1. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–1 Part 2: Understanding marketing Chapter 5: Market segmentation Step 3: Segment the market

2. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–2 When we finish this lecture you should Know how to define generic markets and product markets Know what market segmentation is and how to implement it Understand how the segmentation process varies in international markets Know some of the computer-based approaches to segmentation Understand the three basic approaches to market- oriented strategy planning Know what positioning is and why it is useful Understand what perceptual mapping is and why it is useful

3. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–3 Understanding markets Definition of segmentation ‘One of the most important principles in marketing involves identifying and understanding the needs of particular groups of customers.’ (Marketing: Creating and Delivering Value, 4/e, Quester et al. p. 150) Marketers often aim their products at particular segments of the population

4. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–4 A company’s market Definition of a market ‘A market is a group of potential customers with similar needs, who are willing to exchange something of value for various need-satisfying goods and/or services.’ (Marketing: Creating and Delivering Value, 4/e, Quester et al. p. 150)

5. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–5 Figure 5.1 Narrowing down to target markets

6. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–6 From generic markets to product markets Definition of generic market ‘A market with broadly similar needs, with sellers offering various, and often diverse, ways of satisfying those needs.’ (Marketing: Creating and Delivering Value, 4/e, Quester et al. p. 151) Definition of product market ‘A market with very similar needs, with sellers offering similar, or substitute, products to satisfy those needs.’ (Marketing: Creating and Delivering Value, 4/e, Quester et al. p. 151)

7. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–7 Naming product markets and generic markets What:1.product type (type of product/type of service) To meet what:2.customer (user) needs For whom:3.customer type Where:4.geographic area A complete product-market definition includes a four-part description: (Marketing: Creating and Delivering Value, 4/e, Quester et al. pp. 151–152).

8. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–8 Figure 5.2 Relationship between generic-market and product-market definitions

9. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–9 Market segmentation A two-step process of – Naming broad product markets and – Segmenting these broad product markets in order to select target markets and develop suitable marketing mixes Involves – Disaggregating—breaking down all possible needs into some generic markets and broad product markets – Aggregating—clustering people with similar needs into a market segment

10. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–10 Figure 5.3 A market grid diagram with submarkets

11. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–11 Figure 5.4 a & b Every individual has a unique position in a market—those with similar positions can be aggregated into potential target markets: (a) product market showing three segments; (b) product market showing six segments

12. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–12 Criteria for segmenting a broad product market ‘Good’ market segments should meet the following criteria: – Customers within a segment are homogeneous  Similar responses to marketing mix  Similar segmenting dimensions – Customers in different segments are heterogeneous  Different responses to marketing mix  Different segmenting dimensions

13. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–13 Criteria for segmenting a broad product market (continued) – Segment is substantial  Segment is big enough to be profitable – Segmenting dimensions are operational  Useful for identifying customers  Helpful in deciding on the marketing mix

14. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–14 Developing strategies in a broad product market Single target market approach – Select one homogeneous segment as the target Multiple target market approach – Select two or more target segments – Develop a different marketing mix for each segment Combined target market approach – Combine submarkets into a single target market – Develop one marketing mix for the combined target

15. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–15 Figure 5.5 Target marketers versus combiners

16. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–16 Figure 5.6 There may be different demand curves in different segments: (a) mass marketer sees one demand curve for its target market; (b) combiner sees one demand curve for its combined target market; (c) segmenter sees one demand curve for each submarket

17. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–17 Figure 5.7 Possible segmenting dimensions for business/organisational markets

18. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–18 Figure 5.8 Relationship of potential target-market dimensions to marketing mix decision areas

19. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–19 Figure 5.9 Possible segmenting dimensions and typical breakdowns for consumer markets

20. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–20 Examples of possible segmenting dimensions for consumer markets Customer related – Geographic location (fast-food outlets) – Age (insurance policies) – Sex (clothing) – Family size (refrigerators) – Income (cars) – Education (magazines) Situation related – Benefits offered (toothpaste) – Consumption/use patterns (cameras) – Brand familiarity (health care products) – Buying situation (soft drinks)

21. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–21 Segmenting dimensions qualifying and determining Qualifying dimensions – Segmenting dimensions relevant to the product market – Are there characteristics typical of customers who are at least potentially interested in the relevant product type? Determining dimensions – Segmenting dimensions that affect the purchase of a specific product or brand – Why does a potential customer select one brand over another?

22. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–22 Segmenting international markets Success in international marketing requires even more attention to segmentation There are over 228 countries in the world Each country has unique culture/s Major differences in language, customs, beliefs, religions, ethics, race and income distribution patterns

23. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–23 Computer-based methods of segmenting Clustering—search for similar patterns within sets of data Data mining—the detection of relevant patterns in a database Conjoint analysis—technique to assist marketing managers in determining how much importance customers place on certain elements of the company’s marketing mix

24. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–24 Differentiation and positioning Competitive advantage—the marketing mix of a company is perceived to by the target market as superior to those of its competitors Positioning—how customers regard proposed and/or present brands’ images in a market in relation to competitor offerings

25. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–25 Perceptual mapping Perceptual mapping can be used to – Show how (potential) customers view a company’s current or potential offerings – Show how customers view competitors' offerings – See what kind of offerings different segments see as ideal – See what offerings are likely to appeal to which segments – Help with combining and segmenting—by revealing which segments view the market in similar (or dissimilar) ways

26. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–26 Figure 5.11 Hypothetical ‘product space’ map representing consumers’ perceptions of different home loans

27. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–27 Repositioning Companies are sometimes faced with the problem of how to change their current positioning The positioning that has served the brand well for 10–20 years may have become stale or lost meaning

28. ﴀ Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 5–28 What we will be doing in the next chapter In Chapter 6 we will be discussing consumer behaviour Chapter 6 covers – Buyer behaviour domestically and globally – The psychology of buying – The problem-solving processes that are used in buying situations