1 chapter 8: segmenting and targeting markets prepared by amit shah, frostburg state university...

1

Chapter 8: Segmenting and Targeting Markets

Prepared by Amit Shah, Frostburg State University

Designed by Eric Brengle, B-books, Ltd.

Copyright 2010 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

LO1

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.

LO1


(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

Market- People or organizations with needs or wants and the ability and

willingness to buy.

Market Segment- A subgroup of peopleor organizations sharing one or more

characteristics that cause them to havesimilar product needs.

Market Segmentation- The process ofdividing a market into meaningful,

relatively similar, identifiable segmentsor groups.


The Concept of Market Segmentation

7Copyright 2010 by Cengage Learning Inc. All Rights Reserved

The Importance of Market Segmentation

8

Explain the importance of market segmentation.

LO2


The Importance of Market Segmentation

9

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

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

Segmentation Bases - Characteristics

of individuals, groups, or organizations

used to divide a total market into

segments (variables).


Bases for Segmentation

16

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 competition18Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Demographic Segmentation

19

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) are twice as likely to shop at warehouses

• 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

23

Age

MaritalStatus Children


Family Life Cycle


Psychographic Segmentation

25

Psychographic Segmentation- Market

segmentation on the basis of

personality, motives, lifestyles,

and demographics.


Bases for Psychographic Segmentation

26

PersonalityPersonality

MotivesMotives

LifestylesLifestyles

GeodemographicsGeodemographics


Lifestyle Segmentation

• How time is spent

• Importance of things around them

• Beliefs

• Socioeconomic characteristics


Geodemographic Segmentation

28

Geodemographic Segmentation -

Segmenting potential customers into

neighborhood lifestyle categories.

Combines geographic, demographic,

and lifestyle segmentation


Benefit Segmentation

29

Benefit segmentation- The process of

grouping customers into market

segments according to the benefits

they seek from the past.


Usage-Rate Segmentation

30

Usage-Rate Segmentation- Dividing a

market by the amount of product

bought or consumed.

80/20 Principle- 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

CompanyCharacteristics

CompanyCharacteristics

BuyingProcesses

BuyingProcesses

ProducersProducers

ResellersResellers

GovernmentGovernment

InstitutionsInstitutions



34

Company Characteristics

Geographic location

Type of company

Company size

Volume of purchase

Product use


Buyer Characteristics

35

Satisficers - Business customers who place an order with the first

familiar supplier to satisfy product and delivery requirements.

Optimizers - Business customers who consider numerous suppliers,

both familiar and unfamiliar, solicit bids, and study all proposals

carefully before selecting one.


Buyer Characteristics

36

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

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

ConcentratedStrategy

UndifferentiatedStrategy

MultisegmentStrategy


Undifferentiated Targeting Strategy

43

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

UndifferentiatedStrategy

Advantage:

Potential savings on production and marketing costs

Disadvantages:

Unimaginative product offerings

Company more susceptible to competition


Concentrated Targeting Strategy

45

Concentrated Targeting Strategy –

A strategy used to select

one segment of a market

for targeting efforts.

Niche – One segment of a market.


Concentrated Targeting Strategy

46

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

A strategy that chooses two or

more well-defined market

segments and develops a

distinct marketing mix for each.


Multisegment Targeting Strategy

48

MultisegmentStrategy

Advantages: Greater financial success Economies of scale

Disadvantages: High costs Cannibalization


Costs of Multisegment Targeting

49

Product design costs

Production costs

Promotion costs

Inventory costs

Marketing research costs

Management costs

Cannibalization


Cannibalization

50

Situation that occurs when

sales of a new product cut into

a 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

An individualized marketingmethod that utilizes customer information to build long-term,

personalized, and profitablerelationships with each

customer.



54

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

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

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

59

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

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

61

A positioning strategy that some firms use to

distinguish their products from those of their competitors.

Distinctions can be real or perceived.


Perceptual Mapping

62

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

64

AttributeAttribute

Price and QualityPrice and Quality

Use or ApplicationUse or Application

Product UserProduct User

Product ClassProduct Class

CompetitorCompetitor

EmotionEmotion


Repositioning

65

Changing perceptions of a brand in relation to competing brands.


Review Learning Outcome Positioning and Product Differentiation

66

LO9


1 chapter 8: segmenting and targeting markets prepared by amit shah, frostburg state university...

Documents

cengage learning

rights reserved bases

market segments

market people

concept of market segmentation

rights reserved criteria

total market

successful segmentation