1. Segmenting and Targeting Markets6
Canadian Adaptation prepared by Don Hill, Langara College

2. 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

3. 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

4. Learning Objectives (continued)
7. Discuss alternative strategies for selecting target markets
8. Explain one-to-one marketing
9. Discuss the forces that have influenced the emergence of one-to-one marketing

5. Learning Objectives (continued)
10. Discuss privacy issues related to one-to-one marketing
11. Explain how and why firms implement positioning strategies and how product differentiation plays a role

6. Chapter 7
Learning Objective
Describe the characteristics of markets and market segments 1
Online
Alliance Atlantis Communications
How many different TV channels does Alliance Atlantis have? What “market” segments do you think each of these particular channels would appeal to? What other products and services do they have that might be of interest to Canadian marketers?
Online 1

7. 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. 1

8. Chapter 7
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.
Notes:
All markets share several characteristics, as outlined on this slide.
Within a market, a market segment is a subgroup of people or organizations with one or more common characteristics that cause them to have similar product needs.
Market segmentation is the division of a market into meaningful, identifiable segments or groups. 1

9. The Concept of Market Segmentation
Chapter 7
The Concept of Market Segmentation 1

10. Learning Objective 2
Explain the importance of market segmentation 2

11. The Importance of Market Segmentation
Chapter 7
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
Notes:
Until the 1960s, market segmentation was not used extensively. Consider Coca-Cola with its one product aimed at the entire soft drink market. Today over a dozen different products are marketed to different market segments.
Market segmentation plays a key role in the marketing strategy of organizations, with the benefits as described on this slide, leading to competitive advantage.
Discussion/Team Activity:
Discuss how Coca-Cola’s product lines fit the needs of different market segments. 2

12. The Importance of Market Segmentation
Chapter 7
The Importance of Market Segmentation
Market
segmentation
More precise definition of customers needs and wants
More accurate marketing objectives
Improved resource allocation
Better marketing results 2

13. Learning Objective Discuss criteria for successful market segmentation3 3

14. Criteria for Segmentation
Chapter 7
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.
Notes:
Markets are segmented for three reasons:
Segmentation enables the identification of groups of customers with similar needs, and the analysis of the buying behaviour of these groups.
Segmentation provides information for the specific matching of the design of marketing mixes with the characteristics of the segment.
Segmentation helps marketers satisfy customers wants and needs while meeting the organization’s objectives.
A segmentation scheme must produce segments that meet the four basic criteria as defined above. 3

15. Criteria For Successful Segmentation
Chapter 7
Criteria For Successful Segmentation 3

16. Learning Objective 4
Describe the bases commonly used to segment consumer markets 4

17. Segmentation Bases Segmentation Bases
Characteristics of individuals, groups, or organizations used to divide a total market into segments. (variables) 4

18. Bases for Segmentation
Chapter 7
Bases for Segmentation
Usage Rate
Benefits Sought
Psychographics
Demographics
Geography
Online
Too Faced Cosmetics
Visit the various pages on the Too Faced Web site. What demographic group (age, ethnicity, etc.) do you think this new cosmetic company is targeting?
Notes:
One or more of the characteristics listed above is used to segment markets.
Online 4

19. Bases for Segmentation4

20. Geographic Segmentation
Chapter 7
Geographic Segmentation
Geographic Segmentation
Segmenting markets by region of the country or world, market size, market density, or climate. 4

21. Geographic Segmentation
Chapter 7
Geographic Segmentation
Region of the country or world
Market size
Market density
Climate
Notes:
Geographic segmentation of markets is based on the region, market size, market density (number of people within a unit of land), or climate. 4

22. Benefits of Regional Segmentation
Chapter 7
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 4

23. Demographic Segmentation
Chapter 7
Demographic Segmentation
Demographic Segmentation
Segmenting markets by age, gender, income, ethnic background, and family life cycle 4

24. Bases for Demographic Segmentation
Chapter 7
Bases for Demographic Segmentation
Age
Gender
Income
Ethnic background
Family life cycle
Video
RadioShack
Segmentation choices play out in the advertising messages that companies use. Watch the ad for RadioShack and decide which segmentation variables are used to target its products.
Notes:
Demographic information is widely available and often related to consumer behaviour and buying. Some common bases are age, gender, income, ethnic background, and family life cycle. 4

25. Age Segmentation Young children under age 9 Tweens Teens Young adults
Chapter 7
Age Segmentation
Young children
Tweens
Teens
Young adults
Baby boomers
under age 9
ages 10 to 14
ages 15 to 19
ages 20 to 34
ages 43 to 61
Seniors
ages 65 and over 4

26. Gender Segmentation Canadian population breakdown is;
Chapter 7
Gender Segmentation
Canadian population breakdown is;
49.5% men
50.5% women
Not equal in all age groups;
More men in all age groups under 45
More women in over 45 age groups 4

27. Chapter 7
Income Segmentation
Average family income for Canada was $78,400 (2005)
Average family expenditures were $66,857
Major Breakdown;
Income taxes %
Shelter %
Transportation 13.6%
Food %
Recreation % 4

28. Ethnic Background Largest Canadian ethnic markets are: European
Chapter 7
Ethnic Background
Largest Canadian ethnic markets are:
European
Oriental
Black
In 2001 visible minorities totaled 13.7% of the Canadian population 4

29. Family Life Cycle Age Marital Status Children 4 Online
Chapter 7
Family Life Cycle
Age
Marital Status
Children
Video
Dodge
Segmentation choices play out in the advertising messages that companies use. Watch this ad for Dodge and decide which segmentation variables it uses to target their products.
Notes:
Consumption patterns among people of the same age and gender differ because of differences in the family life cycle stage.
The FLC is a series of stages determined by a combination of age, marital status, and the presence or absence of children.
Online 4

30. Family Life Cycle 4 Chapter 7 Discussion/Team Activity:
Find examples of advertisements that target different stages of the family life cycle. 4

31. Psychographic Segmentation
Chapter 7
Psychographic Segmentation
Psychographic Segmentation
Market segmentation on the basis of personality, motives, lifestyles, and geodemographics. 4

32. Bases for Psychographic Segmentation
Chapter 7
Bases for Psychographic Segmentation
Personality
Motives
Lifestyles
Geodemographics
Video
Tostitos
Segmentation choices play out in the advertising messages that companies use. Watch this ad for Tostitos and decide which segmentation variables are used.
Online
Canadian Living
Use psychographic segmentation to classify the kinds of consumers who would be interested in the information and promotions
offered at Canadian Living online.
Notes:
Demographic segmentation provides the “skeleton,” but psychographic segmentation adds “meat to the bones.”
Personality reflects a person’s traits, attitudes, and habits. Consider the personality types that describe segmented Porsche buyers.
Motives: Carmakers appeal to customers with status-related motives, whereas baby products appeal to emotional motives.
Lifestyles and geodemographics are described on subsequent slides.
Online 4

33. Lifestyle Segmentation
Chapter 7
Lifestyle Segmentation
How time is spent
Importance of things around them
Beliefs
Socioeconomic characteristics
Notes:
Lifestyle segmentation divides people into groups according to how time is spent, the importance of things around them, beliefs, and socioeconomic characteristics such as income and education.
For example, Harley-Davidson divides its customers into seven lifestyle segments, ranging from arrogant troublemakers to classy capitalists with wealth. 4

34. Geodemographic Segmentation
Chapter 7
Geodemographic Segmentation
Geodemographic Segmentation Segmenting potential customers into neighborhood lifestyle categories.
Combines geographic, demographic, and lifestyle segmentation. 4

35. Benefit Segmentation Benefit Segmentation
Chapter 7
Benefit Segmentation
Benefit Segmentation
The process of grouping customers into market segments according to the benefits they seek from the product.
Notes:
Most segmentation is based on the assumption that the selected variable(s) and customers’ needs are related. On the other hand, benefit segmentation groups potential customers on the basis of their needs or wants. 4

36. Benefit Segmentation of the Snack-Food Market
Chapter 7
Benefit Segmentation of the Snack-Food Market
% of Snackers
Lifestyle Character-istics
Benefits Sought
Consump-tion Level
Nutritional Snackers
22%
Self-assured, controlled
Nutritious w/o artificial ingredients
Light
Weight Watchers
14%
Outdoorsy, influential, venturesome
Low in calories, quick
Guilty Snackers 9%
Highly anxious, isolated
Low in calories, good tasting
Heavy 4

37. Usage-Rate Segmentation
Chapter 7
Usage-Rate Segmentation
Usage-Rate Segmentation
Dividing a market by the amount of product bought or consumed. 4

38. The 80/20 Principle 80 / 20 Principle
Chapter 7
The 80/20 Principle
80 / 20 Principle
A principle holding that 20 percent of all customers generate 80 percent of the demand.
Notes:
Segmenting by usage rate enables marketers to focus efforts on heavy users or to develop multiple marketing mixes aimed at different segments. The focus of marketing is often on the heavy-user segment, based on the 80/20 principle.
Discussion/Team Activity:
What programs do companies have to develop customers into heavy users? The list should include airline frequent flyer programs and in-store coupon dispensing. 4

39. Learning Objective Describe the bases for segmenting business markets
Chapter 7
Learning Objective
Describe the bases for segmenting business markets 5
Notes:
The business market consists of four segments: Producers Resellers Institutions Government 5

40. Bases for Business Segmentation
Chapter 7
Bases for Business Segmentation
Online
Atlas Overhead Doors
How does Atlas Overhead Doors’ website differentiate between business and consumer market segments? (Hint: Click on the inquiry button). Explain what you find.
atlasdoors.ca
Notes:
Company characteristics include geographic location, type of company, company size, and product use.
The purchasing strategies of buyers provide useful segments. Two purchasing profiles are satisficers and optimizers. Satisficers contact familiar suppliers and place the order with the first one to satisfy product and delivery requirements. Optimizers consider numerous suppliers, obtain bids, and study all proposals before selecting one.
Customer relationship building focuses on the type of relationship established with customers, such as the amount of revenue generated, and how cost-effective it is to serve particular customers.
Online 5

41. Buyer Characteristics
Chapter 7
Buyer Characteristics
Demographic characteristics
Decision style
Tolerance for risk
Confidence level
Job responsibilities
Notes:
The personal characteristics of the buyers influence their buying behaviour and offer a viable basis for segmenting some business markets. 5

42. Learning Objective List the steps involved in segmenting markets 6 6
Chapter 7
Learning Objective 6
List the steps involved in segmenting markets 6

43. Steps in Segmenting a Market
Chapter 7
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
Notes:
The purpose of market segment is to identify marketing opportunities. This slide traces the steps in segmenting a market.
Keep in mind that markets are dynamic and must be monitored proactively for changes in age, etc. 6

44. Chapter 7
Learning Objective
Discuss alternative strategies for selecting target markets 7 7

45. Target Market Target Market
Chapter 7
Target Market
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.
Notes:
Because most markets will include customers with different lifestyles, backgrounds, and income levels, it is unlikely that a single marketing mix will attract all segments of the market. 7

46. Strategies for Selecting Target Markets
Chapter 7
Strategies for Selecting Target Markets
Concentrated
Strategy
Undifferentiated
Multisegment
Online
Barbie
Look at Barbie.everythinggirl.com and Barbie collector.com. How are they linked together? How are these two sites different? The same? What targeting strategies can you identify on the respective sites?
Notes:
The three general strategies for selecting target markets are illustrated in Exhibit 7.4 and on this slide. A description of each follows.
Online 7

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

48. Undifferentiated Targeting Strategy
Chapter 7
Undifferentiated Targeting Strategy
Advantages:
Potential savings on production and marketing costs
Disadvantages:
Unimaginative product offerings
Company more susceptible to competition
Notes:
The first firm in an industry sometimes uses an undifferentiated strategy. Consider Coca-Cola when it had a single product and a single size of its original soft drink.
Marketers of commodity products, such as flour and sugar, are also likely to use this strategy. 7

49. Concentrated Targeting Strategy
Chapter 7
Concentrated Targeting Strategy
Concentrated Targeting Strategy
A strategy used to select one segment of a market for targeting marketing efforts.
Notes:
A concentrated strategy of focusing on a narrow market is sometimes more profitable than spreading resources over several different segments.
A concentrated strategy often enables small firms to compete effectively with much larger firms. 7

50. Niche Niche One segment of a market. 7 Chapter 7
Discussion/Team Activity:
Identify firms that have adopted a niche strategy. Examples: Porsche, OshKosh B’Gosh, Orvis, Starbucks, AOL, Enterprise Rent-A-Car, and Hot Topic. 7

51. Concentrated Targeting Strategy
Chapter 7
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 7

52. Multisegment Targeting Strategy
Chapter 7
Multisegment Targeting Strategy
Multisegment Targeting Strategy
A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.
Notes:
Examples of multisegment targeting strategy include Stouffer’s—with its line of gourmet entrees, as well as Lean Cuisine for another segment. 7

53. Multisegment Targeting Strategy
Chapter 7
Multisegment Targeting Strategy
Advantages:
Greater financial success
Economies of scale
Disadvantages:
High costs
Cannibalization 7

54. Costs of Multisegment Targeting
Chapter 7
Costs of Multisegment Targeting
Product design costs
Production costs
Promotion costs
Inventory costs
Marketing research costs
Management costs
Cannibalization 7

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

56. Review: Alternative Strategies for Targeting7

57. Chapter 7
Learning Objective 8
Explain one-to-one marketing 8

58. One-to-One Marketing One-to-One Marketing
Chapter 7
One-to-One Marketing
One-to-One Marketing
An individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer. 8

59. What Is One-to-One Marketing?
Information-Intensive
Long-Term Oriented
One-to-One
Marketing is...
Individualized
Strong Relationships
With a Goal of…
Cost Reduction
Profitability
Personalized
Customer loyalty 8

60. One-to-One Marketing One-to-One Marketing Mass Marketing
Focuses on Share of Customer
Develops Customers
Finds Products for Customers
Mass Marketing
Focuses on Share of Market
Develops Products
Finds Customers for Products 8

61. One to One Marketing 8

62. Learning Objective
Discuss the forces that have influenced the emergence of one-to-one marketing 9 9

63. Forces Influencing One-to-One Marketing
Chapter 7
Forces Influencing One-to-One Marketing
Online:
CBC
Visit CBC's website and sign on to become a member. How does CBC personalize its content? Can this action be considered one-to-one marketing? Why or why not?
Notes:
Forces that have helped shape the one-to-one focus on customers include the factors described on this slide:
A more diverse society: Homes today no longer live the “Leave it to Beaver” life. Modern families are split into many smaller segments, and society has accepted that diversity.
More demanding, time-poor consumers. The rise in the number of women in the workforce and the rise in single-parent households have contributed to a shortage of time to spend on anything but the most pressing details of their lives. Consumers have less time to shop, and more than two-thirds of the population order goods by phone, mail, or on-line.
Decreasing brand loyalty. Consumers are likely to experiment with generics or switch between major brands. This decline can be attributed in part to couponing, trade deals, and deep price promotions. Additionally, the proliferation of available brand choices has led to a confusion about product differences or the lack of time to learn about each new brand. Price has become a major differentiation factor.
Emergence of new media alternatives: Hundreds of available television channels and the power of the Internet are changing the face of mass-media advertising. Marketers are splitting their marketing dollars among the various media available, concentrating on the best bang for the buck.
Demand for accountability: The impact of mass-media advertising on sales has always been difficult to measure. Management now wants proof that money spent on advertising and marketing will deliver results.
Online 9

64. How have these Trends Influenced One-To-One Marketing?
One-size-fits-all no longer fits
Direct and personal marketing
Deep price promotions
Proliferation of brands 9

65. Learning Objective 10
Discuss privacy issues related to one-to-one marketing 10

66. Privacy Concerns with One-to-One Marketing
Chapter 7
Privacy Concerns with One-to-One Marketing
Invasion of
Privacy
Misunderstanding about
privacy laws and
regulations
Popularity of Internet
for data collection
Unawareness
of information collected
Online
Privacy Commissioner of Canada
Visit the Privacy Commissioner of Canada website. What resources have been made available to marketers and businesspeople to help them comply with Canadian privacy laws? Take the privacy quiz to see how well you know your privacy rights. How did you do?
Online 10

67. Privacy Issues 10

68. Learning Objective
Explain how and why firms implement positioning strategies and how product differentiation plays a role 11 11

69. Chapter 7
Position
Position
The place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings. 11

70. Effective Positioning
Chapter 7
Effective Positioning
Assess the positions occupied by competing products
Determine the dimensions of these positions
Choose an effective market position
Online
Use the Internet to see how the positionings of the whiskies listed in Exhibit 6.9 are reflected on the Johnnie Walker website.
Online 11

71. Product Differentiation
A positioning strategy that some firms use to distinguish their products from those of competitors. 11

72. Perceptual Mapping 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. 11

73. Positioning Bases Attribute Price and Quality Use or Application
Chapter 7
Positioning Bases
Attribute
Price and Quality
Use or Application
Product User
Product Class
Competitor
Online 11

74. Repositioning Repositioning
Chapter 7
Repositioning
Repositioning
Changing consumers’ perceptions of a brand in relation to competing brands. 11

75. Repositioning 11