Review Market - Group of people with sufficient purchasing power, authority, and willingness to buy Target market - Group of people a firm believes is most likely to buy its goods and services Types of markets Consumer products: Consumer’s personal use Business products: Resale purposes 1

Market Segmentation Division of the total market into smaller, relatively homogenous groups Criteria for effective market segmentation Measurable purchasing power and size Promote and serve the market segment effectively Sufficiently large Aim for segments that match its marketing capabilities

Segmenting Consumer Markets Geographic segmentation Demographic segmentation Psychographic segmentation Product-related segmentation

The Market Segmentation Process Develop a relevant profile for each segment Forecast market potential Forecast probable market share Select specific market segments

Strategies for Reaching Target Markets Undifferentiated marketing Differentiated marketing Strategy that focuses on producing a single product and marketing it to all customers; also called Mass Marketing Strategy that focuses on producing several products and pricing, promoting, and distributing them with different marketing mixes designed to satisfy smaller segments

Concentrated Marketing and Micromarketing Concentrated marketing - Focuses its efforts on profitably satisfying a single market segment Micromarketing - Targeting potential customers at very narrow, basic levels such as by Zip code, specific occupation, or lifestyle—possibly even individuals themselves

Positioning Placing a product at a certain point or location within a market in the minds of prospective buyers Possible approaches Attributes Price/quality Competitors Application Product user/class

Pricing Laws for Contemporary Marketers Robinson-Patman Act Unfair-trade laws Fair-trade laws

Robinson-Patman Act Federal legislation prohibiting price discrimination that is not based on a cost differential Prohibits selling at an unreasonably low price to eliminate competition Inspired by price competition triggered by the rise of grocery store chains

Robinson-Patman Act Price discrimination - Some consumers pay more than others for the same product A defense based on cost differentials works only: If the price differences do not exceed the cost differences resulting from selling to various classes of buyers

Unfair-Trade Laws State laws requiring sellers to maintain minimum prices for comparable merchandise Intended to protect small specialty stores from loss-leader tactics

Fair-Trade Laws Statutes enacted in most states that once permitted manufacturers to stipulate a minimum retail price for their product Assumes a product’s price is part of its image, which the manufacturer owns These laws became invalid with the passage of the Consumer Goods Pricing Act (1975)

Methods for Determining Prices Prices are traditionally determined in two basic ways Supply and demand Cost-oriented analyses Competition-oriented Customary prices - Traditional prices that customers expect to pay for certain goods and services

Price Determination in Economic Theory Demand - The amounts of a firm’s product that consumers will purchase at different prices during a specified time period Supply - The amounts of a good or service that will be offered for sale at different prices during a specified period Pure competition - A market structure with so many buyers and sellers that no single participant can significantly influence price

Distinguishing Features of the Four Market Structures

The Concept of Elasticity in Pricing Strategy Elasticity - Measure of responsiveness of purchasers and suppliers to a change in price Elasticity of demand Elasticity of supply

Breakeven Pricing technique used to determine the number of products that must be sold at a specified price to generate enough revenue to cover total cost

Target Returns Most managers include a targeted profit in their analyses