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MKTG 504 - MARKET SEGMENTATION Breaking the Market into Bits Dr. Dennis Pitta University of Baltimore.

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Presentation on theme: "MKTG 504 - MARKET SEGMENTATION Breaking the Market into Bits Dr. Dennis Pitta University of Baltimore."— Presentation transcript:

1 MKTG MARKET SEGMENTATION Breaking the Market into Bits Dr. Dennis Pitta University of Baltimore

2 MARKET An aggregate of people who, as individuals or as organizations, have needs for products in a product class and who have the ability, willingness, and authority to purchase such products.

3 The Basics - the Market zPeople with needs, zwho have money (or something of value), and za willingness to trade that value to satisfy those needs

4 Types of Markets Consumer Market (made up of ultimate consumers) Industrial Market (made up of producer firms) Intermediate Market (wholesalers and retailers) Government Market (federal, state, county, or local agencies) Institutional Market (non-profit organizations)

5 Marketing’s Main Task SATISFYING WANTS AND NEEDS mostly wants....

6 Needs and Wants: Defined zNEED: Something that is lacking that is necessary for physical, psychological or social well-being. zWANT: Something that is lacking that is desirable or useful.

7 Examples of Needs: Food Clothing Shelter Warmth Safety Belonging Knowledge

8 Examples of Wants Food LOBSTER ClothingTOMMY HILFIGER - FUBU ShelterCONDO IN ST. BARTS WarmthHOT TUB Safety.357 MAGNUM Belonging RAVENS BOOSTER CLUB KnowledgeUB – TOWSON MBA

9 Marketing Lesson #1 WANTS = DEMAND

10 Why do Wants = Demand? z_______________________

11 Why People Buy Products zFEATURES zADVANTAGES zBENEFITS z = WANTS SATISFIED!

12 Market Aggregation The total market is not divided into segments. Examples: Pabst Blue Ribbon Beer Miller High Life Beer Coke (a few years back) Salt

13 Market Aggregation Advantages Lower Production and Marketing Costs

14 Market Aggregation Disadvantages Vulnerability to Segmented Products

15 Market Segment A group of individuals, groups, or organizations that share one or more characteristics which make them have relatively similar product needs.

16 Examples of Three Market Segments Quantity Age => Age X II III I

17 Market Segmentation A marketing strategy in which a large, heterogeneous market is broken down into small, more homogeneous segments, and a separate marketing program is developed for each segment.

18 Market Segmentation Advantages zBetter match between market wants and product benefits.

19 Market Segmentation Disadvantages zHigher Marketing Costs zHigher Production Costs

20 Suppose you want to develop and additional segment?

21 Balance is essential in developing another segment. There must be a net advantage over the additional costs of serving a new segment with a new product.

22 Problems with Developing New Segments: zCannibalism zNew Competition

23 Criteria for Good Segments zIdentifiable zReachable zSignificant zResponsive zStable

24 Identifiable zCan you identify the want …..out there…?

25 Reachable zCan you contact the segment (efficiently) y….using radio x…..TV xnewspaper xmail xdirectly (in a meeting) xthe Internet xthe telephone

26 Responsive zDo they respond to your message?

27 Significant zIs the segment large enough or rich enough to justify serving them?

28 Stable zWill they have the same wants and needs in a year? zThe Chevrolet Camaro example...

29 Potential Bases for Segmentation zDescriptive Bases yDemographic variables ySocioeconomic variables yGeographic zBehavioral Bases yUser Status yUsage Rate yBenefits Sought yPersonality yLife Style ySocial Class

30 Potential Bases for Segmentation zDemographic Variables: yAge ySex yRace yFamily Size yMarital Status yReligion yPlace of Residence zSocioeconomic Variables: yIncome yOccupation yEducation

31 Exercise 1 - Use of Descriptive Variables in Segmentation Richardson Vicks The number of young adults age who have skin problems now exceeds the number of teenagers with blemishes. Segmentation response: CLEARSIL ADULT CARE

32 Williams-Sonoma 15 percent of its cookware customers are male. The company has been considering what to do to boost the sales of its catalogs. Segmentation response: _____________ _________________________________

33 COCA-COLA Coca-Cola’s research found that children of working class parents prefer to GULP their drinks. Coca- Cola, and other carbonated beverages, are difficult to gulp. Segmentation response: MELLO YELLOW - THE FASTEST DRINK IN THE WEST

34 Behavioral variables are more powerful means of segmenting markets than descriptive variables. They can be viewed as determining variables.

35 Behavioral Variables Product Usage* Benefits Sought** Personality and Lifestyle Occasions Social Class

36 Heavy and Light Users of Common Consumer Products HEAVY HALF LIGHT HALF PRODUCT (% USERS) 75% 71% Soaps and detergents (94%) 25% 29% 79%21% Toilet tissue (95%) Shampoo (94%) 75%25% 17% Paper towels (90%) Cake mix (74%) Laxatives (41%) 83% 13% 5 % 87% 19% ===>Beer (40%) Dog food (30%) Bourbon (20%) 81% 95%

37 What is the implication on sales? zOne heavy drinker (6+ per day) is worth scores of light drinkers (6 per year). zCapturing just this segment insures success!

38 Another example z Originally Lite by Meisterbrau aimed at ladies - light users.

39 Another example the rest of the story… z Miller bought the brand and repositioned it for men - Heavy users. z They fought - less filling - great taste z And drank a lot of it!

40 Product Usage Examples Scheafer is the one beer to have when you’re having more than one. That little pink pill: Correctol laxative You’re in the Pepsi generation Lite Beer from Miller

41 Benefits Sought in Products Levi’s Jeans: DURABILITY Elmer’s Glue-All : ADHESION Revlon Cosmetics: HOPE Lego Toys: POSSIBILITIES Close-Up Toothpaste: WHITER TEETH AND FRESH BREATH

42 The Best Segmentation Base A combination of bases! Like….. BENEFITS + DEMOGRAPHICS BENEFITS + PSYCHOGRAPHICS USAGE RATE + BENEFITS

43 Steps in the Segmentation Process zDetermine Market Boundaries zDecide which Segmentation Bases to Use zAnalyze (Consider) Segmentation Data zDevelop a Profile of Each Segment zTarget the Segments to be Served zDesign a Marketing Plan

44 Targeting Segments Targeting a segment involves choosing the one or ones that are potentially most profitable. Also important is response sensitivity - the likelihood that the segment will react favorably to a marketing program.

45 Reasons Not to Target the Largest Segment Large segments do not always offer the best opportunity. Often the largest segment faces very heavy competition. Consumers in those segments may be very satisfied with the products or brands of competitors.

46 Differentiated Marketing Differentiated marketing is a marketing strategy that aims at several market segments, varying the marketing mix for each segment.

47 Positioning A process in which a marketer communicates with consumers to establish a distinct place for its product or brand in their minds.

48 On the following scale please place a check on the position that describes your beliefs about the brand: Miller Heavy tasteLight taste | | | | | Dark colorLight color | | | | | Budweiser Heavy tasteLight taste | | | | | Dark colorLight color | | | | |

49 On the following scale please place a check on the position that describes your beliefs about the brand: Miller Heavy tasteLight taste | | | | | Dark colorLight color | | | | | Budweiser Heavy tasteLight taste | | | | | Dark colorLight color | | | | |

50 Heavy taste Dark Color Light taste Light color o Budweiser O MILLER LITE O MILLER BEER O GUINESS STOUT

51 High price/oz. Low in calories Low price/oz. High in calories Product & Brand Positioning (a) Product-positioning map (breakfast market) ExpensiveSlow Inexpensive Quick Bacon and eggs Pancakes Instant breakfast Cold cereal Hot cereal b) Brand-positioning map (instant breakfast market) Brand C Brand B Brand A

52 High price/oz. Low in calories Low price/oz. High in calories Product & Brand Positioning (a) Product-positioning map (breakfast market) ExpensiveSlow Inexpensive Quick Bacon and eggs Pancakes Instant breakfast Cold cereal Hot cereal b) Brand-positioning map (instant breakfast market) Brand C Brand B Brand A

53 What position does this one occupy? z The Night Time cough medicine z Why --- it originally was 25% alcohol z Antihistamines + alcohol = unconsciousness

54 Name the products.... zThe night-time cough remedy. zIt's after work, it's ______ time. zWe're No. 2, we try harder. z______ fights cavities. zThe refrigerator deodorant. zHere's to good friends. zThe quicker picker-upper. zThe number one in rent-a-car.

55 Upcoming Topics zConsumer Behavior


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