Segmenting and Targeting Markets
 CHAPTER
           8
                                      Marketing                10
 ...
Learning Outcomes

                  Describe the characteristics of markets
 LOI
                  and market segments

 ...
Learning Outcomes

 LO5              Describe the bases for segmenting
                  business markets
 LO6            ...
LOI                        Market Segmentation




                              Describe the characteristics
            ...
A Market Is...

   (1)            people or organizations with

   (2)            needs or wants, and with

   (3)        ...
LOI
                     Market Segmentation
                                                       People or organization...
The Concept of Market
LOI
                      Segmentation




  Copyright ©2009 by Cengage Learning Inc. All rights res...
LO2
                             The Importance of Market
                                   Segmentation



             ...
LO2                The Importance of Market
                         Segmentation


   Markets have a variety of product
...
LO2               REVIEW LEARNING OUTCOME
                The Importance of Market Segmentation


                        ...
Criteria for Successful
LO3
                                     Segmentation




                                        ...
LO3
                   Criteria for Segmentation
                                                        Segment must be l...
LO3               REVIEW LEARNING OUTCOME
                         Successful Market Segmentation

                       ...
Bases for Segmenting
LO4
                                    Consumer Markets



                                        D...
Bases for Segmenting
LO4
                                  Consumer Markets


                Segmentation                ...
LO4
            Bases for Segmentation

               Geography


           Demographics


         Psychographics


   ...
LO4                  Geographic Segmentation

        • Region of the country or world

        • Market size

        • M...
LO4                     Benefits of Regional
                          Segmentation

•       New ways to generate sales in...
LO4               Demographic Segmentation

                                  Age

                               Gender

...
LO4
         Gender Segmentation

 • In U.S., women…
      – handle 75% of family finances
      – Influence 80% of consum...
LO4
         Income Segmentation

 • Income – popular demographic variable for
   segmenting markets
 • According to Niels...
LO4
            Ethnic Segmentation

 • Largest ethnic markets are:

      – Hispanic Americans
      – African Americans
...
Family Life Cycle


                                                     Age




                         Marital
        ...
LO4
                                    Family Life Cycle




  Copyright ©2009 by Cengage Learning Inc. All rights reserv...
LO4             Psychographic Segmentation


               Psychographic                            Market segmentation o...
LO4                  Bases for Psychographic
                          Segmentation
                 Personality


       ...
LO4                       Lifestyle Segmentation


          • How time is spent
          • Importance of things around t...
Geodemographic
LO4
                              Segmentation

           Geodemographic Segmenting potential customers
  ...
LO4
                    Benefit Segmentation

                  Benefit                              The process of groupi...
LO4
                    Benefit Segmentation

                                                        Dividing a market by...
LO4                  REVIEW LEARNING OUTCOME
                 Bases for Segmenting Consumer Markets


  Geography         ...
Bases for Segmenting
LO5
                                    Business Markets




                                    Desc...
LO5                               Bases for Segmenting
                                    Business Markets
          Prod...
LO5                      Bases for Segmenting
                           Business Markets

                           Comp...
LO5
                    Buyer Characteristics
                                                        Business customers w...
Buyer Characteristics

                              Demographic characteristics

                                        ...
LO5               REVIEW LEARNING OUTCOME
                            Segmenting Business Markets


                      ...
LO6 Steps in Segmenting a Market




                                     List the steps involved
                        ...
LO6                REVIEW LEARNING OUTCOME
                              Steps in Segmenting Markets




 Select          ...
Strategies for Selecting
LO7                               Target Markets




                             Discuss alterna...
Strategies for Selecting
LO7
                             Target Markets


                                               ...
LO7                    Strategies for Selecting
                           Target Markets




     Undifferentiated       ...
LO7   Undifferentiated Targeting Strategy


             Undifferentiated                           A marketing approach t...
LO7
            Undifferentiated Targeting Strategy

                                           Advantage:

              ...
LO7      Concentrated Targeting Strategy


              Concentrated                              A strategy used to sele...
LO7
        Concentrated Targeting Strategy

                                       Advantages:
                          ...
LO7   Multisegment Targeting Strategy


                Multisegment                            A strategy that chooses tw...
LO7        Multisegment Targeting Strategy


                                            Advantages:
                     ...
LO7 Costs of Multisegment Targeting

                          Product design costs
                          Production...
LO7
                                 Cannibalization

                                                        Situation th...
LO7               REVIEW LEARNING OUTCOME
                   Alternatives for Selecting Target Markets


 Undifferentiated...
LO8                      One-to-One Marketing




                             Explain one-to-one marketing




Copyright ...
LO8
                   One-to-One Marketing

                  One-to-One                            An individualized mar...
LO8                         One-to-One Marketing

                 One-to-One
                                            ...
LO8
               One-to-One Marketing

                                              Trends
 1. One-size-fits all market...
LO8               REVIEW LEARNING OUTCOME
                                        One-to-One Marketing




 Copyright ©200...
LO9                                          Positioning



                                Explain how and why firms
    ...
LO9
                                         Positioning

                   Positioning Developing a specific marketing
 ...
Positioning of Procter & Gamble
LO9
                      Detergents
         Brand                                       ...
Effective Positioning

           1.        Assess the positions occupied by
                     competing products

    ...
LO9
                 Product Differentiation

                   Product     A positioning strategy that
               Di...
LO9
                       Perceptual Mapping

                    Perceptual                       A means of displaying ...
Perceptual Mapping




      LO9
Copyright ©2009 by Cengage Learning Inc. All rights reserved   63
LO9
                               Positioning Bases
                                                   Attribute

       ...
LO9
                                    Repositioning

                                                     Changing consu...
LO9               REVIEW LEARNING OUTCOME
                     Positioning and Product Differentiation




 Copyright ©200...
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Int to mktng ch8

  1. 1. Segmenting and Targeting Markets CHAPTER 8 Marketing 10 Lamb, Hair, McDaniel Designed by Prepared by Eric Brengle Amit Shah B-books, Ltd. Frostburg State University Copyright ©2009 by Cengage Learning Inc. All rights reserved 1
  2. 2. Learning Outcomes Describe the characteristics of markets LOI and market segments LO2 Explain the importance of market segmentation Discuss criteria for successful market LO3 segmentation Describe the bases commonly used to segment LO4 consumer markets Copyright ©2009 by Cengage Learning Inc. All rights reserved 2
  3. 3. Learning Outcomes LO5 Describe the bases for segmenting business markets LO6 List the steps involved in segmenting markets Discuss alternative strategies for selecting LO7 target markets LO8 Explain one-to-one marketing Explain how and why firms implement LO9 positioning strategies and how product differentiation plays a role Copyright ©2009 by Cengage Learning Inc. All rights reserved 3
  4. 4. LOI Market Segmentation Describe the characteristics of markets and market segments Copyright ©2009 by Cengage Learning Inc. All rights reserved 4
  5. 5. 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. LOI Copyright ©2009 by Cengage Learning Inc. All rights reserved 5
  6. 6. LOI Market Segmentation People or organizations with Market needs or wants and the ability and willingness to buy. A subgroup of people or Market organizations sharing one or more Segment characteristics that cause them to have similar product needs. Market The process of dividing a market into meaningful, relatively similar, Segmentation identifiable segments or groups. Copyright ©2009 by Cengage Learning Inc. All rights reserved 6
  7. 7. The Concept of Market LOI Segmentation Copyright ©2009 by Cengage Learning Inc. All rights reserved 7
  8. 8. LO2 The Importance of Market Segmentation Explain the importance of market segmentation Copyright ©2009 by Cengage Learning Inc. All rights reserved 8
  9. 9. LO2 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. Copyright ©2009 by Cengage Learning Inc. All rights reserved 9
  10. 10. LO2 REVIEW LEARNING OUTCOME The Importance of Market Segmentation More precise More accurate Market definition of marketing segmentation customers needs objectives and wants Improved resource allocation Better marketing results Copyright ©2009 by Cengage Learning Inc. All rights reserved 10
  11. 11. Criteria for Successful LO3 Segmentation Discuss criteria for successful market segmentation Copyright ©2009 by Cengage Learning Inc. All rights reserved 11
  12. 12. LO3 Criteria for Segmentation Segment must be large Substantiality enough to warrant a special marketing mix. Identifiability Segments must be identifiable and and their size measurable. Measurability Members of targeted segments Accessibility must be reachable with marketing mix. Unless segment responds to a Responsiveness marketing mix differently, no separate treatment is needed. Copyright ©2009 by Cengage Learning Inc. All rights reserved 12
  13. 13. LO3 REVIEW LEARNING OUTCOME Successful Market Segmentation Useful segment?  Substantial  Identifiable and measurable  Accessible  Responsive Then, yes: Useful segmentation scheme Copyright ©2009 by Cengage Learning Inc. All rights reserved 13
  14. 14. Bases for Segmenting LO4 Consumer Markets Describe the bases commonly used to segment consumer markets Copyright ©2009 by Cengage Learning Inc. All rights reserved 14
  15. 15. Bases for Segmenting LO4 Consumer Markets Segmentation Characteristics of Bases individuals, groups, or organizations used to divide a total market into segments. (variables) Copyright ©2009 by Cengage Learning Inc. All rights reserved 15
  16. 16. LO4 Bases for Segmentation Geography Demographics Psychographics Benefits Sought Usage Rate Copyright ©2009 by Cengage Learning Inc. All rights reserved 16
  17. 17. LO4 Geographic Segmentation • Region of the country or world • Market size • Market density • Climate 17 Copyright ©2009 by Cengage Learning Inc. All rights reserved
  18. 18. LO4 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 • Quicker reaction to competition Copyright ©2009 by Cengage Learning Inc. All rights reserved 18
  19. 19. LO4 Demographic Segmentation Age Gender Income Ethnic background Family life cycle 19 Copyright ©2009 by Cengage Learning Inc. All rights reserved
  20. 20. LO4 Gender Segmentation • In U.S., women… – handle 75% of family finances – Influence 80% of consumer purchases – Make purchase decisions about variety of goods and services • New cars, hardware stores, electronics, etc. • Other brands that have targeted men are trying to target women – Gillette razors, Rogaine baldness remedy, Nike, Reebok, etc. Copyright ©2009 by Cengage Learning Inc. All rights reserved 20
  21. 21. LO4 Income Segmentation • Income – popular demographic variable for segmenting markets • According to Nielsen study… – Affluent households (earning more than $100k/ year) twice as likely to shop at warehouses – Lexus catering to wealthy customers • Price-sensitive consumers – P&G • Bounty Basic paper towels • Charmin Basic bath tissue Copyright ©2009 by Cengage Learning Inc. All rights reserved 21
  22. 22. LO4 Ethnic Segmentation • Largest ethnic markets are: – Hispanic Americans – African Americans – Asian Americans • Will comprise 1/3 of U.S. population by 2010 with buying power of $1 trillion annually Copyright ©2009 by Cengage Learning Inc. All rights reserved 22
  23. 23. Family Life Cycle Age Marital Status Children LO4 Copyright ©2009 by Cengage Learning Inc. All rights reserved 23
  24. 24. LO4 Family Life Cycle Copyright ©2009 by Cengage Learning Inc. All rights reserved 24
  25. 25. LO4 Psychographic Segmentation Psychographic Market segmentation on the Segmentation basis of personality, motives, lifestyl es, and geodemographics. Copyright ©2009 by Cengage Learning Inc. All rights reserved 25
  26. 26. LO4 Bases for Psychographic Segmentation Personality Motives Lifestyles Geodemographics Copyright ©2009 by Cengage Learning Inc. All rights reserved 26
  27. 27. LO4 Lifestyle Segmentation • How time is spent • Importance of things around them • Beliefs • Socioeconomic characteristics 27 Copyright ©2009 by Cengage Learning Inc. All rights reserved
  28. 28. Geodemographic LO4 Segmentation Geodemographic Segmenting potential customers Segmentation into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation. Copyright ©2009 by Cengage Learning Inc. All rights reserved 28
  29. 29. LO4 Benefit Segmentation Benefit The process of grouping Segmentation customers into market segments according to the benefits they seek from the product. Copyright ©2009 by Cengage Learning Inc. All rights reserved 29
  30. 30. LO4 Benefit Segmentation Dividing a market by the Usage-Rate amount of product bought Segmentation or consumed. A principle holding that 80/20 20 percent of all customers Principle generate 80 percent of the demand. Copyright ©2009 by Cengage Learning Inc. All rights reserved 30
  31. 31. LO4 REVIEW LEARNING OUTCOME Bases for Segmenting Consumer Markets Geography Demographics Psychographics Benefits Usage Rate • Region • Age • Personality • Benefits • Former • Market size • Gender • Motives sought • Potential • Market • Income • Lifestyle • 1st time density • Race/ethnicity • Geodemo-grap • Light or • Climate • Family life hics irregular cycle • Medium • Heavy Copyright ©2009 by Cengage Learning Inc. All rights reserved 31
  32. 32. Bases for Segmenting LO5 Business Markets Describe the bases for segmenting business markets Copyright ©2009 by Cengage Learning Inc. All rights reserved 32
  33. 33. LO5 Bases for Segmenting Business Markets Producers Resellers Government Institutions Company Buying Characteristics Processes Copyright ©2009 by Cengage Learning Inc. All rights reserved 33
  34. 34. LO5 Bases for Segmenting Business Markets Company Characteristics  Geographic location  Type of company  Company size  Volume of purchase  Product use Copyright ©2009 by Cengage Learning Inc. All rights reserved 34
  35. 35. LO5 Buyer Characteristics Business customers who place an order with the first familiar Satisficers supplier to satisfy product and delivery requirements. Business customers who consider numerous suppliers, both familiar and unfamiliar, Optimizers solicit bids, and study all proposals carefully before selecting one. Copyright ©2009 by Cengage Learning Inc. All rights reserved 35
  36. 36. Buyer Characteristics Demographic characteristics Decision style Tolerance for risk Confidence level Job responsibilities LO5 Copyright ©2009 by Cengage Learning Inc. All rights reserved 36
  37. 37. LO5 REVIEW LEARNING OUTCOME Segmenting Business Markets Company Characteristics Producers Resellers Governments Institutions Buying Process Copyright ©2009 by Cengage Learning Inc. All rights reserved 37
  38. 38. LO6 Steps in Segmenting a Market List the steps involved in segmenting markets Copyright ©2009 by Cengage Learning Inc. All rights reserved 38
  39. 39. LO6 REVIEW LEARNING OUTCOME Steps in Segmenting Markets Select Choose Select Profile Select Design, a market bases descriptors and target implement, for for analyze markets maintain study segmen- segments marketing tation mix 1 2 3 4 5 6 Copyright ©2009 by Cengage Learning Inc. All rights reserved 39
  40. 40. Strategies for Selecting LO7 Target Markets Discuss alternative strategies for selecting target markets Copyright ©2009 by Cengage Learning Inc. All rights reserved 40
  41. 41. Strategies for Selecting LO7 Target Markets A group of people or Target organizations for which an Market organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges. Copyright ©2009 by Cengage Learning Inc. All rights reserved 41
  42. 42. LO7 Strategies for Selecting Target Markets Undifferentiated Concentrated Multisegment Strategy Strategy Strategy Copyright ©2009 by Cengage Learning Inc. All rights reserved 42
  43. 43. LO7 Undifferentiated Targeting Strategy Undifferentiated A marketing approach that Targeting views the market as one big Strategy market with no individual segments and thus requires a single marketing mix. Copyright ©2009 by Cengage Learning Inc. All rights reserved 43
  44. 44. LO7 Undifferentiated Targeting Strategy Advantage:  Potential savings on production and marketing costs Disadvantages:  Unimaginative product offerings Undifferentiated  Company more susceptible to Strategy competition Copyright ©2009 by Cengage Learning Inc. All rights reserved 44
  45. 45. LO7 Concentrated Targeting Strategy Concentrated A strategy used to select one Targeting Strategy segment of a market for targeting marketing efforts. Niche One segment of a market. Copyright ©2009 by Cengage Learning Inc. All rights reserved 45
  46. 46. LO7 Concentrated Targeting Strategy Advantages:  Concentration of resources  Meets narrowly defined segment  Small firms can compete  Strong positioning Disadvantages:  Segments too small, or Concentrated changing  Large competitors may Strategy market to niche segment Copyright ©2009 by Cengage Learning Inc. All rights reserved 46
  47. 47. LO7 Multisegment Targeting Strategy Multisegment A strategy that chooses two or Targeting more well-defined market Strategy segments and develops a distinct marketing mix for each. Copyright ©2009 by Cengage Learning Inc. All rights reserved 47
  48. 48. LO7 Multisegment Targeting Strategy Advantages:  Greater financial success  Economies of scale Disadvantages:  High costs  Cannibalization Multisegment Strategy Copyright ©2009 by Cengage Learning Inc. All rights reserved 48
  49. 49. LO7 Costs of Multisegment Targeting  Product design costs  Production costs  Promotion costs  Inventory costs  Marketing research costs  Management costs  Cannibalization Copyright ©2009 by Cengage Learning Inc. All rights reserved 49
  50. 50. LO7 Cannibalization Situation that occurs when Cannibalization sales of a new product cut into sales of a firm’s existing products. Copyright ©2009 by Cengage Learning Inc. All rights reserved 50
  51. 51. LO7 REVIEW LEARNING OUTCOME Alternatives for Selecting Target Markets Undifferentiated Multisegment Concentrated Copyright ©2009 by Cengage Learning Inc. All rights reserved 51
  52. 52. LO8 One-to-One Marketing Explain one-to-one marketing Copyright ©2009 by Cengage Learning Inc. All rights reserved 52
  53. 53. LO8 One-to-One Marketing One-to-One An individualized marketing Marketing method that utilizes customer information to build long- term, personalized, and profitable relationships with each customer. Copyright ©2009 by Cengage Learning Inc. All rights reserved 53
  54. 54. LO8 One-to-One Marketing One-to-One Has a Goal of… Marketing is... Individualized Cost Reduction Information-Intensive Customer Retention Long-Term Increased Revenue Personalized Customer Loyalty 54 Copyright ©2009 by Cengage Learning Inc. All rights reserved
  55. 55. LO8 One-to-One Marketing Trends 1. One-size-fits all marketing no longer effective 2. Direct and personal marketing will grow to meet needs of busy consumers. 3. Consumers will be loyal to companies that have earned—and reinforced—their loyalty. 4. Mass-media approaches will decline as technology allows better customer tracking. Copyright ©2009 by Cengage Learning Inc. All rights reserved 55
  56. 56. LO8 REVIEW LEARNING OUTCOME One-to-One Marketing Copyright ©2009 by Cengage Learning Inc. All rights reserved 56
  57. 57. LO9 Positioning Explain how and why firms implement positioning strategies and how product differentiation plays a role Copyright ©2009 by Cengage Learning Inc. All rights reserved 57
  58. 58. LO9 Positioning Positioning Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. Copyright ©2009 by Cengage Learning Inc. All rights reserved 58
  59. 59. Positioning of Procter & Gamble LO9 Detergents Brand Positioning Market Share Tide Tough, powerful cleaning 31.1% Cheer Tough cleaning, color protection 8.2% Bold Detergent plus fabric softener 2.9% Gain Sunshine scent and odor-removing formula 2.6% Era Stain treatment and stain removal 2.2% Dash Value brand 1.8% Oxydol Bleach-boosted formula, whitening 1.4% Solo Detergent and fabric softener in liquid form 1.2% Dreft Outstanding cleaning for baby clothes, safe 1.0% Ivory Snow Fabric & skin safety on baby clothes 0.7% Ariel Tough cleaner, aimed at Hispanic market 0.1% 59 Copyright ©2009 by Cengage Learning Inc. All rights reserved
  60. 60. Effective Positioning 1. Assess the positions occupied by competing products 2. Determine the dimensions underlying these positions 3. Choose a market position where marketing efforts will have the greatest impact LO9 60 Copyright ©2009 by Cengage Learning Inc. All rights reserved
  61. 61. LO9 Product Differentiation Product A positioning strategy that Differentiation some firms use to distinguish their products from those of competitors. Distinctions can be real or perceived. Copyright ©2009 by Cengage Learning Inc. All rights reserved 61
  62. 62. LO9 Perceptual Mapping Perceptual A means of displaying or Mapping graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds. Copyright ©2009 by Cengage Learning Inc. All rights reserved 62
  63. 63. Perceptual Mapping LO9 Copyright ©2009 by Cengage Learning Inc. All rights reserved 63
  64. 64. LO9 Positioning Bases Attribute Price and Quality Use or Application Product User Product Class Competitor Emotion Copyright ©2009 by Cengage Learning Inc. All rights reserved 64
  65. 65. LO9 Repositioning Changing consumers’ Repositioning perceptions of a brand in relation to competing brands. Copyright ©2009 by Cengage Learning Inc. All rights reserved 65
  66. 66. LO9 REVIEW LEARNING OUTCOME Positioning and Product Differentiation Copyright ©2009 by Cengage Learning Inc. All rights reserved 66

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