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Chapter 7 Segmenting and Targeting Markets

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1 Chapter 7 Segmenting and Targeting Markets

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

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

4 Bases for Segmentation
Usage Rate Benefits Sought Psychographics Demographics Geography Bases Used to Segment Consumer Markets

5 Geographic Segmentation
Region of the country or world Market size Market density Climate

6 Bases for Demographic Segmentation
Age Gender Income Ethnic background Family Life Cycle

7 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

8 Family Life Cycle Age Marital Status Children

9 Bases for Psychographic Segmentation
Personality Motives Lifestyles Geodemographics

10 Lifestyle Segmentation
How time is spent Beliefs Socioeconomic characteristics

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

12 Quartiles of County Residents of Asian Descent

13 CLARTAS’ PRIZM 62 American clusters
Each cluster is a member of 15 social groups arranged by urbanization density and socio-economic standing. County City High $ $ Low RURAL TOWN 2nd CITY SUBURB URBAN

14 CLARTAS’ PRIZM 62 American clusters
Each cluster is a member of 15 social groups arranged by urbanization density and socio-economic standing. 01: BLUE BLOOD ESTATES 05: KIDS & CUL-DE-SACS 07: MONEY & BRAINS 09: AMERICAN DREAMS 12: UPWARD BOUND 14: COUNTRY SQUIRES 18: YOUNG INFLUENCIALS 28: BIG CITY BLEND 31: LATINO AMERICA 40: MILITARY QUARTERS 41: SHOTGUNS & PICKUPS 62: HARD SCRABBLE To look up a ZIP code use For definitions of each cluster, see for complete descriptions

15 VALS 2 Dimensions Abundant Resources Minimal Resources Principle-
oriented Status- oriented Action- oriented Abundant Resources Actualizers Experi- encers Fulfillers Achievers Believers Strivers Makers Minimal Resources Strugglers

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

17 Usage-Rate Segmentation
Dividing a market by the amount of product bought or consumed.

18 The 80/20 Principle A principle holding that 20 percent of all customers generate 80 percent of the demand. 80/20

19 Steps in Segmenting a Market
Select a market for study Choose bases for segmen-tation Select descrip-tors Profile and analyze segments Select target markets Design, imple- ment, maintain mkting mix

20 Strategies for Selecting Target Markets
Undifferentiated Strategy Concentrated Strategy Multisegment Strategy

21 Undifferentiated Targeting Strategy
Advantages: Potential savings on production and marketing costs Disadvantages: Unimaginative product offerings Company more susceptible to competition

22 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

23 Multisegment Targeting Strategy
Advantages: Greater financial success Economies of scale Disadvantages: High costs Cannibalization

24 Costs of Multisegment Targeting
Product design costs Production costs Promotion costs Inventory costs Marketing research costs Management costs Cannibalization

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

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

27 Effective Positioning
Assess the positions of competing products Determine the dimensions of these positions Choose an effective market position

28 Perceptual Mapping--Levi’s
High Price Vintage Red Line Slates Red Tab Elesco Red Tab Dry Goods Dockers Premium Silver Tab Classic Designer 501 L2 Dockers Classics Red Tab Basics Old product New product Low Price

29 Positioning Bases Positioning Bases Attribute Price and Quality
Use or Application Product User Product Class Competitor Positioning Bases

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

31 Guess Who Owns Theses Brands
Guess Who Owns Theses Brands? What are the segments that each is directed toward? See

32 Product Positioning High PRICE Low Low Richness High

33 Why Do Consumers Purchase Technology?
Primary Motivation Family Career Entertainment Status Neo- hearthminders Fast Forwards Techno- strivers Mouse Potatoes Gadget Grabbers Cyber-snobs X-techs Technology pessimists Technology optimists Disposable Income Disposable Income Low High Low High Traditionalists Handshakers Media Junkies Country Clubbers Sidelined Citizens Source: Forrester Research, Inc.

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