Chapter 7 Segmenting and Targeting Markets

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

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.

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

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

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

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

Family Life Cycle Age Marital Status Children

Bases for Psychographic Segmentation Personality Motives Lifestyles Geodemographics

Lifestyle Segmentation How time is spent Beliefs Socioeconomic characteristics

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

Quartiles of County Residents of Asian Descent

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

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 http://www.velocity.claritas.com/YAWYL/Default.wjsp?System=WL For definitions of each cluster, see http://www.qmsoft.com/solutions/prizm.htm for complete descriptions

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

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

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

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

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

Strategies for Selecting Target Markets Undifferentiated Strategy Concentrated Strategy Multisegment Strategy

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

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

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

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

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

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

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

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

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

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

Guess Who Owns Theses Brands Guess Who Owns Theses Brands? What are the segments that each is directed toward? See http://www.gloss.com/interim_flash.html

Product Positioning High PRICE Low Low Richness High

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.