Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-1 Selecting a Target Market Before a marketing mix strategy can be implemented, the marketer must identify, evaluate, and select a target market. Market: Market: people or institutions with sufficient purchasing power, authority, and willingness to buy Target market: Target market: specific segment of consumers most likely to purchase a particular product

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-2 Types of Markets Consumer products: Consumer products: goods or services purchased by an ultimate consumer for personal use Business products: 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.

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-3 The Role of Market Segmentation 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.

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-4 No Market Segmentation

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-5 Segmented by Sex

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-6 Segmented by Age

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-7 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.

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-8 Segmenting Consumer Markets Geographic Segmentation: 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.

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-9 Using Geographic Segmentation 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

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Geographic Information Service (GIS): 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.

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting Consumer Markets Demographic Segmentation: Demographic Segmentation: dividing consumer groups according to characteristics such as sex, age, income, occupation, education, household size, and stage in the family life cycle A primary source for demographic data in the United States is the Census Bureau

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting by Gender 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

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting by Age Segmenting by Age Identify market segments on the basis of age Products designed to meet the specific needs of certain age groups

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Tweens and Teens 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

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Baby Boomers 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 Huge disposable income Seniors Seniors By 2025, 1 in 5 over age 65 Median age is now 35.2 years Life expectancy 74 for men and 79 for women Heads of households aged 55-plus control about three-quarters of the country’s total financial assets.

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting by Ethnic Group Segmenting by Ethnic Group By 2050, nearly half of the population of the US will belong to nonwhite minority groups.  Hispanic  African Americans  Asian Americans  Native Americans  People of Mixed Race

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Family Life Cycle Stages Segmentation 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 Segmenting by Household Type 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

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting by Income and Expenditure Patterns Segmenting by Income and Expenditure Patterns Engel’s Laws, 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

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Demographic Segmentation Abroad 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

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Psychographic Segmentation 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  VALS and VALS 2 “Values and Lifestyles”

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 9-21

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Psychographic Segmentation of Global Markets 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

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Using Psychographic Segmentation 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

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Product-Related Segmentation 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  Usage rates for a product  Consumers’ brand loyalty toward a product

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Benefits 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 Usage Rates 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”)

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Brand Loyalty Brand Loyalty Segmenting consumers grouped according to the strength of brand loyalty felt toward a product Frequent flyer programs of airlines and many hotels

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Using Multiple Segmentation Bases Using Multiple Segmentation Bases Increase accuracy in reaching the right markets Combine multiple bases  Geographic and Demographic  Product-related with income and expenditure patterns  Others

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved The Market Segmentation Process Develop a Relevant Profile for each Segment Forecast Market Potential Forecast Probable Market Share Select Specific Market Segments

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Strategies for Reaching Target Markets Undifferentiated Marketing: 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: Differentiated Marketing: when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Concentrated Marketing (niche marketing): Concentrated Marketing (niche marketing): when a firm commits all of its marketing resources to serve a single market segment Micromarketing: Micromarketing: involves targeting potential customers at a very basic level, such as by ZIP code, specific occupation, lifestyle, or individual household

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Selecting and Executing a Strategy 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

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Positioning: 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

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Positioning map Positioning map Graphic illustration that shows differences in consumers’ perceptions of competing products Reposition Reposition Marketing strategy to change the position of its product in consumers’ minds relative to the positions of competing products

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved Hypothetical Competitive Positioning Map for Selected Retailers