segmenting

1Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Chapter 7: Segmenting and Targeting MarketsObjectives:

• 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.

• Describe the bases for segmenting business markets.

• List the steps involved in segmenting markets.

• Discuss alternative strategies for selecting target markets.

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

• Discuss global market segmentation and targeting issues.


Market Segmentation

MarketMarket

MarketSegmentMarket

Segment

MarketSegmentation

MarketSegmentation

People 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

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.

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.

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A Market is...

(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.

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The Concept of Market Segmentation

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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

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Criteria for Segmentation

SubstantialitySubstantialitySubstantialitySubstantiality

IdentifiabilityIdentifiabilityMeasurabilityMeasurabilityIdentifiabilityIdentifiabilityMeasurabilityMeasurability

AccessibilityAccessibilityAccessibilityAccessibility

ResponsivenessResponsivenessResponsivenessResponsiveness

Segment must be large enough to warrant a special

marketing mix.

Segment must be large enough to warrant a special

marketing mix.

Segments must be identifiable and their size measurable.

Segments must be identifiable and their size measurable.

Members of targeted segments must be reachable with

marketing mix.

Members of targeted segments must be reachable with

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

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

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Segmentation Bases

Characteristics of

individuals, groups,

or organizations used

to divide a total market

into segments.

(variables)

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Bases for Segmentation

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

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Geographic Segmentation

Segmenting markets by

region of the country or

world, market size, market

density, or climate.

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Geographic Segmentation

● Region of the country or world

●Market size

●Market density

● Climate

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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

● React more quickly to competition

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Demographic Segmentation

Segmenting markets

by age, gender, income,

ethnic background,

and family life cycle

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1 32 4 5 6


Bases for Demographic Segmentation

● Age

● Gender

● Income

● Ethnic background

● Family Life Cycle

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Ethnic Background

● Largest ethnic markets are:African-AmericanHispanic-AmericanAsian-American

●Will comprise 1/3 of U.S. population by 2010 with buying power of a trillion dollars

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Family Life Cycle

AgeAge

MaritalMaritalStatusStatus

ChildrenChildren

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Family Life Cycle44


Psychographic Segmentation

Market segmentation on

the bases of personality,

motives, lifestyles, and

geodemographics.

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Bases for Psychographic Segmentation

PsychographicPsychographicSegmentationSegmentation

PsychographicPsychographicSegmentationSegmentation

PersonalityPersonality

MotivesMotives

LifestylesLifestyles

GeodemographicsGeodemographics

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Categories of Porsche Buyers

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Lifestyle Segmentation

● How time is spent

● Importance of things around them

● Beliefs

● Socioeconomic characteristics

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Geodemographic Segmentation

Segmenting potential

customers into

neighborhood lifestyle

categories.

Combines geographic,

demographic, and lifestyle

segmentation.

http://www.redenvelope.comhttp://www.redenvelope.com

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Benefit Segmentation

The process of grouping

customers into market

segments according to

the benefits they seek

from the product.

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Benefit Segmentation of the Snack-Food Market

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Usage-Rate Segmentation

Dividing a market by the

amount of product

bought or consumed.

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The 80/20 Principle

A principle holding that

20 percent of all customers

generate 80 percent

of the demand.

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Business Marketing Segmentation

CompanyCharacteristics

CompanyCharacteristics

BuyingProcesses

BuyingProcesses

CustomerRelationshipCustomer

Relationship

Segmentation Bases

Segmentation Bases

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Steps in Segmenting a Market

Select a

market for

study

Choosebases

for segmen-

tation

Selectdescrip-

tors

Profileand

analyzesegments

Selecttarget

markets

Design,imple-ment,

maintainmkting

mix

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Target Market

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.

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Strategies for Selecting Target Markets

ConcentratedStrategy

UndifferentiatedStrategy

MultisegmentStrategy

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Undifferentiated Targeting Strategy

Marketing approach that

views the market as one big

market with no individual

segments and thus requires

a single marketing mix.

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Undifferentiated Targeting Strategy

AdvantagesAdvantages: Potential savings on

production and marketing costs

DisadvantagesDisadvantages: Unimaginative product

offerings Company more

susceptible to competition

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Concentrated Targeting Strategy

A strategy used to select

one segment of a market for

targeting marketing efforts.

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Niche

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One segment of

a market.


Concentrated Targeting Strategy

AdvantagesAdvantages: Concentration of resources Meets narrowly defined

segment Small firms can compete Strong positioning

DisadvantagesDisadvantages: Segments too small, or

changing Large competitors may

market to niche segment

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Multisegment Targeting Strategy

A strategy that chooses

two or more well-defined

market segments and

develops a distinct

marketing mix for each.

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AdvantagesAdvantages: Greater financial success Economies of scale

DisadvantagesDisadvantages: High costs Cannibalization

Multisegment Targeting Strategy

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Costs of Multisegment Targeting

$ Product design costs

$ Production costs

$ Promotion costs

$ Inventory costs

$ Marketing research costs

$ Management costs

$ Cannibalization

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Cannibalization

Situation that occurs when

sales of a new product

cut into sales of a

firm’s existing products.

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PositioningDeveloping a specific

marketing mix to

influence potential

customers’ overall

perception of a brand,

product line, or

organization in

general.

88PositionThe place a product,

brand, or group of

products occupies in

consumers’ minds

relative to competing

offerings.


Positioning of Procter & Gamble Detergents

88


Effective Positioning

1. Assess the positions of competing products

2. Determine the dimensions of these positions

3. Choose an effective market position

http://www.pg.comhttp://www.pg.com

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Product Differentiation

A positioning strategy that

some firms use to

distinguish their products

from those of competitors.

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Perceptual Mapping

A means of displaying or

graphing, in two or more

dimensions, the location of

products, brands, or groups

of products in customers’

minds.

88


Perceptual Map and Positioning Strategy for Levi Strauss Products

88


Positioning Bases

AttributeAttribute

Price and QualityPrice and Quality

Use or ApplicationUse or Application

Product UserProduct User

Product ClassProduct Class

CompetitorCompetitor

Positioning Positioning BasesBases

Positioning Positioning BasesBases

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Repositioning

Changing consumers’

perceptions of a brand

in relation to

competing brands.

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Global Issues

Global Market Standardization

Target smaller, defined markets

TrendsTrends

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segmenting

Documents

e lamb hair mcdaniel

southwesternthomson

responsiveness marketing

market segments

competition chapter

variables chapter

total market

global market segmentation