Marketing Concepts Market Segmentation

1. MarketingConceptsMarket Segmentation MKTG 3110-004 Spring 2014 Mrs. Tamara L. Cohen Class #14

2. KEY TERMS Market segments Market segmentation Product differentiation Product positioning / repositioning

3. KEY CONCEPTS Perceptual map 80/20 rule Usage rate

4. Why segment? Companies divide large heterogeneous markets into smaller segments that can be reached more efficiently & effectively with products & services that match their unique needs. Different markets have different needs. One-size-fits-all mass markets are gone. Product differentiation is used for different markets.

5. How to segment? • ONE product & MULTIPLE segments

6. How to segment? • MULTIPLE products & MULTIPLE segments P&G sells 7 brands of laundry detergent in the US - these brands compete with each other on same supermarket shelves - customers want different mixes of benefits, e.g. economy, bleaching power, fabric softening, fresh smell, strength/mildness, lots of/few suds - different priorities for each benefit - 2-tier segmentation strategy vs & - “shotgun” (scattered) approach versus “rifle” (focused) approach

7. How to segment? • Segments of ONE: Mass Customization BMW uses Just-In-Time manufacturing to customize cars in 10 days • Dell uses Built-To-Order systems • computer manufacturing line restricted to a few basic models that can be assembled in 4 minutes • good (but limited) choice + quick delivery

8. Segmentation trade-off: Synergy versus Cannibalization

9. Ways to segment • Geographic • Demographic • Psychographic • Behavioral

10. Ways to segment • Geographic – nation, region, city, neighborhood e.g. Campbell’s sells gumbo soup in Louisiana & Mississippi – people living in the same geographic area often show similar buying patterns – reinforced by local weather, environment, culture

11. Ways to segment • Demographic – age, gender, family size, life cycle, race, income, occupation, religion, education, generation, nationality – most common basis of segmentation • e.g. most US households have 1-2 people, so Campbell’s packaged meals contain 1-2 servings

12. Ways to segment • Psychographic – social class, lifestyle, personality e.g. Pottery Barn customers want furniture that meshes with their lifestyles

13. Ways to segment • Behavioral – customer knowledge, attitudes, uses or responses to a product e.g. occasion (breakfast - orange juice) benefits sought (P&G detergent) loyalty (brands, stores, companies; completely or somewhat loyal) usage rate (light, medium, heavy - fast food)

14. Product Positioning = the way the product is defined by consumers on important attributes • the place the product occupies in consumers’ minds relative to competitive products • e.g. Tide is positioned as a powerful, all-purpose, detergent; Ivory Snow is positioned as a gentle detergent for fine washables & baby clothes • product repositioning • position by differentiation or head-to-head

15. Repositioning The strategy American dairies are using to reposition chocolate milk to reach adults

16. Mapping Segments Perceptual map = graphing the locations of products or brands in consumers’ minds TASK: Position car companies / major brands on a perceptual map. • y-axis: Classy/Distinctive – Practical/Affordable • X-axis: Conservative – Sporty • Cars positioned close to each other are seen as similar on the relevant dimensions by the consumer • e.g. Consumers see Buick, Chrysler & Oldsmobile as similar. They are close competitors and form a competitive grouping.

17. Mapping Segments Classy Distinctive Conservative Sporty Practical Affordable

18. Mapping Segments

19. Next classMar.10: Midterm Exam Preparation: Study power points, your own notes, assignments & assigned readings for each class.