int to mktng ch8

Copyright ©2009 by Cengage Learning Inc. All rights reserved 1

Designed by Eric Brengle B-books, Ltd.

CHAPTER

8

Segmenting and Targeting Markets

Prepared byAmit Shah

Frostburg State University

MarketingLamb, Hair, McDaniel

10

Copyright ©2009 by Cengage Learning Inc. All rights reserved

Learning Outcomes

2

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

LOI

LO2

LO3

LO4


Learning Outcomes

3

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

LO5

LO6

LO7

LO9

LO8


Market Segmentation

4

Describe the characteristics of markets

and market segments

LOI


LOI

(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

6

LOI

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

MarketSegment

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

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

MarketSegmentation

MarketSegmentation

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

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


The Concept of Market Segmentation

7

LOI


The Importance of Market Segmentation

8

Explain the importance of market segmentation

LO2


The Importance of Market Segmentation

9

LO2

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

10

LO2

Marketsegmentation

More precise definition of customers needs and wants

More accurate marketing objectives

Improved resource allocation

Better marketing results


Criteria for Successful Segmentation

11

Discuss criteria for successful market

segmentation

LO3


Criteria for Segmentation

12

LO3

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

13

LO3

Usefulsegment?

Substantial Identifiable and measurable Accessible Responsive

Then, yes: Useful segmentation scheme


Bases for Segmenting Consumer Markets

14

Describe the bases commonly used to

segment consumer markets

LO4


Bases for Segmenting Consumer Markets

15

LO4

SegmentationBases

SegmentationBases

Characteristics of individuals,

groups, or organizations used

to divide a total market into

segments.

(variables)


Bases for Segmentation

16

LO4

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography


Geographic Segmentation

• Region of the country or world

• Market size

• Market density

• Climate

17

LO4


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

18

LO4


Demographic Segmentation

19

LO4

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.

20

LO4


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

21

LO4


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

22

LO4


Family Life Cycle

23LO4

Age

MaritalStatus Children


Family Life Cycle

24

LO4


Psychographic Segmentation

25

LO4

PsychographicSegmentation

PsychographicSegmentation

Market segmentation on the

basis of personality,

motives, lifestyles, and

geodemographics.


Bases for Psychographic Segmentation

26

LO4

PersonalityPersonality

MotivesMotives

LifestylesLifestyles

GeodemographicsGeodemographics


Lifestyle Segmentation

• How time is spent

• Importance of things around them

• Beliefs

• Socioeconomic characteristics

27

LO4


Geodemographic Segmentation

28

LO4

GeodemographicSegmentation

GeodemographicSegmentation

Segmenting potential customers

into neighborhood lifestyle

categories.

Combines geographic,

demographic, and lifestyle

segmentation.


Benefit Segmentation

29

LO4

BenefitSegmentation

BenefitSegmentation

The process of grouping

customers into market segments

according to the benefits they

seek from the product.


Benefit Segmentation

30

LO4

Usage-RateSegmentation

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

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

31

LO4

Geography Demographics Psychographics Benefits Usage Rate

• Region• Market size• Market

density• Climate

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

cycle

• Personality• Motives• Lifestyle• Geodemo-

graphics

• Benefitssought

• Former• Potential• 1st time• Light or

irregular• Medium• Heavy


Bases for Segmenting Business Markets

32

Describe the bases for segmenting

business markets

LO5



33

LO5

CompanyCharacteristics

CompanyCharacteristics

BuyingProcesses

BuyingProcesses

ProducersProducers

ResellersResellers

GovernmentGovernment

InstitutionsInstitutions



34

LO5

Company Characteristics

Geographic location

Type of company

Company size

Volume of purchase

Product use


Buyer Characteristics

35

LO5

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

36LO5

Demographic characteristicsDemographic characteristics

Decision styleDecision style

Tolerance for riskTolerance for risk

Confidence levelConfidence level

Job responsibilitiesJob responsibilities


REVIEW LEARNING OUTCOMESegmenting Business Markets

37

LO5

Producers Resellers

InstitutionsGovernments

Buying Process

Company Characteristics


Steps in Segmenting a Market

38

List the steps involved in segmenting markets

LO6


REVIEW LEARNING OUTCOMESteps in Segmenting Markets

39

LO6

Select a market

for study

Choosebases

for segmen-

tation

Selectdescriptors

Profileand

analyzesegments

Selecttarget

markets

Design,implement,

maintainmarketing

mix

1 53 42 6


Strategies for Selecting Target Markets

40

Discuss alternative strategies for selecting target markets

LO7



41

TargetMarket

TargetMarket

LO7

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.



42

LO7

ConcentratedStrategy

UndifferentiatedStrategy

MultisegmentStrategy


Undifferentiated Targeting Strategy

43

UndifferentiatedTargetingStrategy

UndifferentiatedTargetingStrategy

LO7

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

44

LO7

UndifferentiatedStrategy

Advantage:

Potential savings on production and marketing costs

Disadvantages:

Unimaginative product offerings

Company more susceptible to competition


Concentrated Targeting Strategy

45

ConcentratedTargeting Strategy

ConcentratedTargeting Strategy

LO7

A strategy used to select one

segment of a market for

targeting marketing efforts.

NicheOne segment of a

market.


Concentrated Targeting Strategy

46

LO7

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

47

MultisegmentTargetingStrategy

MultisegmentTargetingStrategy

LO7

A strategy that chooses two or

more well-defined market

segments and develops a

distinct marketing

mix for each.


Multisegment Targeting Strategy

48

LO7

MultisegmentStrategy

Advantages: Greater financial success Economies of scale

Disadvantages: High costs Cannibalization


Costs of Multisegment Targeting

49

LO7

Product design costs

Production costs

Promotion costs

Inventory costs

Marketing research costs

Management costs

Cannibalization


Cannibalization

50

LO7

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

51

LO7

Undifferentiated Multisegment Concentrated


One-to-One Marketing

52

Explain one-to-one marketing

LO8



53

LO8

One-to-OneMarketing

One-to-OneMarketing

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



54

LO8

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.

55

LO8

Trends


REVIEW LEARNING OUTCOMEOne-to-One Marketing

56

LO8


Positioning

57

Explain how and why firms implement positioning

strategies and how product differentiation

plays a role

LO9


Positioning

58

PositioningPositioning

LO9

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

LO9


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

60LO9


Product Differentiation

61

ProductDifferentiation

ProductDifferentiation

LO9

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

Distinctions can be real or perceived.


Perceptual Mapping

62

PerceptualMapping

PerceptualMapping

LO9

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

LO9


Positioning Bases

64

LO9

AttributeAttribute

Price and QualityPrice and Quality

Use or ApplicationUse or Application

Product UserProduct User

Product ClassProduct Class

CompetitorCompetitor

EmotionEmotion


Repositioning

65

RepositioningRepositioning

LO9

Changing consumers’

perceptions of a brand in relation

to competing brands.


REVIEW LEARNING OUTCOME Positioning and Product Differentiation

66

LO9

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learning outcomes lo5describe

market needs

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