Segmenting and Targeting Markets 6 chapter Prepared by Deborah Baker Texas Christian University Chapter 6 Version 3e

chapter 6 Learning Objectives 1. Describe the characteristics of markets and market segments. 2. Explain the importance of market segmentation. 3. Discuss criteria for successful market segmentation. 6 chapter Chapter 6 Version 3e

Learning Objectives (continued) 4. Describe the bases commonly used to segment consumer markets. 5. Describe the bases for segmenting business markets. 6. List the steps involved in segmenting markets. 6 chapter Chapter 6 Version 3e

Learning Objectives (continued) 7. Discuss alternative strategies for selecting target markets. 8. Explain how and why firms implement positioning strategies and how product differentiation plays a role. 9. Discuss global market segmentation and targeting issues. 6 chapter Chapter 6 Version 3e

Describe the characteristics of markets and market segments. 1 Learning Objective Describe the characteristics of markets and market segments. Chapter 6 Version 3e

1 Market Segmentation Market Segment Segmentation People or organizations with needs or wants and the ability and willingness to buy A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The process of dividing a market into meaningful, relatively similar, identifiable segments or groups. Chapter 6 Version 3e

1 A Market is... (1) people or organizations with (2) needs or wants, and with (3) the ability and (4) the willingness to buy. A group of people that lacks any one of these characteristics is not a market. Chapter 6 Version 3e

Explain the importance of market segmentation. 2 Learning Objective Explain the importance of market segmentation. Chapter 6 Version 3e

The Importance of Market Segmentation 2 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 Chapter 6 Version 3e

Discuss criteria for successful 3 Learning Objective Discuss criteria for successful market segmentation. Chapter 6 Version 3e

Criteria for Successful Segmentation 3 Criteria for Market Segments Substantiality Identifiability Accessibility Responsiveness Chapter 6 Version 3e

Criteria for Segmentation 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. Chapter 6 Version 3e

Describe the bases commonly used to segment consumer markets. 4 Learning Objective Describe the bases commonly used to segment consumer markets. Chapter 6 Version 3e

Characteristics of individuals, groups, to divide a total market 4 Segmentation Bases Characteristics of individuals, groups, or organizations used to divide a total market into segments. (variables) Chapter 6 Version 3e

Bases for Segmentation 4 Bases for Segmentation Usage Rate Benefits Sought Psychographics Demographics Geography Bases Used to Segment Consumer Markets Chapter 6 Version 3e

Geographic Segmentation 4 Geographic Segmentation Segmenting markets by region of the country or world, market size, market density, or climate. Chapter 6 Version 3e

Geographic Segmentation 4 Geographic Segmentation Region of the country or world Market size Market density Climate Chapter 6 Version 3e

Benefits of Regional Segmentation 4 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 React more quickly to competition Chapter 6 Version 3e

Demographic Segmentation 4 Demographic Segmentation Segmenting markets by age, gender, income, ethnic background, and family life cycle Chapter 6 Version 3e

Bases for Demographic Segmentation 4 Age Gender Income Ethnic background Family Life Cycle Chapter 6 Version 3e

4 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 Chapter 6 Version 3e

4 Family Life Cycle Age Marital Status Children Chapter 6 Version 3e

Psychographic Segmentation 4 Psychographic Segmentation Market segmentation on the basis of personality, motives, lifestyles, and geodemographics. Chapter 6 Version 3e

Bases for Psychographic Segmentation 4 Psychographic Segmentation Personality Motives Lifestyles Geodemographics Chapter 6 Version 3e

Lifestyle Segmentation 4 Lifestyle Segmentation How time is spent Beliefs Socioeconomic characteristics Chapter 6 Version 3e

Geodemographic Segmentation 4 Geodemographic Segmentation Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation. Chapter 6 Version 3e

4 VALS 2 Dimensions Abundant Resources Minimal Resources Principle- oriented Status- Action- Fulfillers Believers Actualizers Achievers Strivers Strugglers Experi- encers Makers Minimal Resources Abundant Resources Chapter 6 Version 3e

4 Benefit Segmentation The process of grouping customers into market segments according to the benefits they seek from the product . Chapter 6 Version 3e

Usage-Rate Segmentation 4 Usage-Rate Segmentation Dividing a market by the amount of product bought or consumed. Chapter 6 Version 3e

4 The 80/20 Principle A principle holding that 20 percent of all customers generate 80 percent of the demand. 80/20 Chapter 6 Version 3e

Describe the bases for segmenting business markets. 5 Learning Objective Describe the bases for segmenting business markets. Chapter 6 Version 3e

5 Macrosegmentation The process of dividing business markets into segments based on general characteristics such as geographic location, customer type, customer size, and product use. Chapter 6 Version 3e

5 Microsegmentation The process of dividing business markets into segments based on the characteristics of decision-making units within a macrosegment. Chapter 6 Version 3e

Business Marketing Segmentation 5 Business Marketing Segmentation Geographic Customer Type Customer Size Product Use Business Markets Purchasing Criteria Purchasing Strategy Importance Personal Characteristics Micro- segmentation Macro- Chapter 6 Version 3e

List the steps involved 6 Learning Objective List the steps involved in segmenting markets. Chapter 6 Version 3e

Steps in Segmenting a Market 6 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 Chapter 6 Version 3e

Discuss alternative strategies for selecting target markets. 7 Learning Objective Discuss alternative strategies for selecting target markets. Chapter 6 Version 3e

7 Target Market 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. Chapter 6 Version 3e

Strategies for Selecting Target Markets 7 Concentrated Strategy Undifferentiated Multisegment Chapter 6 Version 3e

Undifferentiated Targeting Strategy 7 Marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix. Chapter 6 Version 3e

Undifferentiated Targeting Strategy 7 Advantages: Potential savings on production and marketing costs Disadvantages: Unimaginative product offerings Company more susceptible to competition Chapter 6 Version 3e

Concentrated Targeting Strategy 7 A strategy used to select one segment of a market for targeting marketing efforts. Chapter 6 Version 3e

7 Niche One segment of a market. Chapter 6 Version 3e

Concentrated Targeting Strategy 7 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 Chapter 6 Version 3e

Multisegment Targeting Strategy 7 A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each. Chapter 6 Version 3e

Multisegment Targeting Strategy 7 Advantages: Greater financial success Economies of scale Disadvantages: High costs Cannibalization Chapter 6 Version 3e

Costs of Multisegment Targeting 7 Costs of Multisegment Targeting Product design costs Production costs Promotion costs Inventory costs Marketing research costs Management costs Cannibalization Chapter 6 Version 3e

7 Cannibalization Situation that occurs when sales of a new product cut into sales of a firm’s existing products. Chapter 6 Version 3e

8 Learning Objective Explain how and why firms implement positioning strategies and how product differentiation plays a role. Chapter 6 Version 3e

8 Positioning Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. Chapter 6 Version 3e

8 Position The place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings. Chapter 6 Version 3e

Effective Positioning 8 Effective Positioning Assess the positions of competing products Determine the dimensions of these positions Choose an effective market position Chapter 6 Version 3e

Product Differentiation 8 Product Differentiation A positioning strategy that some firms use to distinguish their products from those of competitors. Chapter 6 Version 3e

8 Perceptual Mapping A means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds. Chapter 6 Version 3e

Perceptual Mapping--Levi’s 8 Perceptual Mapping--Levi’s High Price Low Price Classic Designer Vintage Red Line Slates Red Tab Elesco Red Tab Dry Goods Dockers Premium Silver Tab 501 L2 Dockers Classics Red Tab Basics Old product New product Chapter 6 Version 3e

8 Positioning Bases Positioning Bases Attribute Price and Quality Use or Application Product User Product Class Competitor Positioning Bases Chapter 6 Version 3e

Changing consumers’ perceptions of a brand 8 Repositioning Changing consumers’ perceptions of a brand in relation to competing brands. Chapter 6 Version 3e

Discuss global market segmentation 9 Learning Objective Discuss global market segmentation and targeting issues. Chapter 6 Version 3e

Global Market Standardization 9 Global Issues Trends Global Market Standardization Chapter 6 Version 3e