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- 1. Segmenting and Targeting Markets
CHAPTER
8
Marketing 10
Lamb, Hair, McDaniel
Designed by Prepared by
Eric Brengle Amit Shah
B-books, Ltd. Frostburg State University
Copyright ©2009 by Cengage Learning Inc. All rights reserved 1
- 2. Learning Outcomes
Describe the characteristics of markets
LOI
and market segments
LO2 Explain the importance of market segmentation
Discuss criteria for successful market
LO3 segmentation
Describe the bases commonly used to segment
LO4 consumer markets
Copyright ©2009 by Cengage Learning Inc. All rights reserved 2
- 3. Learning Outcomes
LO5 Describe the bases for segmenting
business markets
LO6 List the steps involved in segmenting markets
Discuss alternative strategies for selecting
LO7 target markets
LO8 Explain one-to-one marketing
Explain how and why firms implement
LO9 positioning strategies and how product
differentiation plays a role
Copyright ©2009 by Cengage Learning Inc. All rights reserved 3
- 4. LOI Market Segmentation
Describe the characteristics
of markets
and market segments
Copyright ©2009 by Cengage Learning Inc. All rights reserved 4
- 5. 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.
LOI
Copyright ©2009 by Cengage Learning Inc. All rights reserved 5
- 6. LOI
Market Segmentation
People or organizations with
Market needs or wants and the ability
and willingness to buy.
A subgroup of people or
Market organizations sharing one or more
Segment characteristics that cause them
to have similar product needs.
Market The process of dividing a market
into meaningful, relatively similar,
Segmentation identifiable segments or groups.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 6
- 7. The Concept of Market
LOI
Segmentation
Copyright ©2009 by Cengage Learning Inc. All rights reserved 7
- 8. LO2
The Importance of Market
Segmentation
Explain the importance
of market segmentation
Copyright ©2009 by Cengage Learning Inc. All rights reserved 8
- 9. LO2 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.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 9
- 10. LO2 REVIEW LEARNING OUTCOME
The Importance of Market Segmentation
More precise
More accurate
Market definition of
marketing
segmentation customers needs
objectives
and wants
Improved
resource
allocation
Better marketing
results
Copyright ©2009 by Cengage Learning Inc. All rights reserved 10
- 11. Criteria for Successful
LO3
Segmentation
Discuss criteria for
successful market
segmentation
Copyright ©2009 by Cengage Learning Inc. All rights reserved 11
- 12. LO3
Criteria for Segmentation
Segment must be large
Substantiality enough to warrant a special
marketing mix.
Identifiability
Segments must be identifiable and
and
their size measurable.
Measurability
Members of targeted segments
Accessibility must be reachable with
marketing mix.
Unless segment responds to a
Responsiveness marketing mix differently, no
separate treatment is needed.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 12
- 13. LO3 REVIEW LEARNING OUTCOME
Successful Market Segmentation
Useful
segment?
Substantial
Identifiable and measurable
Accessible
Responsive
Then, yes: Useful segmentation scheme
Copyright ©2009 by Cengage Learning Inc. All rights reserved 13
- 14. Bases for Segmenting
LO4
Consumer Markets
Describe the bases
commonly used to
segment
consumer markets
Copyright ©2009 by Cengage Learning Inc. All rights reserved 14
- 15. Bases for Segmenting
LO4
Consumer Markets
Segmentation Characteristics of
Bases individuals, groups, or
organizations used to divide a
total market into segments.
(variables)
Copyright ©2009 by Cengage Learning Inc. All rights reserved 15
- 16. LO4
Bases for Segmentation
Geography
Demographics
Psychographics
Benefits Sought
Usage Rate
Copyright ©2009 by Cengage Learning Inc. All rights reserved 16
- 17. LO4 Geographic Segmentation
• Region of the country or world
• Market size
• Market density
• Climate
17
Copyright ©2009 by Cengage Learning Inc. All rights reserved
- 18. 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
Copyright ©2009 by Cengage Learning Inc. All rights reserved 18
- 19. LO4 Demographic Segmentation
Age
Gender
Income
Ethnic background
Family life cycle
19
Copyright ©2009 by Cengage Learning Inc. All rights reserved
- 20. LO4
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.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 20
- 21. 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
Copyright ©2009 by Cengage Learning Inc. All rights reserved 21
- 22. 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
Copyright ©2009 by Cengage Learning Inc. All rights reserved 22
- 23. Family Life Cycle
Age
Marital
Status Children
LO4 Copyright ©2009 by Cengage Learning Inc. All rights reserved
23
- 24. LO4
Family Life Cycle
Copyright ©2009 by Cengage Learning Inc. All rights reserved 24
- 25. LO4 Psychographic Segmentation
Psychographic Market segmentation on the
Segmentation basis of
personality, motives, lifestyl
es, and geodemographics.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 25
- 26. LO4 Bases for Psychographic
Segmentation
Personality
Motives
Lifestyles
Geodemographics
Copyright ©2009 by Cengage Learning Inc. All rights reserved 26
- 27. LO4 Lifestyle Segmentation
• How time is spent
• Importance of things around them
• Beliefs
• Socioeconomic characteristics
27
Copyright ©2009 by Cengage Learning Inc. All rights reserved
- 28. Geodemographic
LO4
Segmentation
Geodemographic Segmenting potential customers
Segmentation into neighborhood lifestyle
categories.
Combines
geographic, demographic, and
lifestyle segmentation.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 28
- 29. LO4
Benefit Segmentation
Benefit The process of grouping
Segmentation customers into market segments
according to the benefits they
seek from the product.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 29
- 30. LO4
Benefit Segmentation
Dividing a market by the
Usage-Rate
amount of product bought
Segmentation
or consumed.
A principle holding that
80/20 20 percent of all customers
Principle generate 80 percent of
the demand.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 30
- 31. LO4 REVIEW LEARNING OUTCOME
Bases for Segmenting Consumer Markets
Geography Demographics Psychographics Benefits Usage Rate
• Region • Age • Personality • Benefits • Former
• Market size • Gender • Motives sought • Potential
• Market • Income • Lifestyle • 1st time
density • Race/ethnicity • Geodemo-grap • Light or
• Climate • Family life hics irregular
cycle • Medium
• Heavy
Copyright ©2009 by Cengage Learning Inc. All rights reserved 31
- 32. Bases for Segmenting
LO5
Business Markets
Describe the bases for
segmenting
business markets
Copyright ©2009 by Cengage Learning Inc. All rights reserved 32
- 33. LO5 Bases for Segmenting
Business Markets
Producers
Resellers
Government
Institutions
Company Buying
Characteristics Processes
Copyright ©2009 by Cengage Learning Inc. All rights reserved 33
- 34. LO5 Bases for Segmenting
Business Markets
Company Characteristics
Geographic location
Type of company
Company size
Volume of purchase
Product use
Copyright ©2009 by Cengage Learning Inc. All rights reserved 34
- 35. LO5
Buyer Characteristics
Business customers who place
an order with the first familiar
Satisficers
supplier to satisfy product and
delivery requirements.
Business customers who
consider numerous suppliers,
both familiar and unfamiliar,
Optimizers
solicit bids, and study all
proposals carefully before
selecting one.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 35
- 36. Buyer Characteristics
Demographic characteristics
Decision style
Tolerance for risk
Confidence level
Job responsibilities
LO5 Copyright ©2009 by Cengage Learning Inc. All rights reserved
36
- 37. LO5 REVIEW LEARNING OUTCOME
Segmenting Business Markets
Company Characteristics
Producers Resellers
Governments Institutions
Buying Process
Copyright ©2009 by Cengage Learning Inc. All rights reserved 37
- 38. LO6 Steps in Segmenting a Market
List the steps involved
in segmenting markets
Copyright ©2009 by Cengage Learning Inc. All rights reserved 38
- 39. LO6 REVIEW LEARNING OUTCOME
Steps in Segmenting Markets
Select Choose Select Profile Select Design,
a market bases descriptors and target implement,
for for analyze markets maintain
study segmen- segments marketing
tation mix
1 2 3 4 5 6
Copyright ©2009 by Cengage Learning Inc. All rights reserved 39
- 40. Strategies for Selecting
LO7 Target Markets
Discuss alternative strategies
for selecting target markets
Copyright ©2009 by Cengage Learning Inc. All rights reserved 40
- 41. Strategies for Selecting
LO7
Target Markets
A group of people or
Target organizations for which an
Market
organization
designs, implements, and
maintains a marketing mix
intended to meet the needs of
that group, resulting in
mutually satisfying
exchanges.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 41
- 42. LO7 Strategies for Selecting
Target Markets
Undifferentiated Concentrated Multisegment
Strategy Strategy Strategy
Copyright ©2009 by Cengage Learning Inc. All rights reserved 42
- 43. LO7 Undifferentiated Targeting Strategy
Undifferentiated A marketing approach that
Targeting views the market as one big
Strategy market with no individual
segments and thus
requires a single
marketing mix.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 43
- 44. LO7
Undifferentiated Targeting Strategy
Advantage:
Potential savings on production
and marketing costs
Disadvantages:
Unimaginative product offerings
Undifferentiated Company more susceptible to
Strategy competition
Copyright ©2009 by Cengage Learning Inc. All rights reserved 44
- 45. LO7 Concentrated Targeting Strategy
Concentrated A strategy used to select one
Targeting Strategy segment of a market for
targeting marketing efforts.
Niche
One segment of a
market.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 45
- 46. LO7
Concentrated Targeting Strategy
Advantages:
Concentration of resources
Meets narrowly defined
segment
Small firms can compete
Strong positioning
Disadvantages:
Segments too small, or
Concentrated changing
Large competitors may
Strategy
market to niche segment
Copyright ©2009 by Cengage Learning Inc. All rights reserved 46
- 47. LO7 Multisegment Targeting Strategy
Multisegment A strategy that chooses two or
Targeting more well-defined market
Strategy segments and develops a
distinct marketing
mix for each.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 47
- 48. LO7 Multisegment Targeting Strategy
Advantages:
Greater financial success
Economies of scale
Disadvantages:
High costs
Cannibalization
Multisegment
Strategy
Copyright ©2009 by Cengage Learning Inc. All rights reserved 48
- 49. LO7 Costs of Multisegment Targeting
Product design costs
Production costs
Promotion costs
Inventory costs
Marketing research costs
Management costs
Cannibalization
Copyright ©2009 by Cengage Learning Inc. All rights reserved 49
- 50. LO7
Cannibalization
Situation that occurs when
Cannibalization sales of a new product cut into
sales of a firm’s existing
products.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 50
- 51. LO7 REVIEW LEARNING OUTCOME
Alternatives for Selecting Target Markets
Undifferentiated Multisegment Concentrated
Copyright ©2009 by Cengage Learning Inc. All rights reserved 51
- 52. LO8 One-to-One Marketing
Explain one-to-one marketing
Copyright ©2009 by Cengage Learning Inc. All rights reserved 52
- 53. LO8
One-to-One Marketing
One-to-One An individualized marketing
Marketing method that utilizes
customer information to
build long-
term, personalized, and
profitable relationships with
each customer.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 53
- 54. LO8 One-to-One Marketing
One-to-One
Has a Goal of…
Marketing is...
Individualized Cost Reduction
Information-Intensive Customer Retention
Long-Term Increased Revenue
Personalized Customer Loyalty
54
Copyright ©2009 by Cengage Learning Inc. All rights reserved
- 55. LO8
One-to-One Marketing
Trends
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.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 55
- 56. LO8 REVIEW LEARNING OUTCOME
One-to-One Marketing
Copyright ©2009 by Cengage Learning Inc. All rights reserved 56
- 57. LO9 Positioning
Explain how and why firms
implement positioning
strategies and how
product differentiation
plays a role
Copyright ©2009 by Cengage Learning Inc. All rights reserved 57
- 58. LO9
Positioning
Positioning Developing a specific marketing
mix to influence potential
customers’ overall perception of a
brand, product line, or organization
in general.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 58
- 59. Positioning of Procter & Gamble
LO9
Detergents
Brand Positioning Market
Share
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
Copyright ©2009 by Cengage Learning Inc. All rights reserved
- 60. 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
LO9 60
Copyright ©2009 by Cengage Learning Inc. All rights reserved
- 61. LO9
Product Differentiation
Product A positioning strategy that
Differentiation some firms use to distinguish
their products from those of
competitors.
Distinctions can be real or
perceived.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 61
- 62. LO9
Perceptual Mapping
Perceptual A means of displaying or
Mapping graphing, in two or more
dimensions, the location of
products, brands, or groups of
products in customers’ minds.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 62
- 63. Perceptual Mapping
LO9
Copyright ©2009 by Cengage Learning Inc. All rights reserved 63
- 64. LO9
Positioning Bases
Attribute
Price and Quality
Use or Application
Product User
Product Class
Competitor
Emotion
Copyright ©2009 by Cengage Learning Inc. All rights reserved 64
- 65. LO9
Repositioning
Changing consumers’
Repositioning perceptions of a brand in relation
to competing brands.
Copyright ©2009 by Cengage Learning Inc. All rights reserved 65
- 66. LO9 REVIEW LEARNING OUTCOME
Positioning and Product Differentiation
Copyright ©2009 by Cengage Learning Inc. All rights reserved 66