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10-1 2000 McGraw-Hill Ryerson Limited
C H A P T E R T E N
MARKET SEGMENTATION,TARGETING, AND POSITIONING
10-2 2000 McGraw-Hill Ryerson Limited
AFTER READING THIS CHAPTER YOU SHOULDAFTER READING THIS CHAPTER YOU SHOULDBE ABLE TO:BE ABLE TO:
Explain what market segmentation is, when to use it, and thefive steps involved in segmentation.
Recognize the different dimensions used to segment consumerand organizational markets.
Develop a market-product grid to use in segmenting andtargeting a market.
Interpret a cross tabulation to analyze market segments.
Understand how marketing managers position products inthe marketplace.
10-3 2000 McGraw-Hill Ryerson Limited
Sneakers Story: From Little Skirmishes to All-out WarSneakers Story: From Little Skirmishes to All-out War
Global $12 billion dollar sneaker market forall kinds of athletic shoes.
Sneaker manufacturers are searching for newmarket segments of consumers and ways todifferentiate their products from everyoneelses.
Reeboks marketing research shows that in1971 only 1 of every 27 women was involved insports; today it is 1 in 3!! Thus Reebok hasput special emphasis on the female market.
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Market Segmentation DefinedMarket Segmentation Defined
Market segmentation involves aggregatingprospective buyers into groups that:
1. Have common needs and
2. Will respond similarly to the marketing action.
The groups that result from the
market segmentation process are
called market segments, a relatively
homogeneous collection of prospective buyers.
10-5 2000 McGraw-Hill Ryerson Limited
Product Differentiation DefinedProduct Differentiation Defined
Product differentiation, in the broadest sense,involves a firms using different marketing mixactivities, such as product features and advertising,to help consumers perceive the product as beingdifferent and better than competing products. Theperceived differences may involve physical ornonphysical features, such as image or price.
In a narrower sense, product differentiation involvesa firms selling two or more products with differentfeatures targeted to different market segments.
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PP10-1 Market Segmentation Links Market Needs to PP10-1 Market Segmentation Links Market Needs to an Organizations Marketing Program an Organizations Marketing Program
Identify marketneeds
Benefits in termsof:
Product FeaturesExpenseQualitySavings in timeand convenience
Process ofsegmenting andtargeting markets
Execute marketing program
A marketing mix in terms of:ProductPricePromotionPlace
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PP10-2 Reebok Market-Product GridMarket Segment Product
GROUP Running Aerobic Tennis Basketball Childrens Walking Cross Step Athletic Golf WITH Shoes Shoes Shoes Shoes Shoes Shoes Traing Traing clothing shoes
General NEED 1981 1982 1984 1984 1984 1986 1988 1991 1993 1997
runners P P
Performance- aerobic P p
conscious dancers
consumers tennis P P
(athletes) players
basketball P P
players
step S P
exercisers
golfers P P
Fashion- comfort & S S S S S S S
conscious style
consumers conscious
(nonathletes) walkers S S S S P P
children P
KEY: P=Primary Market S=Secondary Market
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When To SegmentWhen To Segment
1. One Product & Multiple
Market Segments
2. Multiple Products & Multiple
Market Segments
3. Segments of One: Mass
Customization
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Concept CheckConcept Check
1. Market segmentation involvesaggregating prospective buyers intogroups that have two keycharacteristics. What are they?
2. What is product differentiation?
3. The process of segmenting andtargeting markets is a bridge betweenwhat two marketing activities?
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PP10-3 Five Steps in Segmenting and Targeting MarketsPP10-3 Five Steps in Segmenting and Targeting Markets
Identifymarketneeds
Steps in segmenting andtargeting marketsForm prospective buyersinto segments
Form products to be soldinto groups
Develop a market-productgrid and estimate size ofmarkets
Select target marketsTake marketing actions toreach target markets
Execute
marketing
program
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Criteria to Use in Forming Market SegmentsCriteria to Use in Forming Market Segments
1. 1. Potential for increased profit and ROI.Potential for increased profit and ROI.
2.2. Similarity of needs of potential buyers within aSimilarity of needs of potential buyers within a
segment.segment.
3.3. Difference of needs of buyers among Difference of needs of buyers among segments.segments.
4.4. Feasibility of marketing action to reach a Feasibility of marketing action to reach a segment.segment.
5.5. Simplicity and cost of assigning potential buyersSimplicity and cost of assigning potential buyers
to segments.to segments.
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MAIN DIMENSION SEGMENTATION TYPICAL
VARIABLES BREAKDOWNSCUSTOMER CHARACTERISTICS
Geographic
Demographic
RegionCity or CensusMetropolitan area(CMA) sizeDensityClimate
Atlantic, Quebec, Ontario, Prairies, British ColumbiaUnder 5,000; 5,000-19,999; 20,000-49,999; 50,000-99,999; 100,000-249,999; 250,000-499,999; 500,000-999,999; 1,000,000 or more
Urban; suburban; small town; ruralEast; West
GenderAge
RaceLife StageIncome
Family sizeHome ownershipEducation
Male; female
Under 6; 6-11; 12-17; 18-24; 25-34; 35-44; 45-54; 55-64; 65-74; 75 and over
White; Black; Asian; Native; otherYoung single; young married; older married; etc.Under $10,000; 10,000-19,9999; 20,000-29,999; 30,000-39,999 40,000-54,999; 55,000-74,999; $75,000+
1; 2; 3; 4; 5 or moreOwn home; rent homeGrade school or less; some high school; high school graduate;some college; college graduate
PP10-4a Canadian Consumer Market Segmentation VariablesPP10-4a Canadian Consumer Market Segmentation Variables
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PP10-4b Canadian Consumer Market Segmentation VariablesPP10-4b Canadian Consumer Market Segmentation Variables
MAIN DIMENSION SEGMENTATION TYPICAL
VARIABLES BREAKDOWNS
CUSTOMER CHARACTERISTICS
Behavioural
Psychographic
Benefits soughtUsage rateUser statusLoyalty status
Quality; service; low cost Light user; medium user; heavy user
Non-user; ex-user; prospect; first-time user; regular user None; medium; strong
Personality
Lifestyle (GoldFarbSegments)
Gregarious; compulsive; extroverted; introverted
Structured; discontented; fearful; assured;resentful; caring
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MAIN DIMENSIONS VARIABLES TYPICAL BREAKDOWNS
Geographic Region Atlantic, Quebec, Ontario,segmentation Prairies, British Columbia
Location In CMA; not in CMA
Demographic NAICS code 2-digit; 3-digit; 4-digit; 5-digitsegmentation categories
Number of Employees 119; 2099; 100249; 250+Annual Sales Volume Less than $1 million; $110 mil-
lion; $10100 million; over$100 million
Behavioural Benefits sought Quality; customer service; lowsegmentation price
Usage rate Light user; medium user; heavyuser
User status Nonuser; ex-user; prospect; first-time user; regular user
Loyalty status None; medium; strongPurchase method Centralized; decentralized;
Individual; groupType of buy New buy; modified rebuy; straight
rebuy
MAIN DIMENSIONS VARIABLES TYPICAL BREAKDOWNS
Geographic Region Atlantic, Quebec, Ontario,segmentation Prairies, British Columbia
Location In CMA; not in CMA
Demographic NAICS code 2-digit; 3-digit; 4-digit; 5-digitsegmentation categories
Number of Employees 119; 2099; 100249; 250+Annual Sales Volume Less than $1 million; $110 mil-
lion; $10100 million; over$100 million
Behavioural Benefits sought Quality; customer service; lowsegmentation price
Usage rate Light user; medium user; heavyuser
User status Nonuser; ex-user; prospect; first-time user; regular user
Loyalty status None; medium; strongPurchase method Centralized; decentralized;
Individual; groupType of buy New buy; modified rebuy; straight
rebuy
PP10-5 Segmentation Variables for Organizational MarketsPP10-5 Segmentation Variables for Organizational Markets
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PP10-6 Selecting a Target Market for your Fast-Food RestaurantPP10-6 Selecting a Target Market for your Fast-Food Restaurant