steps in Segmenting a Market Select a market or product category for study
Can be a market they are currently in or a product category they are interested in joining
Anheuser-Busch looked at market closely before introducing Light Beers Anheuser-Busch looked at snack food market closely prior to introducing Eagle
Brand
Choose a “base” for segmenting the market Choosing between demographics, geographics, psychographics, usuage-rate, &
benefits sought Whatever segmentation is chosen must meet be sustainable, identifiable,
measurable, accessible & responsive
Steps in Segmenting a Market Select Segmentation Descriptors
After choosing segmentation bases; the marketer must choose a descriptor
Descriptors identify the specific segmentation variables being used
Example: Company selects demographics as its base; Descriptors could be
Age Gender Occupation Education Income
Steps in Segmenting a Market Profile & Analyze Segments
Profile includes the segments size, expected growth, purchase frequency, current brand usage, brand loyalty, & long-term sales and potential profit.
Allows firm to look at information and rank them according to potential Profit Opportunity Risk Consistency with organizational goals
Steps in Segmenting a Market Select Target Markets
Natural outcome of segmentation process Determines companies Marketing Mix
Design, Implement, & Maintain Appropriate Marketing Mixes Strategies created for:
Product Place Price Promotional
Market Segmentation Markets are dynamic
Dynamic = Changing
Classification is static Static = Consistent. No Change
Consumers will move in and out of the classifications so marketers have to make adjustments and proactively monitor their segmentation strategies People in classification will not always stay there If you target 21-35 year-olds a person can only be in that group at most for 15
years
Strategies for Selecting Target Markets A target market is a group of people for which an organization designs,
implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.
Most markets will include customers with different buying characterisitcs, lifestyles, backgrounds, & income levels; it is unlikely that a single marketing mix will attract all segments of the market
Example: Chevy sells cars that sell for $13,000 & for $60,000
Strategies for Selecting Target Markets The three general
strategies for selecting target markets are:
Undifferentiated
Concentrated
Multi-segment Targeting
Strategies for Selecting Target MarketsUndifferentiated Targeting
A marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix.
Requires a product that has little competition & no substitutes.
Examples of Product Segmented this way:
FlourSugar
Strategies for Selecting Target MarketsConcentrated Targeting
A strategy used to select one segment of a market for targeting marketing efforts.
Companies select a marketing niche to target and they focus on the needs, motives, & satisfactions of that group
Examples:Starbucks – Gourmet coffeeRolex – High priced watchOshKosh B’Gosh – Kids clothes
Strategies for Selecting Target MarketsMultisegment Targeting A strategy that chooses two or more
well-defined market segments and develops a distinct marketing mix for each.
Example:A College offering a variety of programsDay ProgramsMBA DegreesEvening programsWeekend programs
Multi-Segment Target Strategies A Business can choose to create a product that meets these
specific customer bases & descriptors
Different product for each classification
Businesses can also create promotional strategies geared towards each base Similar to consumer market Anheuser-Busch sells beer to different ethnic groups. Ad changes;
product doesn’t
Multisegment Targeting Product Design Costs Production Costs Promotion Costs Inventory Costs Marketing Research Costs Management Costs Cannibalization
Situation that occurs when sales of a new product cut into sales of a firm’s existing products.Example: Code Red Mountain Dew took away 25% of Mountain Dew Drinkers
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REVIEW LEARNING OUTCOMEAlternatives for Selecting Target Markets
Undifferentiated Multisegment Concentrated
One-to-One Marketing One-to-One Marketing is an individualized marketing method that
utilizes customer information to build long-term, personalized, and profitable relationships with each customer.
Goal is to sell multiple products to one customer Reduces customer retention costs Increases customer loyalty and revenue Provides a more focused marketing approach Personalized marketing that encourages communication between company &
consumer Allows for customized products to be made
One-to-One Marketing Four Trends Leading Towards One-to-One Marketing
1. One Size fits all approach to marketing no longer works. Customers want to be treated as individuals not as part of a large group
2. Direct and personal marketing will grow to meet needs of busy consumers. Takes less time for a consumer to make a purchasing decision
3. Consumers will be loyal to companies that have earned—and reinforced—their loyalty.
One-to-One marketing focuses on pleasing the firms best customers so they are happy
4. Mass-media approaches will decline as technology allows better customer tracking.
1. One-to-One marketing is more personalized and cost-effective with improved technology
PositioningPositioning
Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general.
PositionThe place a product, brand, or group of products occupies in consumers’ minds relative to company offerings
Companies assume that consumers compare products on the basis of important features. If features being emphasized are unimportant then consumer will not buy and brand will take a hit.
Consumer Goods marketers are extremely concerned with positioning.
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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%
Effective Positioning Effective Positioning Requires Companies to: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
Example:Campbell’s Select Soup is targeted towards upscale adults who are willing to try something new.
Positioning Strategy Product Differentiation is a positioning strategy that some firms use to distinguish their products from those of competitors. Distinction can either be real or perceived
Most consumer goods are very similar therefore their distinction is more perceived than real
Companies will try to make consumer believe that they really need the product being advertised
Occurs also when companies try to emulate other products
Product Differentiation Ads
Perceptual Mapping Perceptual Mapping is
a means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds.
Example is of Levi’s Jeans Sell to teens Sell to high-end
consumers
Positioning Methods Firms use a variety of variables to determining positioning approach:
Attribute: Product features & benefits Price & Quality: High Price = Quality; Low Price = Value Use or Application: Emphasize how a product can be used Product User: Personality or type of user is focused on. Product Class: Positioned in accordance to other products.
Can be done to compare or prove difference Competitor: Comparing products to their competitors.
In reality all companies do this on some level Emotion: Positioned based on how it makes the customer feel.
Multiple Positioning Methods
Each Product Positioning Approach is Used in the Got Milk Ad on right Product Attribute
Use or Application
Product User
Product Class
Competitor
Emotion
Repositioning Repositioning involves
changing consumers’ perceptions of a brand in relation to competing brands.
Grocery Stores v. Walmart
Every time a Walmart opens; two grocery stores close in that community
Harris Teeter does not position itself directly against Walmart