Segmenting and Targeting Markets Chapter 6 Segmenting and Targeting Markets Prepared by Deborah Baker Texas Christian University Chapter 6 Ver 2e ©2000 South-Western College Publishing

Chapter 6 Objectives 1. Describe the characteristics of markets and market segments. 2. Explain the importance of market segmentation. 3. Discuss criteria for successful market segmentation. 4. Describe the bases commonly used to segment consumer markets. (continued) Chapter 6 Ver 2e ©2000 South-Western College Publishing

Chapter 6 Objectives 5. Describe the bases for segmenting business markets. 6. List the steps involved in segmenting markets. 7. Discuss alternative strategies for selecting target markets. (continued) Chapter 6 Ver 2e ©2000 South-Western College Publishing

Chapter 6 Objectives 8. Explain how and why firms implement positioning strategies and how product differentiation plays a role. 9. Discuss global marketing segmentation and targeting issues. Chapter 6 Ver 2e ©2000 South-Western College Publishing

Market Segmentation A market is... Segmenting and Targeting Markets Market Segmentation A market is... (1) people or organizations with (2) needs or wants, and with (3) the ability and (4) the willingness to buy. A group of people that lacks any one of these characteristics is not a market. Chapter 6 Ver 2e ©2000 South-Western College Publishing

Competitive Advantage Importance of Market Segmentation Markets have a variety of product needs and preferences Marketers can better respond to increase in competition Marketers can better define customer needs Decision makers can define objectives and allocate resources more accurately Competitive Advantage Chapter 6 Ver 2e ©2000 South-Western College Publishing

Criteria for Market Segments Criteria for Successful Segmentation Criteria for Market Segments Substantiality Identifiability Accessibility Responsiveness Chapter 6 Ver 2e ©2000 South-Western College Publishing

Characteristics Used to Segment Markets Bases for Segmenting Consumer Markets Usage Rate Benefits Sought Psychographics Demographics Geography Characteristics Used to Segment Markets Chapter 6 Ver 2e ©2000 South-Western College Publishing

Geographic Segmentation Bases for Segmenting Consumer Markets Geographic Segmentation Region of the country or world Market size Market density Climate Chapter 6 Ver 2e ©2000 South-Western College Publishing

Bases for Segmenting Consumer Markets Demographics Age Gender Income Ethnic background Family Life Cycle Chapter 6 Ver 2e ©2000 South-Western College Publishing

Family Life Cycle Age Marital Status Children Chapter 6 Ver 2e ©2000 South-Western College Publishing

Psychographic Segmentation Bases for Segmenting Consumer Markets Psychographics Psychographic Segmentation Personality Motives Lifestyles Geodemographics Chapter 6 Ver 2e ©2000 South-Western College Publishing

VALS 2 Dimensions Abundant Resources Minimal Resources Principle- oriented Status- Fulfillers Believers Actualizers Achievers Strivers Strugglers Minimal Resources Abundant Resources Action- oriented Experi- encers Makers Chapter 6 Ver 2e ©2000 South-Western College Publishing

Bases for Segmenting Consumer Markets Benefit Segmentation Customers are grouped into market segments according to the benefits they seek from the product. Usage Rate Market is divided based on product consumption 80/20 Principle holds that 20% of customers generate 80% of demand Chapter 6 Ver 2e ©2000 South-Western College Publishing

Bases for Segmenting Business Markets Geographic Customer Type Customer Size Product Use Business Markets Purchasing Criteria Purchasing Strategy Importance Personal Characteristics Micro- segmentation Macro- Chapter 6 Ver 2e ©2000 South-Western College Publishing

Steps in Segmenting a Market Select a market for study Choose bases for segmen-tation Select descrip-tors Profile and analyze segments Select target markets Design, imple- ment, maintain mkting mix Chapter 6 Ver 2e ©2000 South-Western College Publishing

Strategies for Selecting Target Markets Concentrated Strategy Undifferentiated Multisegment Chapter 6 Ver 2e ©2000 South-Western College Publishing

Undifferentiated Strategy Advantages: Potential savings on production and marketing costs Disadvantages: Unimaginative product offerings Company more susceptible to competition Chapter 6 Ver 2e ©2000 South-Western College Publishing

Concentrated Strategy Advantages: Concentration of resources Meet needs of narrowly defined segment Small firms can compete Strong positioning Disadvantages: Segments too small, or changing Large competitors may effectively market to niche segment Chapter 6 Ver 2e ©2000 South-Western College Publishing

Multisegment Strategy Advantages: Greater financial success Economies of scale Disadvantages: High costs Cannibalization Chapter 6 Ver 2e ©2000 South-Western College Publishing

Costs of Multisegment Targeting Product design costs Production costs Promotion costs Inventory costs Marketing research costs Management costs Cannibalization Chapter 6 Ver 2e ©2000 South-Western College Publishing

Perceptual Mapping (General Motors--1989) Segmenting and Targeting Markets Positioning High Price Cadillac Oldsmobile Buick Conservative Expressive Chevrolet Pontiac Perceptual Mapping (General Motors--1989) Low Price Chapter 6 Ver 2e ©2000 South-Western College Publishing

Positioning Bases Positioning Bases Attribute Price and Quality Use or Application Product User Product Class Competitor Chapter 6 Ver 2e ©2000 South-Western College Publishing

Global Market Segmentation Trends Global Market Standardization Micromarketing Chapter 6 Ver 2e ©2000 South-Western College Publishing