MT219 U6 A
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unit_6.pptxLamb, Hair, McDaniel
Chapter 8
Segmenting and Targeting Markets
2012-2013
Chapter 8 Segmenting and Targeting Markets
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Marketing segmentation plays a key role in the marketing strategy of almost all successful organizations.
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
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List the steps involved in segmenting markets
Discuss alternative strategies for selecting target markets
Explain how CRM can be used as a targeting tool
Explain how and why firms implement positioning strategies and how product differentiation plays a role
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Describe the characteristics
of markets and market segments
Market Segmentation
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Characteristics of a Market
people or organizations with
needs or wants, and with
the ability and
the willingness to buy.
A group of people that lacks any one of these characteristics is NOT a market.
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Notes:
The term market means different things to different people. We are all familiar with the supermarket, stock market, labor market, fish market, and flea market. All these types of markets share several characteristics.
Markets are composed of people or organizations with needs and wants that can be satisfied by particular product categories.
They have the ability to buy the products they seek, and are willing to exchange their resources for the desired products.
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Market Segmentation
Market
Market
Segment
Market
Segmentation
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.
The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.
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Notes:
Within a market, a market segment is a subgroup of people or organizations with one or more characteristics that cause them to have similar product needs.
Market segmentation is the division of a market into meaningful, relatively similar, and identifiable segments or groups.
The Concept of Market Segmentation
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Notes:
This graphic illustrates the concept of market segmentation, using age and gender as the bases.
Discussion/Team Activity:
Discuss other ways of segmenting the market in addition to age and gender.
Explain the importance
of market segmentation
The Importance of Market Segmentation
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Chapter 8 Segmenting and Targeting Markets
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© 2013 by Cengage Learning Inc. All Rights Reserved.
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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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Notes:
Until the 1960s, market segmentation was not used extensively. Consider Coca-Cola with its one product aimed at the entire soft drink market. Today over a dozen different products are marketed by the company to different market segments.
Market segmentation plays a key role in the marketing strategy of organizations, leading to competitive advantage. The benefits are described on this slide.
Discussion/Team Activity:
Discuss how Coca-Cola’s product lines fit the needs of different market segments.
Name different fashion retailers and identify their marketing segmentation strategies.
Discuss criteria for
successful market
segmentation
Criteria for Successful Segmentation
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Criteria for Segmentation
Substantiality
Identifiability
and Measurability
Accessibility
Responsiveness
Segment must be large enough to warrant a special marketing mix.
Segments must be identifiable and their size measurable.
Members of targeted segments must be reachable with marketing mix.
Unless segment responds to a marketing mix differently, no separate treatment is needed.
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Notes:
Markets are segmented for three reasons:
Segmentation enables the identification of groups of customers with similar needs, and the analysis of the buying behavior of these groups.
Segmentation provides information for the specific matching of the design of marketing mixes with the characteristics of the segment.
Segmentation helps marketers satisfy customers wants and needs while meeting the organization’s objectives.
A segmentation scheme must produce segments that meet the four basic criteria as defined above.
Describe the bases
commonly used
to segment
consumer markets
Bases for Segmenting
Consumer Markets
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Bases for Segmentation
Usage Rate
Benefits Sought
Psychographics
Demographics
Geography
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Notes:
One or more of the characteristics listed above is used to segment markets. They are described on subsequent slides.
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Geographic Segmentation
Region of the country or world
Market size
Market density
Climate
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Notes:
Geographic segmentation of markets is based on the region, market size, market density (number of people within a unit of land), or 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
Quicker reaction to competition
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Notes:
Consumer goods companies use a regional approach to marketing for the reasons shown on this slide.
Discussion/Team Activity:
Discuss the marketing of regional brands/products in various areas of the country.
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Demographic Segmentation
Age
Gender
Income
Ethnic
Family life cycle
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Notes:
Demographic information is widely available and often related to consumer behavior and buying.
Some common bases are age, gender, income, ethnic background, and family life cycle.
Age Segmentation
Tweens
Teens
Generation Y
Generation X
Baby Boomers
The War Generation (ages 61-66)
The Great Depression Generation (ages 67-76)
The G.I. Generation (ages 77+)
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Marketers can segment markets using cohorts:
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Gender Segmentation
Women make 85 percent of consumers goods purchases annually
Many marketers of male-dominated arenas are targeting women
Increasing numbers of marketers in female dominated categories are targeting men.
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Income Segmentation
Determines consumer wants
Determines buying power
Retailers can appeal to:
low-income (Walmart)
High-income (Saks Fifth Avenue)
Both (Costco, Target)
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Ethnic Segmentation
Largest ethnic markets are:
Hispanic Americans
African Americans
Asian Americans
Companies must make products geared toward specific ethnic groups as they continue to expand.
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Family Life Cycle
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Notes:
Consumption patterns among people of the same age and gender differ because they are in different stages of the family life cycle stage.
The FLC is a series of stages determined by a combination of age, marital status, and the presence or absence of children.
Exhibit 8.1
Family Life Cycle
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Chapter 8 Segmenting and Targeting Markets
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Psychographic
Segmentation
Market segmentation on the basis of personality, motives, lifestyles, and geodemographics.
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Notes:
Demographics provide the skeleton, but psychographics add meat to the bones.
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Bases for Psychographic
Segmentation
Personality
Motives
Lifestyles
Geodemographics
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Personality and Motive Segmentation
Reflects a person’s traits, attitudes, and habits.
Personality
Motives
Marketers might appeal to emotional, rational, or status motives, among others.
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Notes:
Personality reflects a person’s traits, attitudes, and habits. Consider the personality types that describe segmented Porsche buyers.
Motives: Carmakers might appeal to customers with status-related motives, whereas baby products appeal to emotional motives.
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Lifestyle Segmentation
How time is spent
Importance of things around them
Beliefs
Socioeconomic characteristics
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Notes:
Lifestyle segmentation divides people into groups according to how time is spent, the importance of things around them, beliefs, and socioeconomic characteristics such as income and education.
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Geodemographic Segmentation
Segmenting potential customers into
neighborhood lifestyle categories.
Combines geographic, demographic, and lifestyle segmentation.
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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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Notes:
Benefit segmentation is different from other segmentation bases because it groups potential customers on the basis of their needs and wants instead of some other characteristic.
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Usage-Rate Segmentation
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.
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Notes:
Most segmentation is based on the assumption that the selected variable(s) and customers’ needs are related. On the other hand, benefit segmentation groups potential customers on the basis of their needs or wants only.
Segmenting by usage rate enables marketers to focus efforts on heavy users or to develop multiple marketing mixes aimed at different segments.
The focus of marketing is often on the heavy-user segment, based on the 80/20 principle.
Discussion/Team Activity:
What programs do companies use to develop customers into heavy users? The list should include airline frequent flyer programs and in-store coupon dispensing.
Describe the bases for segmenting
business markets
Bases for Segmenting
Business Markets
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Notes:
The business market consists of four segments:
Producers
Resellers
Government
Institutions
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Bases for Segmenting Business Markets
Company
Characteristics
Buying
Processes
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Notes:
Company characteristics include geographic location, type of company, company size, and product use.
Segmenting by customer type allows business marketers to tailor their marketing mixes to the unique needs of particular types of organizations or industries.
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Company Characteristics
Important segmentation variables:
Geographic location
Type of company
Company size
Product use
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Buyer Characteristics
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.
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Notes:
Many business marketers find it helpful to segment customers and prospective customers on the basis of how they buy.
Two purchasing profiles are satisficers and optimizers. Satisficers contact familiar suppliers and place the order with the first one to satisfy product and delivery requirements. Optimizers consider numerous suppliers, obtain bids, and study all proposals before selecting one.
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Buyer Characteristics
Demographic characteristics
Decision style
Tolerance for risk
Confidence level
Job responsibilities
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Notes:
The personal characteristics of the buyers influence their buying behavior and offer a viable basis for segmenting some business markets.
List the steps involved in segmenting markets
Steps in Segmenting a Market
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Chapter 8 Segmenting and Targeting Markets
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Note that steps 5 and 6 are actually marketing activities
that follow market segmentation (steps 1 through 4).
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Steps in Segmenting Markets
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Notes:
The purpose of market segmentation is to identify marketing opportunities. This slide traces the steps in segmenting a market.
(1) selecting a market or product category for study;
(2) choosing a basis or bases for segmenting the market;
(3) selecting segmentation descriptors;
(4) profiling and analyzing segments;
(5) selecting target markets; and
(6) designing, implementing, and maintaining appropriate marketing mixes.
Note that steps 5 and 6 occur after the segmentation scheme is developed.
Keep in mind that markets are dynamic and must be monitored proactively for changes in age, etc. Even though the segmentation classifications are static, the customers and prospects are changing.
Discuss alternative strategies for selecting target markets
Strategies for Selecting
Target Markets
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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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Notes:
Market segmentation is the first step in determining whom to approach about buying a product. The next task is to choose one or more target markets.
A target market is a group of people or organizations for which the organization designs, implements, and maintains a marketing mix to meet that group’s needs.
Because most markets will include customers with different lifestyles, backgrounds, and income levels, it is unlikely that a single marketing mix will attract all segments of the market.
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Strategies for Selecting Target Markets
Concentrated
Strategy
Undifferentiated
Strategy
Multisegment
Strategy
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Notes:
The three general strategies for selecting target markets are undifferentiated, concentrated, and multisegment targeting.
A marketing approach that views the market as one big market with no individual segments and thus
uses a single
marketing mix.
Undifferentiated Targeting Strategy
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Notes:
An undifferentiated targeting strategy is essentially a mass-market philosophy—viewing the market as one big market and using one marketing mix.
Advantage:
Potential savings on production and marketing costs
Disadvantages:
Unimaginative product offerings
Company more susceptible to competition
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Undifferentiated
Strategy
Undifferentiated Targeting Strategy
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Notes:
The first firm in an industry sometimes uses an undifferentiated targeting strategy.
Marketers of commodity products, such as flour and sugar, are also likely to use this strategy.
Even toilet tissue manufacturers have different segments—both industrial and consumer--and adopt different marketing mixes for different segments.
Additionally, small stores in small towns with no competition may offer one marketing mix and be successful.
Concentrated
Targeting Strategy
A strategy used to select one segment of a market for targeting marketing efforts.
Niche
One segment of
a market.
Concentrated Targeting Strategy
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Notes:
1. With a concentrated targeting strategy, a firm selects a niche for targeting its marketing efforts.
Advantage:
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
Concentrated Targeting Strategy
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Concentrated
Strategy
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Notes:
A concentrated strategy of focusing on a narrow market is sometimes more profitable than spreading resources over several different segments.
A concentrated strategy often enables small firms to compete effectively with much larger firms.
However, a concentrated strategy can also be disastrous for a firm that is not successful in its narrowly defined target market.
Discussion/Team Activity:
Identify firms that have adopted a niche strategy. Examples: watchmakers Patek Philippe, Rolex, and Breguet. Porsche, OshKosh B’Gosh, Orvis, Starbucks, AOL, and Enterprise Rent-A-Car.
Multisegment Targeting Strategy
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A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.
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Notes:
Multisegment targeting offers many potential benefits to firms, including greater sales volume, higher profits, larger market share, and economies of scale in manufacturing and marketing.
Advantage:
Greater financial success
Economies of scale
Disadvantages:
Higher costs
Cannibalization
Multisegment Targeting Strategy
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Multisegment
Strategy
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Notes:
Examples of multisegment targeting strategy include Best Buy, Gap, Walmart.
Discussion/Team Activity:
Walmart opened a pilot store in Plano, Texas, that stocks plasma TVs, fine jewelry, expensive wine, etc. Discuss ways that Walmart can attract upper-end customers. What marketing mix would you suggest?
Product design costs
Production costs
Promotion costs
Inventory costs
Marketing research costs
Management costs
Cannibalization
Costs of Multisegment Targeting Strategy
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Notes:
Multisegment targeting does come with a price, including those costs shown on this slide. Before deciding on this strategy, firms should compare the benefits and costs of multisegment targeting to those of undifferentiated and concentrated targeting.
Cannibalization is a situation that occurs when sales of a new product cut into sales of a firm’s existing products.
Explain how CRM can be used as a targeting tool
CRM as a Targeting Tool
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CRM Trends
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Notes:
These four major trends illustrate why CRM is likely to grow.
Although mass marketing will continue to be used, especially to create brand awareness or remind consumers of a product, the advantages of CRM cannot be ignored.
Explain how and why firms implement positioning strategies and how product differentiation
plays a role
Positioning
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Positioning
developing a specific marketing mix to influence potential customers’ overall perception or a brand, product line, or organization in general.
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Notes:
Position is the place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings.
Positioning assumes that consumers compare products on the basis of important features. Effective positioning requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions, and choosing a position in the market where the marketing efforts will have the greatest impact.
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Positioning of Procter & Gamble Detergents
Brand
Positioning
Tide
Tough, powerful cleaning
Cheer
Tough cleaning, color protection
Bold
Detergent plus fabric softener
Gain
Sunshine scent and odor-removing formula
Era
Stan treatment and stain removal
Dash
Value brand
Solo
Detergent and fabric softener in liquid form
Dreft
Outstanding cleaning for baby clothes, safe
Ivory
Fabric and skin safety on baby clothes
Ariel
Tough cleaner, aimed at Hispanic market
Chapter 8 Segmenting and Targeting Markets
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Notes:
This slide compares the unique positions for Procter & Gamble’s laundry detergents.
Discussion/Team Activity:
Discuss specific advertisements for these detergents and how these ads illustrate the unique positions listed on this slide.
Examine the positioning message of other product advertisements.
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Effective Positioning
Assess the positions occupied by competing products
Determine the dimensions underlying these positions
Choose a market position where marketing efforts will have the greatest impact
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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.
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Notes:
Exhibit 8.3 shows how Saks Incorporated uses customer demographics, such as age, spending habits, and shopping patterns, to build a matrix that charts the best mix of clothes and accessories to stock in each store. You may find Exhibit 8.3 on the next slide.
Discussion/Team Activity:
What is the target market and marketplace perception of some of Saks’ brands? What are Saks’ strengths in the marketplace? What are Saks’ weaknesses? How can Saks use perceptual mapping to enhance its product strategy?
Exhibit 8.3
Perceptual Map and Positioning Strategy for Saks’ Department Stores
SOURCE: Vanessa O’Connell, “Park Avenue Classic or Soho Trendy?” Wall Street Journal, April 20, 2007, B1.
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Attribute
Price and Quality
Use or Application
Product User
Product Class
Competitor
Emotion
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Positioning Bases
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Notes:
The following bases for positioning are used:
Attribute: Association of a product with an attribute, a product feature, or customer benefit.
Price and quality: High price as a symbol of quality, or low price as an indicator of value may be used to position a product.
Use or application: Stressing use or applications.
Product user: Positioning base focuses on a personality or type of user.
Product class: Product is positioned as associated with a particular category of products.
Competitor: Positioning against competitors is a part of any positioning strategy.
Emotion: Positioning using emotion focuses on how the product makes customers feel.
One or more positioning bases is often used.
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Repositioning
changing consumers’ perceptions of a brand in relation to competing brands.
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Notes:
Products are repositioned to sustain growth in slow markets or to correct positioning mistakes
Also, consider the expansion of Walmart into the supermarket industry. A consultant predicts that two supermarkets will go out of business for every Walmart superstore that opens in the U.S.
Discussion/Team Activity:
As giant Walmart expands into the supermarket industry, what repositioning strategies should its competitors consider? How do you compete with the low-price position of Walmart?
Chapter 8 Video
Numi Organic Tea
Numi Organic Tea describes how its sampling program helps position the brand with its target markets. Its premium position ties naturally into the customer outlined in the film, but Numi is also interested in expanding outside of the major tea drinker into more casual tea drinkers.
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Chapter 8 Segmenting and Targeting Markets
