McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-1 Chapter 6 Target Marketing What’s a market? Three definitions... n A geographic area n A place where buyer and seller meet n The demand for a product class

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-2 Chapter 6 Target Marketing What’s the criteria for a Target Market? A group of people, businesses and/or institutions with n Similar needs and wants that your product satisfies. n The willingness and ability to pay your price. n Accessibility to your product. n Sufficient size to be profitable. n A desire for your competitive advantage.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-3 Finding and Exploiting the Target Market n Step One: Segment the Market > >Take a large group of people or businesses with different wants and needs; then divide them into smaller groups with similar wants and needs. > >Segmentation is necessary because groups of customers in a market have: »Differences in buying habits. »Differences in usage patterns »Different motives for buying.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-4 Finding and Exploiting the Target Market n Step Two: Evaluate each segment in terms of the Target Market Criteria > >Similar needs and wants that your product satisfies. > >Willingness and ability to pay your price. > >Accessibility to your product. > >Sufficient size to be profitable. > >A desire for your competitive advantage. n Step Three: Select Target Market(s) and develop a Marketing Mix(es)

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-5 Target Market Strategies n Market aggregation —treat the total market as a single segment. Employ one Marketing Mix to capture everyone. n Single-segment target —focus on only one particular segment- a niche market. n Multiple-segment targets —select two or more segments and devise different marketing mixes for each.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-6 The most basic (‘first cut’) segmentation divides prospects into: n Ultimate consumers who buy goods or services for their own personal or household use. n Business users who buy goods and services to use in their businesses and institutions, to make other products and services, or to resell to other business users or consumers.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-7 Consumer Markets are commonly further segmented on the basis of: n Geography n Demographics n Psychographics n Buying Behavior n Note: Thus we can express our Target Market Profiles >Single men, age 34-49, with incomes of $50K+, living in greater Atlanta, who actively date, and are appearance conscience.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-8 Table Segmentation Bases for Consumer Markets Geographic: RegionNew England, Middle Atlantic, and other census regions City or MSA sizeUnder 25,000; 25, ,000; 100, ,000; 500,001-1,000,000; etc. Urban-ruralUrban, suburban, rural ClimateHot, cold, sunny, rainy, cloudy Demographic: IncomeUnder $10,000; $10,001-$25,000; $25,001- $35,000; $35,001-$50,000; over $50,000 AgeUnder 6, 6-12, 13-19, 20-34, 35-49, 50-64, 65 and over GenderMale, female Family life cycleYoung, single; young, married, no children, etc. Social classUpper class, upper middle, lower middle, upper lower, etc. Typical Market Segments

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6-9 Table Segmentation Bases for Consumer Markets (Con’t.) Demographic (cont.): EducationGrade school only, high school graduate, college graduate OccupationProfessional, manager, clerical, sales, student, homemaker, unemployed Ethnic backgroundAfrican, Asian, European, Hispanic, Middle Eastern, etc. Psychographic: PersonalityAmbitious, self-confident, aggressive, introverted, extroverted, sociable Life-style (AIO)Activities (golf, travel); Interests (politics, modern art); Opinions (conservation, capitalism) ValuesValues and Life-Styles 2 (VALS2) Benefits desiredPurchase motives: appliance — cost, quality, durability; toothpaste —cavities, plaque, bright teeth, taste, price Behavioral: Usage rateNonuser, light user, heavy user Typical Market Segments

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved Business markets are often segmented on the basis of: n Customer location. n Type of business customer, including: > >Industry > >Size > >Purchase organization structure > >Purchase criteria/motivation

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved Table Segmentation Bases for Business Markets Customer location: Typical market segments RegionSoutheast Asia, Central America, Upper Midwest, Atlantic Seaboard LocationsSingle buying site, multiple buying sites Customer type: SizeSales volume, number of employees IndustrySIC code Organization structureCentralized or decentralized; group or individual decision Purchase criteriaQuality, price, durability, lead time Type of useResale, component part, ornamental Transaction conditions: Buying situationStraight rebuy, modified rebuy, new buy Usage rateNonuser, light user, heavy user Purchasing procedure Competitive bidding, lease, svc. contracts Order sizeSmall, medium, large Service requirementsLight, moderate, heavy

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved n 1. Fashion Statements—most affluent and educated, use credit cards, expect to be treated well by retail personnel. n 2. Wanna-buys—similar to Fashion Statements but with less income. Enjoy buying on impulse. n 3. Family Values—represent large families, often are professionals, buying focuses on children or the home. n 4. Down to Basics—most likely to have children, not college educated, careful spenders, prefer not to use credit, like coupons. n 5. Matriarchs—older, often retired, they like department stores but are risk averse and have few purchase plans. A Segmentation Example Female department store shoppers have been classified into 5 types, based on demographics, values, and attitudes. The groups and their descriptive names are:

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved BUYING-DECISION PROCESS Need recognition Identification of alternatives Evaluation of alternatives Purchase and related decisions Postpurchase behavior INFORMATION Commercial sources Social sources SITUATIONAL FACTORS When consumers buy Where consumers buy Why consumers buy Conditions under which consumers buy PSYCHOLOGICAL FORCES Motivation Perception Learning Personality Attitude SOCIAL AND GROUP FORCES Culture Subculture Social class Reference groups Family and households

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved Buying Behavior n Buying Decision > >Influencers > >Decision-makers > >Payers > >Users n Buying Habits > >When they buy > >Where they buy--Patronage motive > >How they buy

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved Table Value of family purchases influenced by children aged 4-12 Category Millions of dollars Food & beverages $110,320 Entertainment 25,260 Clothing 17,540 Automobiles 17,740 Electronics 6,400 Health & beauty 3,500 Other 5,570 Total 187,740 Source: James U. McNeal, “Tapping the Three Kids’ Markets,” American Demographics, April, 1998, pp

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved For many purchases the most important decision is selecting a retail store. The choice is based on patronage motives that are determined by factors such as: n Location convenience n Service speed n Merchandise availability n Crowding n Prices n Merchandise assortment n Services offered n Store appearance n Sales personnel n Mix of other shoppers

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved SELF-ACTUALIZATION Needs for self-fulfillment ESTEEM Needs for self-respect, reputation, prestige, and status BELONGING AND LOVE Needs for affection, belonging to a group, and acceptance SAFETY Needs for security, protection, and order PHYSIOLOGICAL Needs for food, drink, sex, and shelter Maslow’s Hierarchy of Needs/Motives

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved Positioning n Positioning is how the company/product is to be perceived versus competition. n There are three steps in the positioning process: > >Select The Story. > >Identify the Competitive Advantage that most effectively conveys the position. > >Coordinate the marketing mix components to convey a consistent position. n Perception: How people think about our company/product. Is it what we want it to be? > >Examples: Movado, BMW, IBM, Wal-Mart, Bill Clinton

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved Perceptual Map How Customers Think About Your Product “When people buy my product, it gives them the feeling of ______?” Status/Expensive Practical/Inexpensive DurableComfortable Calvin Klein Levi Wrangler Gap Unoccupied position Unoccupied position

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved The Competitive Advantage n The Competitive Advantage is the basis upon which companies and products compete. n It explains how your company/product is different/better than the competition n Strong brands have a strong Competitive Advantage

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved Finding Competitive Advantages Product Price Place Brand Story Execution Areas to create/search for Competitive Advantage Areas to create/search for Competitive Advantage Promotion