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Explain what market segmentation is and when to use it. LEARNING OBJECTIVES (LO) After reading Chapter 9, you should be able to: LO1 Explain what market segmentation is and when to use it. Identify the five steps involved in segmenting and targeting markets. LO2 Recognize the factors used to segment consumer and organizational markets. LO3 1-2 Market Segmentation

Explain how marketing managers position products in the marketplace. LEARNING OBJECTIVES (LO) After reading Chapter 9, you should be able to: Develop a market-product grid to identify a target market and recommend resulting actions. LO4 LO5 Explain how marketing managers position products in the marketplace. Describe three approaches to developing a sales forecast for an organization. LO6 1-3 Market Segmentation

The Affluent Asian Adult The Multiple Faces Five distinct groups of affluent adults in ten Asian countries today “Work to lives” (28%) “Gimmes” (25%) “Executive Warriors” (21%) “HUMmers (15%) “Luxury Loyalist” (12%) Source: Synovate Survey 1-4 Opening Story – Market Segmentation

The Affluent Asian Adult The “Executive Warriors” Executive Warriors are frequent users of e-mail, instant messaging, and blackberry products 1-5 Opening Story – Market Segmentation

Product Differentiation Market Segmentation Nature & Meaning Market Segmentation Market Segments Product Differentiation Segmentation: Linking Needs to Actions LO1 1-6 What is Market Segmentation

FIGURE 9-1 Market segmentation links market needs to an organization’s marketing program through marketing mix actions LO1 1-7 What is Market Segmentation

FIGURE 9-2 Market-product grid showing how different pillows reach different segment of sleepers 1-8 What is Market Segmentation

When & How to Segment Markets Market Segmentation When & How to Segment Markets 1. One Product and Multiple Market Segments 2. Multiple Products and Multiple Market Segments 3. Segments of One: Mass Customization LO1 1-9 What is Market Segmentation

Harry Potter One Product and Multiple Market Segments LO1 What Market Segmentation is this? One Product and Multiple Market Segments LO1 1-10 What is Market Segmentation

When & How to Segment Markets Market Segmentation When & How to Segment Markets Segments of One: Mass Customization Customer Relationship Management (CRM) Mass Customization Build-to-Order (BTO) LO1 1-11 What is Market Segmentation

What Market Segmentation is this? Segments of One: Mass Customization LG What Market Segmentation is this? Segments of One: Mass Customization LO1 1-12 What is Market Segmentation

Segmenting & Targeting Markets A Five-Step Approach FIGURE 9-3 The five key steps in segmenting and targeting markets that link market needs to a firm’s marketing program LO2 1-13 Five Steps in Segmenting & Targeting Markets

Segmenting & Targeting Markets Step 1: Grouping Potential Buyers into Segments Simplicity and Cost-Effectiveness of Assigning Potential Buyers to Segments Potential for Increased Profit Similarity of Needs of Potential Buyers Within a Segment Difference of Needs of Buyers Among Segments Potential of a Marketing Action to Reach a Segment LO3 1-14 Factors used to segment consumer & organisational markets

FIGURE 9-4 Segmentation variables and breakdowns for consumer markets Customer Characteristics Buying Responses LO3 1-15 Factors used to segment consumer & organisational markets

Segmenting & Targeting Markets Step 1: Grouping Potential Buyers into Segments Ways to Segment Consumer Markets – Customer Characteristics Geographic customer characteristic Demographic customer characteristic Psychographic customer characteristic LO3 1-16 Factors used to segment consumer & organisational markets

Segmenting & Targeting Markets Step 1: Grouping Potential Buyers into Segments Ways to Segment Consumer Markets – Buying Responses Product Features Usage Rate or Frequency Marketing 80/20 Rule LO3 1-17 Factors used to segment consumer & organisational markets

FIGURE 9-5 Patronage of fast-food restaurants by adults 18 years and older LO3 1-18 Factors used to segment consumer & organisational markets

FIGURE 9-6 Comparison of various kinds of users and nonusers for Wendy’s, Burger King, and McDonald’s fast-food restaurants LO3 1-19 Factors used to segment consumer & organisational markets

Segmenting & Targeting Markets Step 1: Grouping Potential Buyers into Segments Behavioral Variables to Use in Forming Segments Students Dorms, Sororities, & Fraternities Day Commuters Apartments Night Commuters Nonstudents Faculty & Staff Workers in Area Residents in Area Visitors LO3 1-20 Factors used to segment consumer & organisational markets

Firms’ Colour Copying Problems What variables can Xerox use for segmentation? LO3 1-21 Factors used to segment consumer & organisational markets

FIGURE 9-7 Segmentation variables and breakdowns for organizational markets LO3 1-22 Factors used to segment consumer & organisational markets

Segmenting & Targeting Markets Step 1: Grouping Potential Buyers into Segments Ways to Segment Organizational Markets Geographic customer characteristic Statistical Areas LO3 1-23 Factors used to segment consumer & organisational markets

Segmenting & Targeting Markets Step 1: Grouping Potential Buyers into Segments Ways to Segment Organizational Markets Demographic customer characteristic SICS Code Number of employees LO3 1-24 Factors used to segment consumer & organisational markets

Segmenting & Targeting Markets Step 1: Grouping Potential Buyers into Segments Ways to Segment Organizational Markets Benefits sought product features LO3 1-25 Factors used to segment consumer & organisational markets

Segmenting & Targeting Markets Step 2: Grouping Products into Categories So that buyers can relate to them Product groups/lines E.g. Aisles in supermarkets LO3 1-26 Factors used to segment consumer & organisational markets

Segmenting & Targeting Markets Step 3: Market-Product Grid & Size of Markets Market-Product Grid Forming a Market-Product Grid Estimating Market Sizes LO4 1-27 Developing a Market-Product Grid and marketing actions for a target market

Segmenting & Targeting Markets Step 3: Market-Product Grid & Size of Markets FIGURE 9-8 Selecting a target market for your restaurant next to an urban university (target market is shaded) LO4 1-28 Developing a Market-Product Grid and marketing actions for a target market

Segmenting & Targeting Markets Step 4: Selecting a Target Market Criteria to Use in Selecting Target Markets Market Size Expected Growth Competitive Position Cost of Reaching Segment Compatibility with Organizational Goals and Resources LO4 1-29 Developing a Market-Product Grid and marketing actions for a target market

Segmenting & Targeting Markets Step 4: Selecting a Target Market Note the 2 different sets of criteria in market segmentation process: Criteria for Segmenting Market (Step 1) Criteria for Targeting Market (Step 4) LO4 1-30 Developing a Market-Product Grid and marketing actions for a target market

Segmenting & Targeting Markets Step 4: Selecting a Target Market Choose the Products & Segments No Breakfast Four Student Segments Only LO4 1-31 Developing a Market-Product Grid and marketing actions for a target market

Segmenting & Targeting Markets Step 5: Taking Marketing Actions to reach Target Market Your restaurant’s segmentation strategy Day Commuters Between-Meal Snacks Dinners to Night Commuters LO4 1-32 Developing a Market-Product Grid and marketing actions for a target market

FIGURE 9-9 Advertising actions to reach specific student segments (an entire market segment vs. a narrow niche) LO4 1-33 Developing a Market-Product Grid and marketing actions for a target market

Segmenting & Targeting Markets Step 5: Taking Marketing Actions to reach Target Market Apple’s Ever-Changing Segmentation Strategy Market-Product Synergies: A Balancing Act Marketing Synergies Product Synergies LO4 1-34 Developing a Market-Product Grid and marketing actions for a target market

Apple’s Segmentation Strategy Marketing Matters Apple’s Segmentation Strategy From an unfocused, disorganised ‘camp runamok’ to a superbly segmented market strategy LO4 1-35 Developing a Market-Product Grid and marketing actions for a target market

Product Repositioning Product Positioning Two Approaches Product Positioning Product Repositioning Two Approaches to Product Positioning Head-to-Head Positioning Differentiation Positioning LO5 1-36 Positioning Products in the Marketplace

Product Positioning Product Positioning Two Approaches Product Positioning Identify Important Attributes for a Product Class Judgments of Existing Brands on These Important Attributes Ratings of an Ideal Product’s or Brand’s Attributes LO5 1-37 Positioning Products in the Marketplace

How can dairies put more zip into chocolate milk sales? Product Positioning Two Approaches Perceptual Map Repositioning Chocolate Milk for Adults How can dairies put more zip into chocolate milk sales? LO5 1-38 Positioning Products in the Marketplace

FIGURE 9-10 Using positioning and perceptual map to increase milk sales to children and adult Nutrition, premium, and indulgence are used to position chocolate milk to adults LO5 1-39 Positioning Products in the Marketplace

Sales Forecasting Sales Forecast Market Potential Industry Potential Three Approaches Market Potential Sales Forecast Industry Potential Company Forecast LO6 1-40 Three Approaches to developing a Sales Forecast

Judgments of the Decision Maker Sales Forecasting Three Approaches Judgments of the Decision Maker Direct Forecast Lost-Horse Forecast Surveys of Knowledgeable Groups Lost-Horse Forecast: Curiously named. In order to find a lost horse, you would go to the last known location, assess options, and move towards where you think it may go. For the lost-horse forecast, you use the last known sales numbers of the product, list some factors/events which may affect the number, and decide whether numbers will improve or degrade, and by how much. Survey of Buyers’ Intentions Forecast Salesforce Survey Forecast LO6 1-41 Three Approaches to developing a Sales Forecast

Sales Forecasting Statistical Methods Trend Extrapolation Three Approaches Statistical Methods Trend Extrapolation Linear Trend Extrapolation LO6 1-42 Three Approaches to developing a Sales Forecast

FIGURE 9-12 Linear trend extrapolation of sales revenues at Xerox (made at the start of 2000) LO6 1-43 Three Approaches to developing a Sales Forecast