8 Segmentation & Target Marketing Dr. Close

Finding Markets Markets = people with needs/wants and the ability and willingness to buy Types of markets: –Generic People with broadly similar needs (social) Diverse ways of satisfying (restaurants, movies) –Products Very similar needs (thirsty for soft drinks) Very close substitutes (Coke vs. Pepsi, and what else?) Close substitutes or no?

Pepsi vs Coke

What’s the Difference? Market Segment Market Segment Market Segmentation Market Segmentation People or organizations with needs or wants and the ability and willingness to buy. A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.

Market Segmentation Dividing market into meaningful, similar groups (or aggregating those with similar needs) Why is segmentation important?....Why is segmentation important?.... Markets have a variety of product preferences Marketers can better define customer needs Decision makers can define objectives and allocate resources more accurately

Criteria for Segmentation Substantiality Identifiability and Measurability Accessibility Responsiveness Segment must be large enough to warrant a special marketing mix. Segments must be identifiable and their size measurable. Members of targeted segments must be reachable with marketing mix. Unless segment responds to a marketing mix differently, no separate treatment is needed.

So, A Good Segment is… Homogenous within: members are similar Heterogeneous between: outsiders differ (choose the best) Substantial: large enough for profit (Ned Flanders) Operational: workable (identify then access  China)

Bases for Segmenting Markets GeographyDemographicsPsychographicsBenefitsUsage Rate Region Market size Market density Climate Age Gender Income Ethnicity Family life cycle Personality Motives Lifestyle Geodemo- graphics Benefits sought Former Potential 1 st time Light or irregular Medium Heavy

Demographic Segmentation: Family Life Cycle

Psychographic Segmentation Personality (cars) Motives (emotions) Lifestyles (outdoor) Geodemographics (PRIZM)

Benefit Segmentation Group consumers via needs/wants (NOT by gender, age, lifestyle etc.) What do you want from your cell phone?

Usage Rate Segmentation Group by amount/rate of consumption Former apple users Potential apple users Light apple users Heavy apple users 80/20 principle of demand

6 Steps to Segment a Market Select a market for study Choose bases for segmen- tation Select descriptors Profile and analyze segments Select target markets Design, implement, maintain marketing mix

Strategies for Selecting Target Markets Options… –Undifferentiated Targeting One market, one mix (plain toilet paper) Any other examples? –Concentrated Targeting Multiple markets & mix for each Examples include Ford, Lincoln, Mercury, and what else? –Multi-segment Targeting Multiple markets share mix (bad idea) Advantages = Greater financial success; Economies of scale Disadvantages= High costs; Cannibalization

Strategies for Selecting Target Markets Options –Undifferentiated Targeting One market, one mix (plain toilet paper) Any other examples? –Concentrated Targeting Multiple markets & mix for each Examples include Ford, Lincoln, Mercury, and what else? –Multi-segment Targeting Multiple markets share mix (bad idea) Example: network television and any more?

One-to-One Marketing Information-Intensive Long-Term One-to-One Marketing is... One-to-One Marketing is... Individualized Cost Reduction Has a Goal of… Customer Loyalty Increased Revenue Personalized Customer Retention

One-to-One Marketing One-size-fits all marketing is lame. Direct/personal marketing will grow to meet needs of busy consumers. We will be loyal to companies that have earned—and reinforced—our loyalty. Mass-media approaches will decline as technology allows better customer tracking. Trends

Marketing Strategy Matching opportunity with resources and business objectives Goals: 1.SCA Enduring superiority of a business BEST: from many parts (Wal-Mart) 2.Breakthrough opportunity Conditions right for SCA

Positioning Developing a marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. How is Wal-Mart Positioned?

Attribute Price and Quality Use or Application Product User Product Class Competitor Emotion Positioning Bases

LO 9 0.7%Fabric & skin safety on baby clothesIvory Snow 0.1%Tough cleaner, aimed at Hispanic marketAriel 1.0%Cleaning for baby clothes, safeDreft 1.2%Detergent and fabric softener in liquid formSolo 1.4%Bleach-boosted formula, whiteningOxydol 1.8%Value brandDash 2.2%Stain treatment and stain removalEra 2.6%Sunshine scent, odor-removingGain 2.9%Detergent plus fabric softenerBold 8.2%Tough cleaning, color protectionCheer 31.1%Tough, powerful cleaningTide Market Share PositioningBrand Positioning of Procter & Gamble Detergents

Effective Positioning 1.Assess the positions occupied by competing products 2.Determine the dimensions underlying these positions 3.Choose a market position where marketing efforts will have the greatest impact

Product Differentiation A positioning strategy that some firms use to distinguish their products from those of competitors. Are distinctions real or perceived?

Perceptual Mapping

Daimler Chrysler: Do they need a reposition? (Changing consumers’ perceptions of a brand in relation to competing brands)

Summary Generic vs product markets Segmentation: Criteria Bases for segmenting Strategies of segmentation (effective)Positioning/repositioning, bases Any questions?