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Market Segmentation. Segmentation, Targeting, Positioning. Markets people and institutions with: willingness to buy purchasing power authority to buy. Types of Markets. Classified by: purchaser reasons for buying the goods Consumer products

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segmentation targeting positioning
Segmentation, Targeting, Positioning
  • Markets
    • people and institutions with:
      • willingness to buy
      • purchasing power
      • authority to buy
types of markets
Types of Markets
  • Classified by:
    • purchaser
    • reasons for buying the goods
  • Consumer products
    • goods/services purchased by the ultimate consumer for personal use
  • Business products
    • products used, either directly or indirectly,
types of markets cont
Types of Markets (cont)
  • Business products (cont)
    • in the production of other goods and services for resale
  • Commercial products
    • industrial products not directly used in producing other products
the role of market segmentation
The Role of Market Segmentation
  • Market Segmentation
    • process of dividing the total market into several homogeneous groups
    • no single marketing mix can satisfy everyone
    • separate mixes are used for different market segments
    • cannot be used in all cases
basic requirements of segmentation
Basic Requirements of Segmentation
  • Market segments must be measurable in terms of both purchasing power and size
  • Marketeers must be able to effectively promote to and serve a market segment
  • Market segments must be sufficiently large to be potentially profitable
  • Number of segments must match the firm’s capabilities
segmenting consumer markets
Segmenting Consumer Markets
  • Geographic Segmentation
    • dividing overall market into homogeneous groups on basis of population location
  • Demographic Segmentation
    • dividing overall market into homogeneous groups based on characteristics such as:
      • age gender income level
      • occupation education household size
      • stage in the family life cycle
segmenting consumer markets8
Segmenting Consumer Markets
  • Psychographic Segmentation
    • utilizing behavioral profiles developed from analysis of:
      • activities opinions
      • interests lifestyles
  • Product-Related Segmentation
    • dividing a population into homogeneous groups based on characteristics of the consumer’s relationship to the product
geographic segmentation
Geographic Segmentation
  • U.S. population = 268.1 MM (Census POP clock)
  • Not divided geographically evenly
  • Concentrated in large metropolitan states
  • Largest 3 states: CA, TX, NY
  • 5 smallest?
  • One of earliest segmentation bases used
geographic segmentation10
Geographic Segmentation
  • Three categories of urban data classification:
    • MSA (Metropolitan Statistical Areas)
      • freestanding urban areas with an urban center population of at least 50K
    • CMSA (Consolidated Metropolitan Statistical Areas)
      • the 25 or so urban giants such as:
        • NYC Chicago Los Angeles
geographic segmentation11
Geographic Segmentation
  • PMSA (Primary Metropolitan Statistical Areas)
    • urbanized county or counties with social and economic ties to nearby areas
  • Specific region segmentation
    • many products prone to regional preference
    • national firms develop products/marketing strategies for specific regions
geographic segmentation12
Geographic Segmentation
  • Core regions
    • Most national brands get 40-80% of sales from core regions
  • Geographic segmentation useful when:
    • differences in preferences/purchasing patterns emerge along regional lines
    • categories such as region, urban/suburban/rural, and climate are principle preference definers
geographic segmentation13
Geographic Segmentation
  • GIS Systems useful to:
    • record different layers of data on the same map
    • help businesspeople visualize marketing data
demographic segmentation
Demographic Segmentation
  • Most commonly used segmentation base
  • Focuses on variables as:
    • gender age household size income
    • occupation education lifecycle stage
  • Segmenting by gender
    • natural variable for certain markets
    • many products (magazines, fragrances,clothes) are gender-specific
demographic segmentation15
Demographic Segmentation
  • Segmenting by Gender
    • many products once considered “male-specific” now successfully marketed to women
  • Segmenting by Age
    • age distribution, projected changes in age are important because consumer needs/wants differ among groups (the cohort effect)
demographic segmentation16
Demographic Segmentation
  • Segmenting by Age
    • Generation X - 1966/1974 21% of pop
    • Baby Boomers - 1946/1965 42% of pop
    • Seniors 26% of pop
    • (33% by 2010)
    • some product markets shrink in declining age groups
      • 18-25 young adult population declining
      • requires stronger college/university ad campaigns
demographic segmentation17
Demographic Segmentation
  • Segmenting by Ethnic Group
    • U.S. population changing
    • 2050 - 1/2 of U.S. population nonwhite
    • African Americans are largest minority group - 31MM (13%)
    • Hispanics 2nd largest minority group - 28MM (10%)
      • Hispanic growth rate 4X African American; 10X whites
demographic segmentation18
Demographic Segmentation
  • Segmenting by Ethnic Group
    • Asian American population - fastest growing minority group
      • heterogeneous group
      • 12MM by 2000
  • Segmenting by Family Lifecycle Stage
    • process of family formation and dissolution
    • underlying theme is life stage, not age
    • singles, young parents, empty nesters
demographic segmentation19
Demographic Segmentation
  • Segmenting by Household Type
    • U.S. household = 5.8 persons in 1790
    • 2.7 persons in 1997
    • trend to smaller households results from:
      • lower fertility rates;singles/elderly living alone
      • tendency to postpone marriage or never marry
      • increasing desire of couples to limit number of children or remain childless
      • ease and frequency of divorce
demographic segmentation20
Demographic Segmentation
  • Segmenting by Household Type
    • important trend in last 20 years - declining % of so-called “traditional” families
      • 2 parents and their children
      • 1970 - 40% of all U.S. households
      • 1990s - 26% of all U.S. households
    • % of unmarried individuals living together has risen
      • new market segment = POSLSQ
      • people of opposite sex living in same quarters
demographic segmentation21
Demographic Segmentation
  • Segmenting by Household Type
    • DINKS (double-income, no kids) is often attractive market
    • purchase of luxury goods high
  • Engel’s laws only partially valid, but remain useful generalizations for marketing manager
psychographic segmentation
Psychographic Segmentation
  • Attempt to provide fuller, lifelike portraits of consumers than possible with demographic segmentation
  • Focuses on lifestyle
    • consumer’s mode of living
    • composite of individual’s social psychological makeup, including:
psychographic segmentation23
Psychographic Segmentation
  • Individual social psychological composite (cont)
    • needs
    • motives
    • perceptions
    • attitudes
    • family
    • job
    • social activity and culture
psychographic segmentation24
Psychographic Segmentation
  • Defined as the psychological profiles of different consumers
    • developed from asking consumers to agree or disagree with AIO statements
    • AIO statements
      • collection of several hundred statements dealing with activities, interests, and opinions individuals may hold
psychographic segmentation25
Psychographic Segmentation
    • AIO Statements (cont)
      • VALS 2 (values, attitudes, lifestyles) is a commercially available psychological segmentation system
      • developed by SRI International (1978)
  • Psychographics can be applied on a global basis
    • 5 global segments
    • cross national and cultural barriers
psychographic segmentation26
Psychographic Segmentation
  • 5 global segments:
    • strivers
    • achievers
    • the pressured
    • adapters
    • traditional
product related segmentation
Product-Related Segmentation
  • Takes several different forms:
    • segment by benefits people seek when they buy a product
    • segment by usage rates for a product
    • segment by degree of brand loyalty that consumers feel toward product
segmenting business markets
Segmenting Business Markets
  • Overall process resembles consumer markets; methods differ
  • Business-to-business segmentations:
    • demographic
    • customer type
    • application
    • purchasing situation
market segmentation decision process
Market Segmentation Decision Process
  • Five stages
    • seek bases on which to segment
    • develop relevant profiles for each segment
    • forecast market potential
    • forecast probable market share
    • select specific market segments
  • Gross vs. net vs. realizable potential
strategies for reaching target markets
Strategies for Reaching Target Markets
  • Four basic strategies for achieving consumer satisfaction
    • Undifferentiated Marketing
      • firms that produce only one product or one product line and market it to all customers with a single marketing mix
    • Differentiated Marketing
      • firms that produce numerous products with different marketing mixes designed to satisfy smaller segments
strategies for reaching target markets31
Strategies for Reaching Target Markets
  • Four basic strategies for achieving consumer satisfaction (cont)
    • Concentrated Marketing
      • focusing efforts on profitably satisfying a smaller target market
      • not attempting to market product offerings to entire market
      • also called niche marketing
      • particularly appealing to small firms that lack financial resources of larger competitors
strategies for reaching target markets32
Strategies for Reaching Target Markets
  • Four basic strategies for achieving consumer satisfaction (cont)
    • Micromarketing
      • targeting potential customers at a very basic level:
        • ZIP codes occupations
        • lifestyles individual households individuals
selecting and executing segmentation strategies
Selecting and Executing Segmentation Strategies
  • Should take into account:
    • company resources
    • homogeneity
    • stage in the product’s life cycle
    • competitors’ strategies
selecting and executing segmentation strategies34
Selecting and Executing Segmentation Strategies
  • Possible approaches - positioning to:
    • attributes price/quality competitors
    • application product user product class
  • Positioning map
    • graphically illustrates how consumers perceive competitive products within an industry
  • Repositioning
    • competitive environment/perception may require
slide35

High Resources

Actualizers

Principle Oriented

Action Oriented

StatusOriented

Fulfilleds

Achievers

Experiencers

Believers

Strivers

Makers

Low Resources

Strugglers

Figure 7.07

VALS™ 2 Network

slide36

Figure 7.9

Market Segmentation Decision Process

Identify Market Segmentation Process

Select Specific

Market Segments

Stage I

Develop a Relevant Profile for Each Segment

Do Benefits Achieve Company Goals and Justify Development?

Stage II

Stage V

Forecast Market Potential

Estimate Cost-Benefit for Each Segment

Stage III

Analyze Competitive Forces Within Each Segment

Determine Marketing Mix to Serve Each Segment

Forecast Own Market Share for Each Segment

Stage IV

slide37

Positioning Strategies

  • Based on Attributes
  • Based on Price/Quality
  • Based on Competitors
  • Based on Application
  • Based on Product User
  • Based on Product Class
slide38

Figure 7.12

Competitive Positioning Map for the Pain-Reliever Market

Age=5 +/- 5 years

Use=Fever

Gentleness

Age=70 +/- 10 years

Use=Arthritis

Tylenol

Datril

Generic

acetominophen

Extra-Strength Tylenol

Age=30 +/- 10 years

Use=Aches

Bufferin

Advil

Effectiveness

slide39

Figure 8.9

An Integrated Model of the Consumer Decision Process

  • Interpersonal Determinants
  • Cultural Influences
  • Social Influences
  • Family Influences

Problem Recognition

Search

Feedback

  • Personal Determinants
  • Needs and Motives
  • Perception
  • Attitudes
  • Learning
  • Self-Concept

Alternative Evaluation

Purchase

Purchase Act

Purchase Evaluation

slide40

Business-to-Business Segmentation Bases

  • Demographic Segmentation
    • Size
    • Geographic Location
  • Customer Type
    • Broad Categories
    • Industry
      • SIC Codes
  • End-use Application
  • Purchasing Situation
slide41

Figure 9.2

Standard Industrial Classification (SIC) System

SIC

3211510

Window and Cast Flat Glass

SIC

32110

Flat Glass

SIC

3210

Glass Products

SIC

320

Stone, Clay and Glass Products

SIC

32

Stone, Clay, Glass and ConcreteProducts

SIC

20-39

Manu-facturing

Basic Industry

(Two-Digit)

Major Group

(Two-Digit)

Industry Group

(Three-Digit)

Specific Industry

(Four-Digit)

Product Class

(Five-Digit)

Product

(Seven-Digit)

slide42

Characteristics of the Business Market

  • Geographic Concentration
  • Sizes and Numbers of Buyers
  • Purchase Decision Procedures
  • Buyer-Seller Relationships
five forces determining segment structural attractiveness

Fig. 8.01

Five Forces Determining Segment Structural Attractiveness

T30

Potential Entrants

(Threat of

Mobility)

Suppliers

(Supplier power)

Industry

Competitors

(Segment rivalry)

Buyers

(Buyer power)

Substitutes

(Threats of

substitutes)

barriers and profitability

Fig. 8.02

T31

Barriers and Profitability

Exit barriers

Low

High

Low, stable

returns

Low, risky

returns

Low

Entry Barriers

High, stable

returns

High, risky

returns

High

product market battlefield for toothpaste

T32

Fig. 8.03

Product / Market Battlefield for Toothpaste

Customer segmentation

Children / Teens

Age 19-35

Age 36+

Plain

toothpaste

Colgate-Palmolive

Procter & Gamble

Colgate-Palmolive

Procter & Gamble

Colgate-Palmolive

Procter & Gamble

Toothpaste

with fluoride

Colgate-Palmolive

Procter & Gamble

Colgate-Palmolive

Procter & Gamble

Colgate-Palmolive

Procter & Gamble

Gel

Colgate-Palmolive

Procter & Gamble

Lever Bros.

Colgate-Palmolive

Procter & Gamble

Lever Bros.

Colgate-Palmolive

Procter & Gamble

Lever Bros.

Product segmentation

Striped

Beecham

Beecham

Smoker’s

toothpaste

Topol

Topol

strategic groups in the major appliance industry

Fig. 8.04

T33

Strategic Groups in the Major Appliance Industry
  • Group A
  • Narrow line
  • Lower mfg. cost
  • Very high service
  • High price

High

  • Group C
  • Moderate line
  • Medium mfg. cost
  • Medium service
  • Medium price

Quality

  • Group B
  • Full line
  • Low mfg. cost
  • Good service
  • Medium price
  • Group D
  • Broad line
  • Medium mrg. cost
  • Low service
  • Low price

Low

High

Low

Vertical Integration

steps in market segmentation targeting and positioning

Fig. 9.01

T34

Steps in Market Segmentation, Targeting,and Positioning

Market

Segmentation

Market

Targeting

Market

Positioning

1. Identify

segmentation

variables and

segment the

market

2. Develop

profiles of

resulting

segments

3. Evaluate

attractiveness

of each

segment

4. Select the

target

segment(s)

5. Identify

possible

positioning

concepts for

each target

segment

6. Select,

develop, and

communicate

the chosen

positioning

concept

basic market preference patterns

Fig. 9.03

T35

Basic Market-Preference Patterns

(a) Homogeneous

preferences

(b) Diffused

preferences

(c) Clustered

preferences

Creaminess

Creaminess

Creaminess

Sweetness

Sweetness

Sweetness

heavy and light users of common consumer products

Fig. 9.04

T36

Heavy and Light Users of Common Consumer Products

PRODUCT (% USERS)

HEAVY HALF

LIGHT HALF

Soups and

detergents (94%)

75%

25%

71%

29%

Toilet tissue (95%)

79%

21%

Shampoo (94%)

75%

25%

Paper towels (90%)

83%

17%

Cake mix (74%)

83%

17%

Cola (67%)

87%

13%

Beer (41%)

81%

19%

Dog food (30%)

95%

5%

Bourbon (20%)

five patterns of target market selection

Fig. 9.05

Five Patterns of Target Market Selection

T37

Single-segment

concentration

Selective

specialization

Product

specialization

M1 M2 M3

M1 M2 M3

M1 M2 M3

P1

P2

P3

P1

P2

P3

P1

P2

P3

Market

specialization

Full market

coverage

M1 M2 M3

M1 M2 M3

P1

P2

P3

P1

P2

P3

P = Product

M = Market

segment by segment invasion plan

Fig. 9.06

Segment-by-SegmentInvasion Plan

T38

Customer Groups

Airlines

Railroads

Truckers

Large

computers

Mid-size

computers

Product Varieties

Personal

computers

Company A

Company B

Company C