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Segmenting and Targeting Markets

Segmenting and Targeting Markets. 7. chapter. Prepared by Deborah Baker Texas Christian University. Learning Objectives. 1. Describe the characteristics of markets and market segments. 2. Explain the importance of market segmentation.

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Segmenting and Targeting Markets

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  1. Segmenting and Targeting Markets 7 chapter Prepared by Deborah Baker Texas Christian University Chapter 7 Version 6e

  2. Learning Objectives 1. Describe the characteristics of markets and market segments. 2. Explain the importance of market segmentation. 3. Discuss criteria for successful market segmentation. 7 chapter Chapter 7 Version 6e

  3. Learning Objectives (continued) 4. Describe the bases commonly used to segment consumer markets. 5. Describe the bases for segmenting business markets. 6. List the steps involved in segmenting markets. 7 chapter Chapter 7 Version 6e

  4. Learning Objectives (continued) 7. Discuss alternative strategies for selecting target markets. 8. Explain how and why firms implement positioning strategies and how product differentiation plays a role. 9. Discuss global market segmentation and targeting issues. 7 chapter Chapter 7 Version 6e

  5. 1 Learning Objective Describe the characteristics of markets and market segments. Chapter 7 Version 6e

  6. Market People or organizations with needs or wants and the ability and willingness to buy Market Segment A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. Market Segmentation The process of dividing a market into meaningful, relatively similar, identifiable segments or groups. 1 Market Segmentation Chapter 7 Version 6e

  7. 1 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. Chapter 7 Version 6e

  8. 2 Learning Objective Explain the importance of market segmentation. Chapter 7 Version 6e

  9. 2 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 Competitive Advantage Chapter 7 Version 6e

  10. 3 Learning Objective Discuss criteria for successful market segmentation. Chapter 7 Version 6e

  11. Criteria for Market Segments Substantiality Identifiability Accessibility Responsiveness 3 Criteria for Successful Segmentation Chapter 7 Version 6e

  12. Substantiality Segment must be large enough to warrant a special marketing mix. Identifiability Measurability Segments must be identifiable and their size measurable. Accessibility Members of targeted segments must be reachable with marketing mix. Responsiveness Unless segment responds to a marketing mix differently, no separate treatment is needed. 3 Criteria for Segmentation Chapter 7 Version 6e

  13. 4 Learning Objective Describe the bases commonly used to segment consumer markets. Chapter 7 Version 6e

  14. 4 Segmentation Bases Characteristics of individuals, groups, or organizations used to divide a total market into segments. (variables) Chapter 7 Version 6e

  15. Geography Demographics Bases Used toSegmentConsumerMarkets Psychographics Benefits Sought Usage Rate 4 Bases for Segmentation Chapter 7 Version 6e

  16. 4 Geographic Segmentation Segmenting markets by region of the country or world, market size, market density, or climate. Chapter 7 Version 6e

  17. 4 Geographic Segmentation • Region of the country or world • Market size • Market density • Climate Chapter 7 Version 6e

  18. 4 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 • React more quickly to competition Chapter 7 Version 6e

  19. 4 Demographic Segmentation Segmenting markets by age, gender, income, ethnic background, and family life cycle Chapter 7 Version 6e

  20. 4 Bases for Demographic Segmentation • Age • Gender • Income • Ethnic background • Family Life Cycle Chapter 7 Version 6e

  21. 4 Ethnic Background • Largest ethnic markets are: African-American Hispanic-American Asian-American • Will comprise 1/3 of U.S. population by 2010 with buying power of a trillion dollars Chapter 7 Version 6e

  22. 4 Family Life Cycle Age MaritalStatus Children Chapter 7 Version 6e

  23. 4 Psychographic Segmentation Market segmentation on the basis of personality, motives, lifestyles, and geodemographics. Chapter 7 Version 6e

  24. PsychographicSegmentation Personality Motives Lifestyles Geodemographics 4 Bases for Psychographic Segmentation Chapter 7 Version 6e

  25. 4 Lifestyle Segmentation • How time is spent • Beliefs • Socioeconomic characteristics Chapter 7 Version 6e

  26. 4 Geodemographic Segmentation Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation. Chapter 7 Version 6e

  27. Status- oriented Action- oriented Principle- oriented Abundant Resources Actualizers Experi-encers Achievers Fulfillers Makers Believers Strivers Minimal Resources Strugglers 4 VALS 2 Dimensions Chapter 7 Version 6e

  28. 4 Benefit Segmentation The process of grouping customers into market segments according to the benefits they seek from the product . Chapter 7 Version 6e

  29. 4 Usage-Rate Segmentation Dividing a market by the amount of product bought or consumed. Chapter 7 Version 6e

  30. 4 The 80/20 Principle A principle holding that 20 percent of all customers generate 80 percent of the demand. 80/20 Chapter 7 Version 6e

  31. 5 Learning Objective Describe the bases for segmenting business markets. Chapter 7 Version 6e

  32. 5 Macrosegmentation The process of dividing business markets into segments based on general characteristics such as geographic location, customer type, customer size, and product use. Chapter 7 Version 6e

  33. 5 Microsegmentation The process of dividing business markets into segments based on the characteristics of decision-making units within a macrosegment. Chapter 7 Version 6e

  34. Geographic Customer Type Macro- segmentation Customer Size Business Markets Product Use Purchasing Criteria Purchasing Strategy Micro- segmentation Importance Personal Characteristics 5 Business Marketing Segmentation Chapter 7 Version 6e

  35. 6 Learning Objective List the steps involved in segmenting markets. Chapter 7 Version 6e

  36. Select a market for study Choosebasesfor segmen-tation Selectdescrip-tors Profileandanalyzesegments Selecttargetmarkets Design,imple-ment,maintainmktingmix 6 Steps in Segmenting a Market Chapter 7 Version 6e

  37. 7 Learning Objective Discuss alternative strategies for selecting target markets. Chapter 7 Version 6e

  38. 7 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. Chapter 7 Version 6e

  39. Undifferentiated Strategy Concentrated Strategy Multisegment Strategy 7 Strategies for SelectingTarget Markets Chapter 7 Version 6e

  40. 7 Undifferentiated Targeting Strategy Marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix. Chapter 7 Version 6e

  41. 7 Undifferentiated Targeting Strategy • Advantages: • Potential savings on production and marketing costs Disadvantages: • Unimaginative product offerings • Company more susceptible to competition Chapter 7 Version 6e

  42. 7 Concentrated Targeting Strategy A strategy used to select one segment of a market for targeting marketing efforts. Chapter 7 Version 6e

  43. 7 Niche One segment of a market. Chapter 7 Version 6e

  44. 7 Concentrated Targeting Strategy • Advantages: • 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 Chapter 7 Version 6e

  45. 7 Multisegment Targeting Strategy A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each. Chapter 7 Version 6e

  46. 7 Multisegment Targeting Strategy • Advantages: • Greater financial success • Economies of scale Disadvantages: • High costs • Cannibalization Chapter 7 Version 6e

  47. Product design costs • Production costs • Promotion costs • Inventory costs • Marketing research costs • Management costs • Cannibalization 7 Costs of Multisegment Targeting Chapter 7 Version 6e

  48. 7 Cannibalization Situation that occurs when sales of a new product cut into sales of a firm’s existing products. Chapter 7 Version 6e

  49. 8 Learning Objective Explain how and why firms implement positioning strategies and how product differentiation plays a role. Chapter 7 Version 6e

  50. 8 Positioning Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. Chapter 7 Version 6e

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