Targeting Attractive Segments
PPT6
Prof. S.Venkat
Discussion Questions
1. What’s a market?
2. What’s a market segment?
• What’s a market?
• A group of individuals or organizations (i.e.,
buyers) having the willingness and ability to buy
good...
Discussion Questions
3. Why should we segment markets and
target certain segments?
Are there benefits in doing so?
Are the...
Market Segmentation
• Segmentation is important because markets
are rarely homogeneous in benefits wanted,
purchase rates,...
Market Segmentation
• Market segmentation has become increasingly
important in setting marketing strategies.
• Population ...
Market Segmentation
• Market segmentation has become increasingly
important in setting marketing strategies.
• There is an...
Market Segmentation
• Benefits of market segmentation:
• It identifies opportunities for new product development.
• It hel...
Objectives of Market Segmentation
• Identify a homogeneous segment that
differs from other segments
• Specify criteria tha...
Discussion Question
4. How should market segments be
defined?
Three good ways to do it.

• Who the customers are
• Where t...
Ask, for each approach, “What tools do we have to define
segments this way?
Can you think of examples of markets typically...
Discussion Question
5.What are some commonly used
demographic, geographic and behavioral
descriptors?
Segmentation basis Typical market segments
Geographic:
Region
City or MSA size
Urban-rural
Climate
Demographic:
Income
Age...
Segmentation basis Typical market segments (cont.)
Demographic (cont.):
Education
Occupation
Ethnic background

Psychograp...
Segmentation basis Typical market segments (cont.)
Behavioral:
Benefits desired

Usage rate

Examples vary widely dependin...
A SEGMENTATION EXAMPLE
Female department store shoppers have been classified into 5 types, based
on demographics, values, ...
Discussion Question
6. Do these same approaches apply to
organizational markets?
Examples?
Who?
•Demographic descriptors: company age, size, etc.
Example: different software versions for small and large
businesses...
BUSINESS MARKETS ARE OFTEN SEGMENTED
ON THE BASIS OF:
• Customer location.
• Type of business customer, including:
– Size
...
Segmentation basis Typical market segments
Customer location:
Region
Locations

Customer type:
Size
Industry
Organization ...
How should we Decide Which Segments to
Target? - Steps in Constructing a Market-Attractiveness/CompetitivePosition Matrix ...
A Useful Tool for Assessing Market
Segments: Segment Rating Chart
WEIGHT

RATING
(0-10)

TOTAL

Customer needs and behavio...
The Market Attractiveness/
Competitive Position Matrix Exhibit 6.10
Market
Attractiveness
High
(8-10)

l

Moderate
(4-7)
L...
Implications of Alternative Positions
Within the Market-Attractiveness/
Competitive-Position Matrix Exhibit 6.11
Competiti...
Discussion Questions
7. What targeting strategies are available?
When should each be used?
Niche-market strategy
•One or more segments with substantial number of customers
seeking somewhat specialized benefits fro...
Growth-market strategy
•Often target one or more fast-growth segments
•A strategy often favored by smaller competitors to ...
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  1. 1. Targeting Attractive Segments PPT6 Prof. S.Venkat
  2. 2. Discussion Questions 1. What’s a market? 2. What’s a market segment?
  3. 3. • What’s a market? • A group of individuals or organizations (i.e., buyers) having the willingness and ability to buy goods and services to satisfy a class of want or need • What’s a market segment? • A group of potential customers in a market who share similar wants and needs that are different from the wants and needs of consumers in other segments
  4. 4. Discussion Questions 3. Why should we segment markets and target certain segments? Are there benefits in doing so? Are there drawbacks?
  5. 5. Market Segmentation • Segmentation is important because markets are rarely homogeneous in benefits wanted, purchase rates, and price and promotion elasticities, and their response rates to products and marketing programs differ. • Variation among market segments in product preferences, size and growth in demand, media habits, and competitive structures further affect the differences and response rates.
  6. 6. Market Segmentation • Market segmentation has become increasingly important in setting marketing strategies. • Population growth has slowed, and more product-markets are maturing. This sparks more intense competition as firms seek growth via gains in market share as well as in an increase in brand extensions. • Such social and economic forces as expanding disposable incomes, higher educational levels, and more awareness of the world have produced customers with more varied and sophisticated needs, tastes, and lifestyles than ever before. This has led to an outpouring of goods and services that compete with one another for the opportunity of satisfying some group of consumers.
  7. 7. Market Segmentation • Market segmentation has become increasingly important in setting marketing strategies. • There is an increasingly important trend toward microsegmentation, in which extremely small segments are targeted. • Many marketing organizations have made it easier to implement sharply focused marketing programs by more sharply targeting their own services.
  8. 8. Market Segmentation • Benefits of market segmentation: • It identifies opportunities for new product development. • It helps in the design of marketing programs that are most effective for reaching homogeneous groups of customers. • It improves the strategic allocation of marketing resources. • Drawbacks of market segmentation: • Potential customers who do not fit into the target segment are missed. • Marketers may misjudge who their target market is, which could result in product failure or poor sales.
  9. 9. Objectives of Market Segmentation • Identify a homogeneous segment that differs from other segments • Specify criteria that define the segment • Determine segment size and potential
  10. 10. Discussion Question 4. How should market segments be defined? Three good ways to do it. • Who the customers are • Where they are • How they behave
  11. 11. Ask, for each approach, “What tools do we have to define segments this way? Can you think of examples of markets typically segmented this way?” Who? •Tools: demographic descriptors (age, income, gender, education, etc.): cereal, clothing, cosmetics, some magazines Where? •Tools: geographic descriptors: (location) suntan lotion, snow blowers, trade areas for retail stores How they behave? Tools: •Benefits sought: bicycles of various types, computers of various types •Product usage: key accounts among organizational buyers •Lifestyle/psychographics: health clubs, automobiles/SUVs •Social class: jewelry, automobiles
  12. 12. Discussion Question 5.What are some commonly used demographic, geographic and behavioral descriptors?
  13. 13. Segmentation basis Typical market segments Geographic: Region City or MSA size Urban-rural Climate Demographic: Income Age Gender Family life cycle Social class New England, Middle Atlantic, and other census regions Under 25,000; 25,001-100,000; 100,001500,000; 500,001-1,000,000; etc. Urban, suburban, rural Hot, cold, sunny, rainy, cloudy Under $10,000; $10,001-$25,000; $25,001$35,000; $35,001-$50,000; over $50,000 Under 6, 6-12, 13-19, 20-34, 35-49, 50-64, 65 and over Male, female Young, single; young, married, no children, etc. Upper class, upper middle, lower middle, upper lower, etc.
  14. 14. Segmentation basis Typical market segments (cont.) Demographic (cont.): Education Occupation Ethnic background Psychographic: Personality Life-style Values Grade school only, high school graduate, college graduate Professional, manager, clerical, sales, student, homemaker, unemployed African, Asian, European, Hispanic, Middle Eastern, etc. Ambitious, self-confident, aggressive, introverted, extroverted, sociable Activities (golf, travel); interests (politics, modern art); opinions (conservation, capitalism) Values and Life-Styles 2 (VALS2), List of Values (LOV)
  15. 15. Segmentation basis Typical market segments (cont.) Behavioral: Benefits desired Usage rate Examples vary widely depending on product: appliance — cost, quality, operating life; toothpaste — no cavities, plaque control, bright teeth, good taste, low price Nonuser, light user, heavy user
  16. 16. A SEGMENTATION EXAMPLE Female department store shoppers have been classified into 5 types, based on demographics, values, and attitudes. The groups and their descriptive names are: • • • • • 1. Fashion Statements—most affluent and educated, use credit cards, expect to be treated well by retail personnel. 2. Wanna-buys—similar to Fashion Statements but with less income. Enjoy buying on impulse. 3. Family Values—represent large families, often are professionals, buying focuses on children or the home. 4. Down to Basics—most likely to have children, not college educated, careful spenders, prefer not to use credit, like coupons. 5. Matriarchs—older, often retired, they like department stores but are risk averse and have few purchase plans.
  17. 17. Discussion Question 6. Do these same approaches apply to organizational markets? Examples?
  18. 18. Who? •Demographic descriptors: company age, size, etc. Example: different software versions for small and large businesses. Where? •Geographic descriptors: Example: B2B Websites in different languages to reach different geographical markets. How they behave? •Benefits sought by different industries: Example: software tailored to different vertical markets. •Product usage: Example: treating key accounts among organizational buyers differently •Lifestyle/psychographics: Example: marketing corporate wellness programs/corporate health club memberships to different kinds of firms •Social class: Example: company vehicles differ for different job levels
  19. 19. BUSINESS MARKETS ARE OFTEN SEGMENTED ON THE BASIS OF: • Customer location. • Type of business customer, including: – Size – Industry – Purchase organization – Purchase criteria • Transaction conditions, including: – Type of buying situation • Straight rebuy • Modified rebuy • New buy – Usage rate—heavy, light, nonusers. – Purchase procedure.
  20. 20. Segmentation basis Typical market segments Customer location: Region Locations Customer type: Size Industry Organization structure Southeast Asia, Central America, Upper Midwest, Atlantic Seaboard Single buying site, multiple buying sites Purchase criteria Type of use Sales volume, number of employees SIC code, NAICS code Centralized or decentralized; group or individual decision Quality, price, durability, lead time Resale, component part, ornamental Transaction conditions: Buying situation Usage rate Purchasing procedure Order size Service requirements Straight rebuy, modified rebuy, new buy Nonuser, light user, heavy user Competitive bidding, lease, svc. contracts Small, medium, large Light, moderate, heavy
  21. 21. How should we Decide Which Segments to Target? - Steps in Constructing a Market-Attractiveness/CompetitivePosition Matrix (Exhibit 6.7) 1. Choose criteria to measure market attractiveness and competitive position. 2. Weigh market attractiveness and competitive position factors to reflect their relative importance. 3. Assess the current position of each potential target market on each factor. 4. Project the future position of each market based on expected environmental, customer, and competitive trends 5. Evaluate implications of possible future changes for business strategies and resources requirements.
  22. 22. A Useful Tool for Assessing Market Segments: Segment Rating Chart WEIGHT RATING (0-10) TOTAL Customer needs and behavior .5 10 5.0 Segment size and growth rate .3 7 2.1 Macro trends .2 8 1.6 Total: Market attractiveness 1.0 Market attractiveness factors 8.7 Competitive position factors Opportunity for competitive advantage .6 7 4.2 Capabilities and resources .2 5 1.0 Industry attractiveness .2 7 1.4 Total: Competitive position 1.0 6.6
  23. 23. The Market Attractiveness/ Competitive Position Matrix Exhibit 6.10 Market Attractiveness High (8-10) l Moderate (4-7) Low (0-3) Low Moderate High (0-3) (4-7) (8-10) Company’s Competitive Position l = Market attractiveness and competitive position of distance runners segment
  24. 24. Implications of Alternative Positions Within the Market-Attractiveness/ Competitive-Position Matrix Exhibit 6.11 Competitive Position Weak Market Attractiveness High Med. Low Build selectively: • Spec. in limited strengths • Seek to overcome weak. • Withdraw if indications of sustainable growth are lacking Limited expansion or harvest: • Look for ways to expand w/out high risk; otherwise min. invest. and focus operations Medium Strong Desirable Potential Target Protect position: • Invest to grow at max. digestible rate • Concentrate on maintaining strength Desirable Potential Target Manage for earnings: Build selectively: • Protect existing strengths • Invest to improve position only • Emphasize profitability by increasing productivity in areas where risk is low • Build up ability to counter competition Desirable Potential Target Invest to build: • Challenge for leadership • Build selectively on strengths • Reinforce vulnerable areas Divest: Manage for earnings: • Sell when possible to maximize • Protect position cash value • Minimize investment • Meantime, cut fixed costs & avoid further investment Protect and refocus: • Defend strengths • Seek ways to increase current earnings without speeding market’s decline Sources: Adapted from George S. Day, Analysis for Strategic Market Decisions (St. Paul: West, 1986), p. 204; D. F. Abell and J. S. Hammond, Strategic Market Planning Problems and Analytical Approaches (Englewood Cliffs, NJ: Prentice Hall, 1979); and S. J. Robinson, R. E. Hitchens, and D. P. Wade, “The Directional Policy Matrix: Tool for Strategic Planning,” Long Range Planning 11 (1978), pp. 8-15.
  25. 25. Discussion Questions 7. What targeting strategies are available? When should each be used?
  26. 26. Niche-market strategy •One or more segments with substantial number of customers seeking somewhat specialized benefits from a product or service •Strategy is designed to avoid direct competition with larger firms that are pursuing bigger segments Mass-market strategy •Ignore any segment differences and design a single product-and-marketing program that will appeal to the largest number of consumers (undifferentiated marketing) •Objective of strategy is to capture sufficient volume to gain economies of scale and a cost advantage •Favored by larger business units or by those whose parent corporation provides substantial support •A second approach to the mass market is to design separate products and marketing programs for the differing segments (differentiated marketing)
  27. 27. Growth-market strategy •Often target one or more fast-growth segments •A strategy often favored by smaller competitors to avoid direct confrontations with larger firms while building volume and share

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