Ch 10


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Ch 10

  1. 1. Chapter 10 Identifying Market Segments and Selecting Target Markets
  2. 2. “Don’t buy market share. Figure out how to earn it.”
  3. 3. Chapter Objectives  We focus on the following questions:  How can a company identify the segments that make up a market?  What criteria can a company use to choose the most attractive target markets?
  4. 4. Target Marketing  Target marketing requires marketers to take three major steps:  Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation).  Select one or more market segments to enter (market targeting).  For each target segment, establish and communicate the key distinctive benefit(s) of the company’s market offering (market positioning).
  5. 5. Levels and Patterns of Market Segmentation  Levels of Market Segmentation  Mass marketing: mass production, mass distribution, and mass promotion of one product for all buyers.  Micromarketing: four levels of marketing – segments, niches, local areas, and individuals. Segment marketing Market segment: Group of customers who share a similar set of wants. Sector: Young, middle income car buyers is a sector rather than a segment. Flexible market offering  Naked solution: products & services that all segment members value.  Discretionary options: some segment members value.
  6. 6. Niche Marketing  Niche: more narrowly defined group seeking a distinctive mix of benefits. By dividing segments into sub segments. Characteristics of Niches:  Customer in the niche have a distinct set of needs.  Customer will pay a premium to the firm that best satisfies their needs.  Niche is not likely to attract other competitors.  Nicher gains certain economies through specialization  Niche has size, profit, and growth potential. Local Marketing Needs and wants of local customer groups – trading areas, neighborhoods, even individual stores. Levels and Patterns of Market Segmentation
  7. 7. Levels and Patterns of Market Segmentation Individual Customer Marketing Ultimate level of segmentation.  Mass-customization: Mass basis individually designed products, services, programs, and communications to meet each customer’s requirements.  Choiceboard: Interactive online system allowing customers designing their own products and services.  Customerization: operationally driven mass customization with customized marketing empowering customers to design the product and service offering. Products or services for -  Segments or  Individuals
  8. 8. Levels and Patterns of Market Segmentation  Patterns for Market Segmentation  Preference segments: According to buyers’ preferences.  Homogeneous preferences: consumers have roughly the same preferences.  Diffused preferences: consumers may be scattered throughout the space, indicating variation in preferences.  Clustered preferences  Natural market segments: distinct preference cluster.  Concentrated marketing: largest market segment.  Center position: hoping to appeal to all groups.  In largest market segment.  Several brands in different positions.
  9. 9. Levels and Patterns of Market Segmentation Sweetness Sweetness Sweetness (a) Homogeneous preferences (b) Diffused preferences (c) Clustered preferences
  10. 10. Levels and Patterns of Market Segmentation  Market Segmentation Procedure  Needs-based market segmentation approach Steps in Segmentation Process 1. Needs-Based Segmentation Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem. 2. Segment Identification For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable). 3. Segment Attractiveness Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment.
  11. 11. 4. Segment Profitability Determine segment profitability. 5. Segment Positioning For each segment, create a “value proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics. 6. Segment “Acid Test” Create “segment storyboards“ to test the attractiveness of each segment’s positioning strategy. 7. Market-Mix Strategy Expand segment positioning strategy to include all aspects of the marketing mix: product, price, promotion, and place. Levels and Patterns of Market Segmentation
  12. 12.  Market partitioning Investigating the hierarchy of attributes consumers examine in choosing a brand.  Brand-dominant hierarchy: Toyota > Toyota Corolla  Nation-dominant hierarchy: Japanese Car > Toyota  Effective Segmentation  Measurable: size, purchasing power, and characteristics of the segments.  Substantial: large and profitable enough to serve.  Accessible: effectively reached and served.  Differentiable: conceptually distinguishable and respond differently to different marketing mix elements and programs.  Actionable: effective programs can be formulated to attract and serve the segments. Levels and Patterns of Market Segmentation
  13. 13. Segmenting Consumer and Business Markets  Bases for Segmenting Consumer Markets Major Segmentation Variables for Consumer Markets: Segmentation Variable Variable Type Geographic Region, city or metro size, Density,Climate Demographic Age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, social class Psychographic Life style, personality Behavioral Occasions, benefits, user status, user rate, loyalty status, readiness stage, attitude toward product
  14. 14. Segmenting Consumer and Business Markets Loyalty Status  Hard-core loyal: buy one brand all the time.  Split-loyal: loyal to two or three brands.  Shifting-loyal: shift from one brand to another.  Switchers: no loyalty to any brand.
  15. 15. Segmenting Consumer and Business Markets  Bases For Segmenting Business Markets Major Segmentation Variables for Business Markets: Segmentation Variables Variable Types Demographic Industry, Company size, Location Operating Variables Technology, user or nonuser status, customer compatibilities. Purchasing Approaches Purchasing function organization, power structure, nature of existing relationships, general purchase policies, purchasing criteria. Situational Factors Urgency, specific application, size of order Personal Characteristics Buyer-seller similarity, attitudes towards risk, loyalty.
  16. 16. Segmenting Consumer and Business Markets  Rackman and Vincentis proposed a segmentation scheme that classifies business buyers into three groups  Price-oriented customers (transactional selling) They want value through lowest price.  Solution-oriented customers (consultative selling) They want value through more benefits and advice.  Strategic-value customers (enterprise selling) They want value through the supplier co-investing and participating in the customer’s business.
  17. 17. Market Targeting  Evaluating and Selecting the Market Segments  Single-Segment Concentration: mini pack chips.  Selective Specialization: BAT, gold leaf for A,B&H for B, Star for C.  Product Specialization : Otobi, products for Univ, office, home … all segments. ISP, PDB.  Market Specialization: Firms sell products only to university labs.  Full Market Coverage: Coca cola, IBM, GM.  Undifferentiated marketing  Differentiated marketing
  18. 18. Market Targeting M1 M2 M3 M1 M2 M3M1 M2 M3M1 M2 M3 M1 M2 M3 P1 P2 P3 P1 P2 P3 P1 P2 P3 P1 P2 P3 P1 P2 P3 Single-segment concentration Market Specialization Full Market Coverage Product Specialization Selective specialization
  19. 19.  Higher costs using differentiated marketing include  Product modification cost: R&D, engineering, and special tooling costs.  Manufacturing cost: less economies of scale.  Administrative cost: separate marketing plans, research, forecasting, sales analysis, promotion, and channel management.  Inventory cost: different inventories to meet different requirements.  Promotion cost: increased promotion planning and media costs. Market Targeting
  20. 20. Market Targeting  Super segment: set of segments sharing some exploitable similarity. Orchestra targets broad cultural interests.  Mega marketing: strategic coordination of economic, psychological, political, and public- relations skills, to gain the cooperation of a number of parties in order to enter or operate in a given market. Pepsi in India.
  21. 21. Segment-by-Segment Invasion Plan