Chapter 7 Identifying Market Segments and Selecting Target Markets by Lecturer: Ung Veasna

Kotler on Marketing “Don’t buy market share. Figure out how to earn it.”

Segmentation Works Because ... Subgroups may be identified Subgroups smaller and more homogeneous Not all buyers alike Easier to satisfy smaller groups

Major Steps in Segmentation & Targeting 1. Break market down 2. Group into segments TARGET MARKET 3. Choose target market

Segmentation Rule Organizations cannot be “all things” to “all people.” They must choose the customers they wish to serve.

Market Segmentation The process of dividing a market into distinct groups of buyers who might require separate products or marketing mixes.

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).

1. Market Segmentation Mass Marketing Segment Marketing Same product to all consumers 1. Market Segmentation Dividing Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Services That Match Their Unique Needs. Segment Marketing Different products to one or more segments

Table 7-1: Steps in Segmentation Process Description 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. 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.

Bases for Segmenting Consumer Markets Geographic Region, City or Metro Size, Density, Climate Demographic Age, Gender, Family size and Fife cycle, Race, Occupation, or income ... Lifestyle or Personality Psychographic Occasions, Benefits, Uses, or Attitudes Behavioral

Dividing the market into groups based on variables such as: Demographic Segmentation Dividing the market into groups based on variables such as: - Age - Life-cycle stage, size - Gender - Income - Occupation - Education - Religion - Race - Nationality Most Popular Bases & Easier to Measure

Table 7-2: Major Segmentation Variables for Geographic Region Pacific, Mountain, West North Central, West South Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New England City or metro size Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-100,000; 100,000-250,000; 250,000-500,000; 500,000-1,000,000; 1,000,000-4,000,000; 4,000,000 or over Density Urban, suburban, rural Climate Northern southern

Divides Buyers Into Different Groups Based on: Psychographic Segmentation Divides Buyers Into Different Groups Based on: Social Class Lifestyle Personality

Behavioral Segmentation Dividing the market into groups based on variables such as: Occasions Benefits sought User status Usage rate Loyalty status

Requirements for Effective Segmentation Measurable Requirements for Effective Segmentation Accessible Substantial Size, purchasing power, profiles of segments can be measured. Differential Segments can be effectively reached and served. Actionable Segments are large or profitable enough to serve. Segments must respond differently to different marketing mix elements & programs. Effective programs can be designed to attract and serve the segments.

2- Market Targeting Evaluating and Selecting the Market Segments Single-Segment Concentration Selective Specialization Product Specialization Market Specialization Full Market Coverage Undifferentiated marketing Differentiated marketing

Market Targeting Higher costs using differentiated marketing include: Product modification cost Manufacturing cost Administrative cost Inventory cost Promotion cost

Market Targeting Evaluating Market Segments 1-Segment Size and Growth - Analyze current segment sales, growth rates, and expected profitability for various segments. 2- Segment Structural Attractiveness - Consider effects of: competitors, availability of substitute products, and the power of buyers & suppliers. 3- Company Objectives and Resources - Examine company skills & resources needed to succeed in that segment(s). - Offer superior value & gain advantages over competitors.

Product’s Life-Cycle Stage Competitors’ Marketing Strategies Base for Selecting Market Segments Company Resources Product Variability Product’s Life-Cycle Stage Market Variability Competitors’ Marketing Strategies

Target Market Approaches (Coverage Strategies) Undifferentiated (mass marketing) One mix to the whole market Differentiated Multiple mixes to multiple segments Concentrated One mix to one market segment Custom One mix to one customer

Market Company Marketing Mix Company A. Undifferentiated Marketing Segment 1 Segment 2 Segment 3 Company Marketing Mix 1 Marketing Mix 2 Marketing Mix 3 Marketing A. Undifferentiated Marketing B. Differentiated Marketing C. Concentrated Marketing

Possible Strategies for Target Marketing Differentiated marketing Multiple market segmentation

Matching the Marketing Mix to Target Market Our target market: Women aged 14-21 living in the United States The right… Product? Price? Promotion? Place?