MKTG

1. MKTG Lamb, Hair, McDaniel 2008-2009 7 CHAPTER Segmenting and Targeting Markets Designed by Amy McGuire, B-books, Ltd. Prepared by Deborah Baker, Texas Christian University

2. Learning Outcomes Describe the characteristics of markets and market segments Explain the importance of market segmentation Discuss criteria for successful market segmentation Describe the bases commonly used to segment consumer markets Describe the bases for segmenting business markets LO1 LO2 LO3 LO4 LO5

3. Learning Outcomes List the steps involved in segmenting markets Discuss alternative strategies for selecting target markets Explain one-to-one marketing Explain how and why firms implement positioning strategies and how product differentiation plays a role LO6 LO7 LO8 LO9

4. A Market Is... people or organizations with needs or wants, and with the ability and the willingness to buy. A group of people that lacks any one of these characteristics is not a market. LO1

5. 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. Market Segmentation LO1

6. The Concept of Market Segmentation LO1

7. 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 LO2

8. Market segmentation More precise definition of customers needs and wants More accurate marketing objectives Improved resource allocation Better marketing results REVIEW LEARNING OUTCOME LO2 The Importance of Market Segmentation

9. Substantiality Segment must be large enough to warrant a special marketing mix. Identifiabilityand 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. Criteria for Segmentation LO3

10. REVIEW LEARNING OUTCOME LO3 Successful Market Segmentation Usefulsegment? • Substantial • Identifiable and measurable • Accessible • Responsive Then, yes: Useful segmentation scheme

11. SegmentationBases Bases for Segmenting Consumer Markets Characteristics of individuals, groups, or organizations used to divide a total market into segments. (variables) LO4

12. Bases for Segmentation Geography Demographics Psychographics Benefits Sought Usage Rate LO4

13. Region of the country or world Market size Market density Climate Geographic Segmentation LO4

14. 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 LO4

15. Age Gender Income Ethnic background Family life cycle Demographic Segmentation LO4

16. 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 Ethnic Segmentation LO4

17. Family Life Cycle Age MaritalStatus Children LO4

18. Family Life Cycle LO4

19. Market segmentation on the basis of personality, motives, lifestyles, and geodemographics. Psychographic Segmentation PsychographicSegmentation LO4

20. Personality Motives Lifestyles Geodemographics http://www.marthastewart.comhttp://www.goodhousekeeping.com Online Bases for Psychographic Segmentation LO4

21. How time is spent Importance of things around them Beliefs Socioeconomic characteristics Lifestyle Segmentation LO4

22. Geodemographic Segmentation Geodemographic Segmentation Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation. LO4

23. Benefit Segmentation The process of grouping customers into market segments according to the benefits they seek from the product. Benefit Segmentation LO4

24. Usage-RateSegmentation Dividing a market by the amount of product bought or consumed. 80/20Principle A principle holding that 20 percent of all customers generate 80 percent of the demand. Benefit Segmentation LO4

25. Geography Demographics Psychographics Benefits Usage Rate • Region • Market size • Marketdensity • Climate • Age • Gender • Income • Race/ethnicity • Family life cycle • Personality • Motives • Lifestyle • Geodemo-graphics • Benefitssought • Former • Potential • 1st time • Light orirregular • Medium • Heavy REVIEW LEARNING OUTCOME LO4 Bases for Segmenting Consumer Markets

26. Producers Resellers Government Institutions Bases for Segmenting Business Markets LO5 Company Characteristics Buying Processes

27. Company Characteristics Bases for Segmenting Business Markets LO5 • Geographic location • Type of company • Company size • Volume of purchase • Product use

28. Satisficers Business customers who place an order with the first familiar supplier to satisfy product and delivery requirements. Optimizers Business customers who consider numerous suppliers, both familiar and unfamiliar, solicit bids, and study all proposals carefully before selecting one. Buyer Characteristics LO5

29. Demographic characteristics Decision style Tolerance for risk Confidence level Job responsibilities Buyer Characteristics LO5

30. Company Characteristics Producers Resellers Governments Institutions Buying Process REVIEW LEARNING OUTCOME LO5 Segmenting Business Markets

31. Select a market for study Choosebasesfor segmen-tation Selectdescriptors Profileandanalyzesegments Selecttargetmarkets Design,implement,maintainmarketingmix REVIEW LEARNING OUTCOME LO6 Steps in Segmenting Markets

32. Strategies for Selecting Target Markets LO7 TargetMarket 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.

33. Strategies for Selecting Target Markets Undifferentiated Strategy Concentrated Strategy Multisegment Strategy LO7

34. Undifferentiated Targeting Strategy UndifferentiatedTargetingStrategy A marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix. LO7

35. Undifferentiated Strategy Undifferentiated Targeting Strategy Advantage: • Potential savings on production and marketing costs Disadvantages: • Unimaginative product offerings • Company more susceptible to competition LO7

36. Concentrated Targeting Strategy ConcentratedTargeting Strategy A strategy used to select one segment of a market for targeting marketing efforts. NicheOne segment of a market. LO7

37. Concentrated Strategy Concentrated Targeting Strategy Advantage: • 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 LO7

38. MultisegmentTargeting Strategy A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each. MultisegmentTargetingStrategy LO7

39. Multisegment Strategy MultisegmentTargeting Strategy Advantage: • Greater financial success • Economies of scale Disadvantages: • High costs • Cannibalization LO7

40. Multisegment Strategy Costs of Multisegment Targeting • Product design costs • Production costs • Promotion costs • Inventory costs • Marketing research costs • Management costs • Cannibalization LO7

41. Situation that occurs when sales of a new product cut into sales of a firm’s existing products. Cannibalization Cannibalization LO7

42. Undifferentiated Multisegment Concentrated REVIEW LEARNING OUTCOME LO7 Alternatives for Selecting Target Markets

43. An individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer. One-to-One Marketing One-to-One Marketing LO8

44. One-to-One Marketing is... Has a Goal of… Cost Reduction Individualized Customer Retention Information-Intensive Increased Revenue Long-Term Personalized Customer Loyalty One-to-One Marketing LO8

45. One-size-fits all marketing no longer effective • Direct and personal marketing will grow to meet needs of busy consumers. • Consumers will be loyal to companies that have earned—and reinforced—their loyalty. • Mass-media approaches will decline as technology allows better customer tracking. One-to-One Marketing Trends LO8

46. REVIEW LEARNING OUTCOME LO8 One-to-One Marketing

47. Positioning Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. LO9

48. Brand Positioning MarketShare 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% LO9 Ivory Snow Fabric & skin safety on baby clothes 0.7% Ariel Tough cleaner, aimed at Hispanic market 0.1% Positioning of Procter & Gamble Detergents LO9

49. Assess the positions occupied by competing products Determine the dimensions underlying these positions Choose a market position where marketing efforts will have the greatest impact Effective Positioning LO9

50. Product Differentiation A positioning strategy that some firms use to distinguish their products from those of competitors. Distinctions can be real or perceived. Eat Fresh! LO9