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  1. 2. Chapter 7 Market Segmentation and Targeting McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
  2. 3. After studying this chapter you should be able to: <ul><li>Define and explain market segmentation, target markets, and product differentiation and positioning. </li></ul><ul><li>Understand the criteria used for evaluating the likely success of a segmentation strategy. </li></ul><ul><li>Know the role of market segmentation in the development of marketing strategies and programs. </li></ul>
  3. 4. <ul><li>Describe the issues involved in product and brand positioning. </li></ul><ul><li>Understand the alternative bases for segmenting consumer and business-to-business markets. </li></ul><ul><li>Evaluate alternative approaches for pursuing segmentation strategies. </li></ul>After studying this chapter you should be able to:
  4. 5. Market Segmentation <ul><li>Market Segmentation: </li></ul><ul><ul><li>Divides a market into subsets of prospective customers who behave in the same way, have similar wants, or have similar characteristics that relate to purchase. </li></ul></ul><ul><li>Intermarket Segments: </li></ul><ul><ul><li>Well-defined, similar clusters of customers across national boundaries. </li></ul></ul>
  5. 6. Target Markets <ul><li>Targeting: </li></ul><ul><ul><li>Selecting which segments in a market </li></ul></ul><ul><ul><li>are appropriate to focus on and </li></ul></ul><ul><ul><li>designing the means of reaching them. </li></ul></ul>
  6. 7. Product Differentiation <ul><li>Product Differentiation: </li></ul><ul><ul><li>Exists when a firm’s offerings differ or are perceived to differ from those of competing firms on any attribute, including price. </li></ul></ul>
  7. 8. From Mass Marketing to Mass Customization <ul><li>Mass Customization: </li></ul><ul><ul><li>Complex manufactured products made to order. </li></ul></ul>
  8. 9. Criteria for Effective Segmentation <ul><li>Five Criteria: </li></ul><ul><ul><li>Measurability </li></ul></ul><ul><ul><li>Accessibility </li></ul></ul><ul><ul><li>Substantialness </li></ul></ul><ul><ul><li>Durability </li></ul></ul><ul><ul><li>Differential Responsiveness </li></ul></ul>
  9. 10. Stages in Developing Market Segmentation Strategies
  10. 11. Bases for Segmentation <ul><li>Demographics </li></ul><ul><li>Geographics </li></ul><ul><li>Psychographics & Lifestyles </li></ul><ul><li>Benefit Segmentation </li></ul><ul><li>Economic Segmentation </li></ul><ul><li>International Segmentation </li></ul>
  11. 12. Combining Bases of Market Segmentation
  12. 13. Segmentation Strategies Undifferentiated Strategy Differentiated Strategy Concentrated Strategy
  13. 14. Countersegmentation Strategy <ul><li>Countersegmentation: </li></ul><ul><ul><li>An alternative strategy to traditional segmentation approaches. </li></ul></ul><ul><ul><ul><li>Combines market segments </li></ul></ul></ul><ul><ul><ul><li>Consumers accept lower price over variety </li></ul></ul></ul>
  14. 15. Factors Influencing Segmentation Strategy <ul><li>Size and type of the market </li></ul><ul><li>Competitive factors </li></ul><ul><li>Product-related factors: </li></ul><ul><ul><li>Stage in the product life cycle. </li></ul></ul><ul><ul><li>Degree to which the product may be varied or modified. </li></ul></ul><ul><li>Firm’s size and financial position </li></ul>
  15. 16. Estimating Segment Potentials <ul><li>Set time period of interest. </li></ul><ul><li>Define product level. </li></ul><ul><li>Specify segment characteristics or bases. </li></ul><ul><li>Identify geographic market boundaries. </li></ul>
  16. 17. Estimating Segment Potentials <ul><li>Make assumptions about the marketing environment. </li></ul><ul><li>Make assumptions about company’s own marketing efforts and programs (controllable factors). </li></ul><ul><li>Make estimates of market potential, industry sales, and company sales. </li></ul>
  17. 18. Developing Forecasts <ul><li>Qualitative Procedures: </li></ul><ul><ul><li>Survey of Buyers’ Intentions </li></ul></ul><ul><ul><li>Expert Opinion </li></ul></ul><ul><ul><li>Composite of Salesforce Estimates </li></ul></ul><ul><li>Quantitative Methods: </li></ul><ul><ul><li>Trend Analysis </li></ul></ul><ul><ul><li>Market Tests </li></ul></ul><ul><ul><li>Statistical Demand Analysis </li></ul></ul>
  18. 19. Firm and Market Potentials and Forecasts Industry Level Firm Level Best Possible Results Expected Results for Given Strategy Market Potential Market Forecast Sales Potential Sales Forecast
  19. 20. Targeting Market Segments <ul><li>To select target segments, the firm must consider: </li></ul><ul><ul><li>The segment’s potential sales volume and profits. </li></ul></ul><ul><ul><li>Competition currently selling to the segments. </li></ul></ul><ul><ul><li>The firm’s abilities and objectives. </li></ul></ul>
  20. 21. Positioning <ul><li>Repositioning: </li></ul><ul><ul><li>When a firm wants to shift consumer </li></ul></ul><ul><ul><li>opinions about an existing brand. </li></ul></ul><ul><li>Positioning: </li></ul><ul><ul><li>Designing a marketing program, including </li></ul></ul><ul><ul><li>the product mix, that is consistent with how </li></ul></ul><ul><ul><li>the company wants its products or </li></ul></ul><ul><ul><li>services to be perceived. </li></ul></ul>
  21. 22. Perceptual Maps <ul><li>Perceptual Maps: </li></ul><ul><ul><li>Spatial representations of consumer perceptions of products or brands, are often used to evaluate brand positions in a market. </li></ul></ul><ul><li>Diet Pepsi </li></ul><ul><li>Pepsi Cola </li></ul><ul><li>RC Cola </li></ul><ul><li>Dr Pepper </li></ul><ul><li>Diet Sprite </li></ul><ul><li>Diet 7-Up </li></ul><ul><li>7-Up </li></ul><ul><li>Sprite </li></ul><ul><li>Orange Crush </li></ul><ul><li>Coke Classic </li></ul>
  22. 23. Micromarketing <ul><li>Micromarketing: </li></ul><ul><ul><li>Combines census and </li></ul></ul><ul><ul><li>Demographic data to identify </li></ul></ul><ul><ul><li>clusters of households </li></ul></ul><ul><ul><li>that share similar </li></ul></ul><ul><ul><li>consumption patterns. </li></ul></ul>
  23. 24. Micromarketing <ul><li>Enhances the effectiveness of marketing efforts by: </li></ul><ul><ul><li>Identifying potential markets for direct selling through mail and telemarketing campaigns. </li></ul></ul><ul><ul><li>Profiling customers by matching them to demographic and lifestyle clusters. </li></ul></ul><ul><ul><li>Learning which areas offer the greatest potential in site selection for new stores or offices. </li></ul></ul><ul><ul><li>Tailoring advertising themes and planning media. </li></ul></ul>
  24. 25. Market Segmentation and Ethics <ul><ul><li>Advertising to Children </li></ul></ul><ul><ul><li>Harmful Products </li></ul></ul><ul><ul><li>Privacy Issues </li></ul></ul><ul><ul><li>Product Proliferation </li></ul></ul>