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Market Segmentation, Targeting, and Positioning

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1 Market Segmentation, Targeting, and Positioning
Chapter 9 Market Segmentation, Targeting, and Positioning

2 Chapter Objectives Identify the essential components of a market.
Outline the role of market segmentation in developing a marketing strategy. Describe the criteria necessary for effective segmentation. Explain each of the four bases for segmenting consumer markets. Identify the steps in the market segmentation process. Discuss four basic strategies for reaching target markets. Summarize the types of positioning strategies. Explain the reasons for positioning and repositioning products.

3 Selecting a Target Market
Before a marketing mix strategy can be implemented, the marketer must identify, evaluate, and select a target market. Market: people or institutions with sufficient purchasing power, authority, and willingness to buy Target market: specific segment of consumers most likely to purchase a particular product

4 Types of Markets Consumer products: goods or services purchased by an ultimate consumer for personal use Business products: goods or services purchased for use either directly or indirectly in the production of other goods and services for resale The key to classification is to identify the purchaser and the reasons for buying the goods.

5 P&G Courts Business Customers WSJ 1/26/07
P&G struggles to find significant sales growth in consumer households Expands its “Professional Division - sale to janitors, fast-food workers, maids, and launderers Conducted marketing research at hotels and fast-food restaurants U.S. market is $3.2 billion

6 KC Masterpiece Product Targeted at Selected Consumers

7 Cattlemen’s Product Targeted at the Business Market: Comes in 1 and 5 Gallon Containers. Introduced more than 40 years ago to meet the special needs of foodservice operators

8 The Role of Market Segmentation
Market Segmentation Division of the total market into smaller, relatively homogeneous groups No single marketing mix can satisfy everyone. Therefore, separate marketing mixes should be used for different market segments.

9 No Market Segmentation

10 Segmented by Sex

11 Segmented by Age

12 Figure 9.1 Serving the Hispanic-American Market

13 Tom’s of Maine Targeting a Specific Marketing Segment Which segment?

14 Criteria for Effective Segmentation
Market segmentation cannot be used in all cases. To be effective, segmentation must meet the following basic requirements. The market segments must be measurable in terms of both purchasing power and size. Marketers must be able to effectively promote to and serve a market segment. Market segments must be sufficiently large to be potentially profitable. The number of segments must match the firm’s capabilities.

15 Segmenting Consumer Markets
Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locations Does not ensure that all consumers in a location will make the same buying decision. Help in identifying some general patterns.

16 Figure 9.3 The 10 Largest Cities in the U.S.

17 Pampers This ad is an example of geographic segmentation. Why?

18 Urban Data Classified by U.S. Government
Core Based Statistical Area (CBSA) – at least one urban area 10,000 or more population Metropolitan Statistical Area (MSA) – urban center population of 50,000 and area population of over 100,000 Micropolitan Statistical Area – at least one town 10,000 to 49,999 population Consolidated Metropolitan Statistical Area (CMSA) – one of 25 urban giants Primary Metropolitan Statistical Area (PMSA) – urbanized county or counties, one million or more population [Seattle, Tacoma, Bremerton]

19 Using Geographic Segmentation
Demand for some goods and services can vary according to the geographic region Most major brands get percent of their sales from what are called core regions Climate is another important segmentation factor Northern consumers, for example, eat more soup than Southerners Southerners use more chlorine for their swimming pools than Northern residents

20 Figure 9.4 Geographic Segmentation: The Importance of Suburban Homeowners’ Buying Habits

21 Kubota Segmentation by Residence Location

22 Geographic Information Service (GIS): computer technology that records several layers of data on a single map Simplifies the job of analyzing marketing information by placing data in a spatial format The result of which is a geographic map overlaid with digital data about consumers in a particular area.

23 Segmenting Consumer Markets
Demographic Segmentation: dividing consumer groups according to characteristics such as sex, age, income, occupation, education, household size, and stage in the family life cycle U.S. Census Bureau

24 Segmenting by Gender Marketers must ensure that traditional assumptions are not false Recently, the lines have increasingly blurred Some companies market successfully to both genders

25 Segmenting by Age Identify market segments on the basis of age Products designed to meet the specific needs of certain age groups Dole: Developing a Product Specifically for Children

26 Tweens and Teens Rapidly growing market Significant purchasing power Cohert Effect Tendency among members of a generation to be influenced and drawn together by significant events occurring during their key formative years, roughly 17 to 22 years of age

27 Baby Boomers Born from 1946 until 1965. Nearly 42 percent of U.S. adults Values influenced both by the Vietnam War and the career-driven era Baby boomers over the age of 50 will have a total disposable income of $1 trillion

28 Figure 9.6 MasterCard: Appealing to Baby Boomers’ Nostalgia for Music

29 Seniors By 2025, 1 in 5 over age 65 Median age is now 35.2 years Life expectancy is 74 for men and to 79 for women Heads of households aged 55-plus control about three-quarters of the country’s total financial assets.

30 Segmenting by Ethnic Group
By 2050, nearly half of the population of the US will belong to nonwhite minority groups. The three largest and fastest-growing racial/ethnic groups in the US are African Americans, Hispanics, and Asian Americans.

31 Ethnic Group Segmentation
Hispanic African Americans Asian Americans Native Americans People of Mixed Race

32 Figure 9.7 Breakdown of U.S. Minority Populations

33 Family Life Cycle Stages Segmentation
The process of family formation and dissolution Life stage, not age per se, is the primary determinant of many consumer purchases

34 Figure 9.8 Segmenting by Family Life Cycle Stage

35 Segmenting by Household Type
Today’s U.S. households are very diverse Married couples and their children Blended by divorce or loss of spouse Headed by single parent, same-sex parents, grandparents

36 Segmenting by Income and Expenditure Patterns
Engel’s Laws, as family income increases: A smaller percentage of expenditures go for food The percentage spent on housing and household operations and clothing remains constant The percentage spent on other items (such as recreation and education) increases

37 Figure 9.9 Princess Cruise Lines Targets People with Large Disposable Incomes

38 Jaguar Segmentation based on income

39 Demographic Segmentation Abroad
Obtaining the data necessary for global demographic segmentation is often difficult Many countries do not operate regularly scheduled census programs For example, the most recent census of Holland is now over 20 years old, and Germany skipped its census from 1970 to 1987 Daily life cycle data is difficult to apply in global demographic segmentation efforts

40 Psychographic Segmentation
Divides a population into groups that have similar psychological characteristics, values, and lifestyles Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities The most common method for developing psychographic profiles of a population is to conduct a large-scale survey AIO statements describe activities, interests, and opinions VALS and VALS 2 [eight categories] “Values and Lifestyles”


42 Psychographic Segmentation of Global Markets like those done by Roper Starch can paint useful pictures of the residents of various countries Roper found six psychographic consumer segments that are common to 35 nations Strivers Devouts Altruists Intimates Fun seekers Creatives

43 Using Psychographic Segmentation
Psychographic profiles produce rich descriptions of potential target markets Greater detail aids in matching a company’s image and its offerings with the types of consumers who are likely purchasers

44 Figure 9.11 Appealing to Intimates and Fun Seekers

45 Product-Related Segmentation Dividing a consumer population into homogeneous groups based on characteristics of their relationships to the product Can take the form of segmenting based on: Benefits that people seek when they buy a product Usage rates for a product [80/20 principle] Consumers’ brand loyalty toward a product

46 Benefits Focuses on the attributes that people seek in a good or service and the benefits that they expect to receive from that good or service Groups consumers into segments based on what they want a product to do for them

47 Eclipse Segmenting by Benefits Sought

48 Usage Rates Segmenting by grouping people according to the amounts of a product that they buy and use Markets often divided into heavy-user, moderate-user, and light-user segments The 80/20 principle (“Praedo’s Law”) holds that a big percentage of a product’s revenues (roughly 80%) comes from a relative small, loyal percentage (around 20%) of total customers

49 Brand Loyalty Segmenting consumers grouped according to the strength of brand loyalty felt toward a product Frequent flyer programs of airlines and many hotels

50 Using Multiple Segmentation Bases
Increase accuracy in reaching the right markets Combine multiple bases Geographic and Demographic Product-related with income and expenditure patterns

51 The Market Segmentation Process
Develop a Relevant Profile for each Segment Forecast Market Potential Forecast Probable Market Share Select Specific Market Segments

52 Strategies for Reaching Target Markets
Undifferentiated Marketing: when a firm produces only one product or product line and promotes it to all customers with a single marketing mix Differentiated Marketing: when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments

53 Concentrated Marketing (niche marketing): when a firm commits all of its marketing resources to serve a single market segment Micromarketing: involves targeting potential customers at a very basic level, such as by ZIP code, specific occupation, lifestyle, or individual household

54 Differentiated Marketing
Procter and Gamble Practicing Differentiated Marketing

55 Selecting and Executing a Strategy
No single, best choice strategy suits all firms Determinants of a market-specific strategy: Company resources Product homogeneity Stage in the product life-cycle Competitors’ strategy

56 Positioning: a marketing strategy that emphasizes serving a specific market segment by achieving a certain position in buyers’ minds Attributes Price/quality Competitors Application Product user Product class

57 Positioning map Graphic illustration that shows differences in consumers’ perceptions of competing products Reposition Marketing strategy to change the position of its product in consumers’ minds relative to the positions of competing products

58 Hypothetical Competitive Positioning Map for Selected Retailers

59 End Of Chapter Nine

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