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Chapter 4 Segmenting and targeting markets. Learning objectives. 1 Describe the characteristics of markets and market segments 2 Explain the importance of market segmentation 3 List the steps involved in segmenting markets 4 Describe the bases commonly used to segment consumer markets

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learning objectives
Learning objectives

1 Describe the characteristics of markets and market segments

2 Explain the importance of market segmentation

3 List the steps involved in segmenting markets

4 Describe the bases commonly used to segment consumer markets

5 Describe the bases for segmenting business markets

learning objectives cont
Learning objectives (cont.)

6 Discuss the criteria for successful market segmentation

7 Discuss alternative strategies for selecting target markets

8 Explain how and why organisations implement positioning strategies and how product differentiation plays a role

9 Discuss global market segmentation and targeting issues

learning objective 1
Learning objective 1

Describe the characteristics of markets and market segments

Define the term marketing

market segmentation

1

Market segmentation

Market

People or organisations with needs or wants and the ability and willingness to buy.

Market

segment

A subgroup of people or organisations 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 and identifiable segments or groups.

learning objective 2
Learning objective 2

Describe four marketing management philosophies.

Explain the importance of market segmentation

the importance of market segmentation

2

The importance of market segmentation
  • Nearly all markets include people with different product needs and preferences.
  • It helps to define needs and wants more precisely.
  • Decision-makers can define objectives and allocate resources more accurately.
  • More precise objectives = better evaluation of performance.
learning objective 3
Learning objective 3

Describe four marketing management philosophies.

List the steps involved in segmenting markets

steps in segmenting a market

3

Steps in segmenting a market
  • Select a market for study.
  • Choose bases for segmentation.
  • Select descriptors.
  • Profile and analyse segments.
  • Select target markets.
  • Design, implement and maintain marketing mix.
learning objective 4
Learning objective 4

Describe the bases commonly used to segment consumer markets

segmentation bases

4

Segmentation bases

Characteristics of individuals, groups or organisations used

to divide a total market

into segments (variables).

bases for segmentation

4

Bases for segmentation
  • Geography
  • Demographics
  • Psychographics
  • Benefits sought
  • Usage rate
geographic segmentation

4

Geographic segmentation

Segmenting markets by region of the country or world, market size, market density or climate.

geographic segmentation1

4

Geographic segmentation
  • Region of the country or world
  • Market size
  • Market density
  • Climate
benefits of regional segmentation

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.
demographic segmentation

4

Demographic segmentation

Segmenting markets by age, gender, income, ethnic background and family life cycle.

bases for demographic segmentation

4

Bases for demographic segmentation
  • Age
  • Gender
  • Income
  • Ethnic background
  • Family life cycle
family life cycle

4

Family life cycle
  • Age
  • Marital status
  • Children
psychographic segmentation

4

Psychographic segmentation

Market segmentation on the basis of personality, motives, lifestyles and geodemographics.

bases for psychographic segmentation

4

Bases for psychographic segmentation
  • Personality
  • Motives
  • Lifestyles
  • Geodemographics
lifestyle segmentation

4

Lifestyle segmentation
  • How time is spent
  • Beliefs
  • Socioeconomic characteristics
geodemographic segmentation

4

Geodemographic segmentation

Segmenting potential customers into neighborhood lifestyle categories.

Combines geographic, demographic and lifestyle segmentation.

benefit segmentation

4

Benefit segmentation

The process of grouping customers into market segments according to the benefits they seek from the product.

usage rate segmentation

4

Usage-rate segmentation

Dividing a market by the amount of product bought or consumed.

the 80 20 principle
The 80/20 principle

A principle holding that 20 per cent of all customers generate 80 per cent of the demand.

learning objective 5
Learning objective 5

Describe the bases for segmenting business markets

macrosegmentation

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.

microsegmentation

5

Microsegmentation

The process of dividing business markets into segments based on the characteristics of decision-making units within a macrosegment.

business marketing segmentation

5

Business marketing segmentation

Geographic

Customer type

Macro-

segmentation

Customer size

Business

markets

Product use

Purchasing criteria

Purchasing strategy

Micro-

segmentation

Importance

Personal

characteristics

learning objective 6
Learning objective 6

Discuss the criteria for successful market segmentation

criteria for successful segmentation

6

Criteria for successful segmentation
  • Substantiality
  • Identifiability
  • Accessibility
  • Responsiveness
criteria for segmentation

6

Criteria for segmentation

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.

learning objective 7
Learning objective 7

Discuss alternative strategies for selecting target markets

target market

7

Target market

A group of people or organisations for which an organisation designs, implements and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.

strategies for selecting target markets

Undifferentiated

strategy

Concentrated

strategy

Multi-segment

strategy

7

Strategies for selectingtarget markets
undifferentiated targeting strategy

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.

undifferentiated targeting strategy cont

7

Undifferentiated targeting strategy (cont.)

Advantages:

  • Potential savings on production and marketing costs

Disadvantages:

  • Unimaginative product offerings
  • Company more susceptible to competition
concentrated targeting strategy

7

Concentrated targeting strategy

A strategy used to select one segment of a market for targeting marketing efforts.

niche

7

Niche

One segment of a market.

concentrated targeting strategy cont

7

Concentrated targeting strategy (cont.)
  • 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
multi segment targeting strategy

7

Multi-segment targeting strategy

A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.

multi segment targeting strategy cont

7

Multi-segment targeting strategy (cont.)
  • Advantages:
    • Greater financial success
    • Economies of scale
  • Disadvantages:
    • High costs
    • Cannibalisation
costs of multi segment targeting

7

Costs of multi-segment targeting
  • Product design costs
  • Production costs
  • Promotion costs
  • Inventory costs
  • Marketing research costs
  • Management costs
  • Cannibalisation
learning objectives 8
Learning objectives 8

Explain how and why organisations implement positioning strategies and how product differentiation plays a role

positioning

8

Positioning

Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line or organisation in general.

position

8

Position

The place a product, brand or group of products occupies in consumers’ minds relative to competing offerings.

effective positioning

8

Effective positioning
  • Assess the positions of competing products.
  • Determine the dimensions of these positions.
  • Choose an effective market position.
product differentiation

8

Product differentiation

A positioning strategy that some firms use to distinguish their products from those of competitors.

perceptual mapping

8

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.

perceptual mapping levi s

High price

Red TabElesco

Red Line

Vintage

Classic

Designer

Old product

New product

Low price

8

Perceptual mapping – Levi’s

Slates

Red Tab

Dry Goods

DockersPremium

Silver Tab

501

L2

Dockers

Classics

Red TabBasics

positioning bases

8

Positioning bases
  • Attribute
  • Price and quality
  • Use or application
  • Product user
  • Product class
  • Competitor
repositioning

8

Repositioning

Changing consumers’ perceptions of a brand in relation to competing brands.