Market Segmentation and Target Markets chapter 7 Harcourt, Inc.

Objectives Understand the concepts: market, segmentation, and target markets Learn the advantages and disadvantages of target marketing Explain the steps in target market selection Dr. Rosenbloom

Objectives Discuss segmentation criteria, strategies, bases, and information sources Understand market profiling and positioning strategies Discuss differences for business and international marketing Dr. Rosenbloom

What is a market? Individuals or organizations who: Are willing, able, and capable of purchasing a firm’s product Segmentation is critical because demand is often heterogeneous Dr. Rosenbloom

What is market segmentation? Process of dividing a large market into smaller target markets, or customer groups with similar needs and/or desires Dr. Rosenbloom

Market Segmentation Continuum of Market Segmentation Size Mass Market Niche Micro-marketing The Individual Continuum of Market Segmentation Size Personal-ization Micro-marketing Niche Standardized Marketing Mix Dr. Rosenbloom

Target Marketing Advantages Easier analysis of potential and actual consumers Tailoring of products to market Assessment of demand potential Identify competing products Increased sales effectiveness and cost efficiencies Product positioning and easy identification of opportunities Dr. Rosenbloom

Target Marketing Disadvantages Increased marketing costs Personalization can become burdensome to manage Faux segmentation may be viewed cynically Narrow segmentation can impact brand loyalty Ethics and stereotyping issues Dr. Rosenbloom

Target Market Selection Identify Total Market Determine Need for Segmentation Determine Bases for Segmentation Assess Potential Profitability of Segment and Select Target Segment Profile Each Selected Segment Select Positioning Strategy Develop and Implement Appropriate Marketing Mix Monitor, Evaluate and Control Dr. Rosenbloom

Market Criteria Segmentable markets are: Heterogeneous Measurable Substantial Actionable Companies must be able to respond to preferences with an appropriate marketing mix Accessible Market must be efficiently reachable Dr. Rosenbloom

External Factors Stage in product life cycle Competition Product specific issues Market for the product Dr. Rosenbloom

Segmentation Variables Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

Demographic Segmentation Income Level Age Family Ethnicity Education Dr. Rosenbloom

Demographic Segmentation Age Some products are marketed to specific age groups Dr. Rosenbloom

Demographic Segmentation Age Some products are marketed to specific age groups Dr. Rosenbloom

Demographic Segmentation Income Level Some products are marketed to consumers with different income levels Dr. Rosenbloom

Demographic Segmentation Income Level Some products are marketed to consumers with different income levels Dr. Rosenbloom

Demographic Segmentation Bartles and James Hal Riney and Partners Dr. Rosenbloom

Demographic Segmentation Family Some products are marketed to consumers with special family consideration Family Life Cycle Bachelor, marriage, married with children, retired, etc. Dr. Rosenbloom

Functions Of Advertising KinderCare The Martin Agency Dr. Rosenbloom

Demographic Segmentation Family Some products are marketed to consumers with special family consideration Family Life Cycle Bachelor, marriage, married with children, retired, etc. Dr. Rosenbloom

Demographic Segmentation Education Some products are marketed to consumers with certain educational levels Dr. Rosenbloom

Demographic Segmentation Ethnicity Some products are marketed to consumers from specific ethnic backgrounds Dr. Rosenbloom

Demographic Segmentation Ethnicity Some products are marketed to consumers from specific ethnic backgrounds Dr. Rosenbloom

Segmentation Variables Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

Geographic Segmentation When an organization localizes its marketing efforts to accommodate the unique needs of specific geographic regions Dr. Rosenbloom

Geographic Segmentation When an organization localizes its marketing efforts to accommodate the unique needs of specific geographic regions Dr. Rosenbloom

Geographic Segmentation Metropolitan Statistical Areas An urbanized area of 50,000 and a total metropolitan area population of at least 100,000 Charlottesville, Virginia Dr. Rosenbloom

Geographic Segmentation Primary Metropolitan Statistical Areas An urbanized county or cluster of counties with a population of more than 1 million Gary/Hammond, Indiana Dr. Rosenbloom

Geographic Segmentation Consolidated Metropolitan Statistical Area A metropolitan area that includes at least two PMSAs Baltimore, Maryland and Washington, D.C. Dr. Rosenbloom

Segmenting Consumer Markets Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

Psychographic Segmentation Grouping customers together based on social class, lifestyles and psychological characteristics (attitudes, interests and opinions) PRIZM analysis from Claritas Dr. Rosenbloom

Segmenting Consumer Markets Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

Benefits-Sought Segmentation Markets can be segmented based on the benefits that consumers desire from using a specific product Dr. Rosenbloom

Benefits-Sought Segmentation American Pork Council Bozell, Incorporated Dr. Rosenbloom

Segmenting Consumer Markets Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

Situation Segmentation Purchase situation or occasion Physical surroundings Social surroundings Temporal perspective How much time to make a purchase? Task definition Pre-purchase attitude Dr. Rosenbloom

Segmenting Consumer Markets Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

Behavior/Usage Segmentation Markets can be segmented by how often or how heavily consumers use a specific product 80/20 Principle - 80% of revenue generated by 20% of customers Light Users 80% Heavy Users 20% Dr. Rosenbloom

Segmentation Data Internal sources External sources In-house customer and marketing databases Data mine to explore patterns and relationships in collected data External sources Lists of catalog/magazine subscribers U.S. Census information Mediamark, CACI Marketing Systems, etc. Dr. Rosenbloom

Positioning Strategy Differentiation through: Price/quality - emphasize value in terms of quality, price, or both Dr. Rosenbloom

Positioning Strategy Differentiation through: Differentiation through: Product attributes - characteristics as a positioning base Product usage - positioning based on a products typical use Differentiation through: Symbol - use of a symbol or icon to position a product in the consumer consciousness Dr. Rosenbloom

Positioning Strategy Differentiation through: Product user - the typical user of a product Dr. Rosenbloom

Positioning Strategy Differentiation through: Product class - positioning against another type of product or product class Dr. Rosenbloom

Positioning Strategy Differentiation through: Competition - comparisons to a product’s competition (directly or indirectly) Dr. Rosenbloom

Segmenting Business Markets Demographics Industry size, growth potential, etc. Operating Characteristics Technology, brand-user status, etc. Purchasing Approaches Purchasing policies, size of orders, etc. Dr. Rosenbloom

Segmenting Business Markets Product Use or Usage Situation The way the product will be used and customer service levels required Situational Factors Urgency, special product uses Buyer’s Personal Characteristics Dr. Rosenbloom

Segmenting Global Markets Economic Stage of development in a host country Political/Legal Regulations and laws Cultural Language barriers, differences in consumer customs Dr. Rosenbloom

Segmenting Global Markets Some segments transcend national borders Rich around the world Older and comfortable Indulged kids Emerging middle class Women employed outside the house Dr. Rosenbloom

Market Segmentation Differentiated Concentrated Undifferentiated Dr. Rosenbloom

Differentiated Marketing An organization targets multiple market segments and develops segment specific mixes Dr. Rosenbloom

Concentrated Marketing When an organization concentrates its marketing efforts on a smaller segment of a larger market Dr. Rosenbloom

Undifferentiated Marketing An organization develops one strategy appropriate for all members of the total market Dr. Rosenbloom