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CHAPTER SIX

CHAPTER SIX. SEGMENTING AND TARGETING MARKETS. Prepared by Jack Gifford Miami University (Ohio). WHAT IS A MARKET?.

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CHAPTER SIX

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  1. CHAPTER SIX SEGMENTING AND TARGETING MARKETS Prepared by Jack Gifford Miami University (Ohio) 2001 South-Western College Publishing

  2. WHAT IS A MARKET? • 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. QUALIFIERS ABILITY WILLINGNESS AUTHORITY INDIVIDUALS ORGANIZATIONS NEEDS WANTS PRODUCTS SERVICES 2001 South-Western College Publishing

  3. TYPES OF MARKETS? • CONSUMER: Intend to consume or benefit, but not to make a profit • ORGANIZATIONAL: • Resale • Direct use in production • Use in daily operations 2001 South-Western College Publishing

  4. THE IMPORTANCE OF MARKET SEGMENTATION • Market segmentation plays a key role in the marketing strategy of almost all successful organizations. • Because market segments differ in size and potential, segmentation helps decision makers more accurately define marketing objectives and better allocate resources. 2001 South-Western College Publishing

  5. MARKET SEGMENTATION • There are very few products which can be sold to all people or organizations. Therefore, marketers must segment potential customers into subsets, or target markets that can be effectively and efficiently reached. • A viable target market must be… 2001 South-Western College Publishing

  6. VIABLE TARGET MARKETS • IDENTIFIABLE • MEASURABLE • ACCESSIBLE • SUBSTANTIAL • RESPONSIVE 2001 South-Western College Publishing

  7. MARKET SEGMENTATION • Almost any variable may be used as a segmentation variable as long as the marketer remembers… • Not all buyers are alike • Meaningful sub groups must have similar purchasing motives • Every time a marketer adds another segmentation dimension, the market gets smaller 2001 South-Western College Publishing

  8. MAYBE I WON’T SEGMENT MY MARKET AT ALL • MASS MARKETING • + Economies of scale • + Appropriate if all consumers have the same needs and wants • + Simplicity • ------------------------------------- • Ideal method IF all consumers have identical purchasing motives. Reality = RARELY HAPPENS 2001 South-Western College Publishing

  9. DEVELOPING A TARGET MARKET STRATEGY • Analyze consumer demand • Segment the market into like clusters • Select one or more segments to target with a specific marketing mix • Position the product or service so that it is perceived by each target market segment as satisfying their needs better than the opposition. 2001 South-Western College Publishing

  10. Geographic segmentation Demographic segmentation Family Life-Style segmentation Psychographic segmentation Behavioral segmentation Occasions Benefits sought User rates Loyalty Personal characteristics Multi-dimensional cross-classification segmentation matrices COMMON CONSUMER MARKET SEGMENTATON BASES 2001 South-Western College Publishing

  11. GEOGRAPHIC USA / JAPAN / AUSTRALIA SMALL TOWNS TOURIST DESTINATIONS RURAL LIVING CLIMATE POPULATION DENSITY DEMOGRAPHICS MARITAL STATUS INCOME EDUCATION OCCUPATION ETHNIC GENDER AGE RELIGION GEOGRAPHIC AND DEMOGRAPHIC SEGMENTATION 2001 South-Western College Publishing

  12. FAMILY LIFE STYLE SINGLE YOUNG MARRIED W/O CHILDREN YOUNG MARRIED WITH CHILDREN MIDDLE AGED MARRIED WITH CHILDREN MIDDLE AGED MARRIED W/O DEPENDENT CHILDREN OLDER MARRIED OLDER UNMARRIED DIVORCED WITH CHILDREN DIVORCED WITHOUT CHILDREN YOUNG MIDDLE AGED OLD FAMILY LIFE STYLE SEGMENTATION 2001 South-Western College Publishing

  13. PSYCHOGRAPHIC SEGMENTATION • PERSONALITY • MOTIVES • LIFESTYLES • VALUES • ATTITUDES • BELIEFS • PERCEPTIONS OF RISK • REFERENCE GROUPS • NEEDS • VALS2 • RESOURCES • SELF-ORIENTATION 2001 South-Western College Publishing

  14. BEHAVIORAL SEGMENTATION • BENEFIT SEGMENTATION • USAGE SEGMENTATION • LOYALTY SEGMENTATION • Nutrition, taste, calories, value to price, alcohol content, longevity, etc. • Light, medium or heavy user; purchase pattern, how product is used, family or economy size vs singles, etc. • Level of brand, company, family of brands, store loyalty; situation specific brand loyalty 2001 South-Western College Publishing

  15. THE 80/20 PRINCIPLE • 20% OF YOUR CUSTOMERS ACCOUNT FOR 80% OF YOUR PROFITABLE SALES. 2001 South-Western College Publishing

  16. MUST ALSO AVOID THE MAJORITY FALLICY • Some marketers blindly pursue the largest and most visible target markets and miss very attractive niche markets PETITES JUNIORS MISSES XLT 2001 South-Western College Publishing

  17. BASIS FOR SEGMENTING BUSINESS MARKETS • PRODUCERS • RESELLERS • INSTITUTIONS • GOVERNMENT Marketers further divide one or more of these segments into microsegmentation or macrosegmentation variables 2001 South-Western College Publishing

  18. MACROSEGMENTATION VARIABLES • Geographic location • Customer type • Customer size • Product use For example, Home Depot (retailer) targets two principal segments: Professionals DIY Consumers 2001 South-Western College Publishing

  19. MICROSEGMENTATION EXAMPLES • Key purchasing criteria • Purchasing strategies • Importance of purchase • Personal characteristics • Technical support • Product quality • Satisficers • Optimizers • Routine & small • Major expenditure 2001 South-Western College Publishing

  20. Personal characteristics Demographics Decision style Tolerance for risk Confidence level Job responsibilities MICROSEGMENTATION 2001 South-Western College Publishing

  21. STEPS IN SEGMENTING A MARKET • Select a market or product category for study • Choose a basis or bases for segmenting the market • Select the specific segmentation variables for use (descriptors) • Profile and evaluate segment(s) • Size • Expected growth • Purchase frequency • Current brand usage • Brand loyalty • Long-term sales and profit potential 2001 South-Western College Publishing

  22. STEPS IN SEGMENTING A MARKET • Select the target market(s) • Design, implement and maintain appropriate marketing mixes (product, price, promotion, distribution) Steps five and six are actually marketing activities that follow market segmentation, but are natural outcomes of the segmentation process. 2001 South-Western College Publishing

  23. UNDIFFERENTIATED CONCENTRATED MULTISEGMENT Sale of barley, oats or wheat by College Corner Cooperative (undifferentiated product to any buyers) Marketing of Skool 17” electric chainsaws to Sears for home use by consumers (differentiated product to fill specific need Dell Optiplex Gxi with custom configuration to student market ALTERNATIVE STRATEGIES 2001 South-Western College Publishing

  24. POSITIONING AND PERCEPTUAL MAPPING( IN CONSUMER’S MIND RELATIVE TO ALTERNATIVES) HOTELS What two dimensions are the most important to a female business executive when selecting a hotel? • Price • Cleanliness • Recreational facilities • Room amenities • In-house food service • Location • Parking facilities • Safety • Other ??? 2001 South-Western College Publishing

  25. PERCEPTUAL MAP: HOTELS • Days Inn/AmeriHost • Embassy Suites • Holiday Inn • Holiday Express • Howard Johnson • Hyatt Using your two dimensions, where would you place on this perceptual map each of these hotels? 2001 South-Western College Publishing

  26. REPOSITIONING • Sometimes a firm finds itself in a quadrant of the perceptual map that has become saturated with competing customers. In this case the company may choose to REPOSITION itself in a less competitive quadrant to draw customers who value other product or service attributes 2001 South-Western College Publishing

  27. GLOBAL SEGMENTATION STARBUCKS COFFEE IN JAPAN? YOGURT ON THE IVORY COAST? AN EXAMPLE FROM YOUR INTERNATIONAL TRAVELS? 2001 South-Western College Publishing

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