Copyright 2009, Prentice-Hall, Inc.7-1 A Framework for Marketing Management Chapter 7 Identifying Market Segments and Targets

Copyright 2009, Prentice-Hall, Inc. 7-2 Chapter Questions What are the different levels of market segmentation? How can a company identify the segments that make up a market? How should a company choose the most attractive target markets?

Copyright 2009, Prentice-Hall, Inc. 7-3 Target Marketing Requires That Marketers… Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation). Select one or more segments to enter (market targeting). Establish and communicate the offering’s distinctive benefit(s) to each target segment (marketing positioning).

Copyright 2009, Prentice-Hall, Inc. 7-4 Levels of Market Segmentation Segment marketing Niche marketing Local marketing Individual marketing

Copyright 2009, Prentice-Hall, Inc. 7-5 Segment Marketing Market segment—a group of customers who share a similar set of needs and wants. Flexible market offering—consists of:  Naked solution containing the product and service elements that all segment members value.  Discretionary options that some members value. Homogeneous preferences—exist when all consumers have roughly the same preferences. Diffused preferences—consumers vary greatly in their preferences.

Copyright 2009, Prentice-Hall, Inc. 7-6 Niche Marketing Niche—a more narrowly defined customer group seeking a distinctive mix of benefits.  Attractive when: Customers have a distinct set of needs Fairly small but has size, profit, and growth potential Customers will pay a premium Nicher gains certain economies through specialization

Copyright 2009, Prentice-Hall, Inc. 7-7 Local Marketing Marketing programs tailored to the needs and wants of local customer groups in particular trading areas, neighborhoods, even individual stores. Grassroots marketing—concentrating on getting as close and personally relevant to individual customers as possible.

Copyright 2009, Prentice-Hall, Inc. 7-8 Individual Marketing Leads to:  “Segments of one”  “Customized marketing”  “One-to-one marketing” Customerization—combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice.

Copyright 2009, Prentice-Hall, Inc. 7-9 Bases for Segmenting Consumer Markets Geographic Demographic Psychographic Behavioral

Copyright 2009, Prentice-Hall, Inc Geographic Segmentation Dividing the market into different geographical units such as:  Nations  States  Regions  Counties  Cities  Neighborhoods

Copyright 2009, Prentice-Hall, Inc Demographic Segmentation Divide the market into groups based on age and other variables:  Life-cycle stage  Life stage  Gender  Income  Generation  Social class

Copyright 2009, Prentice-Hall, Inc Psychographic Segmentation Psychographics—the science of using psychology and demographics to better understand consumers. Buyers divided into groups on the basis of:  Psychological/personality traits  Lifestyle  Values VALS Framework

Copyright 2009, Prentice-Hall, Inc Behavioral Segmentation Divide consumers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. Behavioral variables:  Occasions  Benefits  User status  Buyer-readiness stage  Loyalty status  Attitude

Copyright 2009, Prentice-Hall, Inc Bases for Segmenting Business Markets Demographic Operating variables Purchasing approaches Situational factors Personal characteristics

Copyright 2009, Prentice-Hall, Inc Effective Segmentation Criteria Measurable Substantial Accessible Differentiable Actionable

Copyright 2009, Prentice-Hall, Inc Evaluating and Selecting Market Segments Must look at two factors:  Segment’s overall attractiveness  Company’s objectives and resources

Copyright 2009, Prentice-Hall, Inc Patterns of Target Market Selections Single-segment concentration  Focus on one segment Selective specialization  Select a number of segments Product specialization  Specialize in making a certain product for several segments. Market specialization  Serve many needs of a particular customer group. Full market coverage  Serve all customer groups with all the products they might need.

Copyright 2009, Prentice-Hall, Inc Full Market Coverage Undifferentiated marketing—firm goes after the whole market with one market offering. Differentiated marketing—operate in several market segments and design different programs for each segment.

Copyright 2009, Prentice-Hall, Inc Additional Considerations Segment-by-segment invasions  Enter one segment at a time and avoid letting rivals know what segment(s) will be next.  Megamarketing—the strategic coordination of economic, psychological, political, and public relations skills to gain the cooperation of a number of parties in order to enter or operate in a given market. Ethical choice of market targets  Concerns over targeting vulnerable or disadvantaged groups with potentially harmful products.

Copyright 2009, Prentice-Hall, Inc All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall