IDENTIFYING MARKET SEGMENTS AND TARGETS C HAPTER

Segmentation  Market Segments –groups of people who think Market Segments –groups of people who think differently from the whole, but the same as each other  Product Differentiation Product Differentiation  Market Segmentation – results in … Market Segmentation – results in … Soda? …

Market-product grid showing how different Reebok shoes reach customer groups with different needs

When to Segment Markets Future?-Build-to-Order (BTO) -runs of 1, not 1001, like Dell Computers Mass produced goods homogenized need but were cheap Mass customization is now cheap & encourages choice, so companies segment by that choice When the expected gain in sales is larger than the expense of the process

Ann Taylor & Ann Taylor Loft What is the danger of a two-segment strategy? If danger is small, segmenting begins

Group Buyers into Segments Potential for Increased Profit  Criteria to Use in Forming the Segments Similarity of Needs of Buyers within a Segment Simplicity and Cost of Assigning Buyers to Segments Difference of Needs of Buyers Among Segments Potential of a Marketing Action to Reach a Segment

SubstantialitySubstantialityIdentifiabilityMeasurabilityIdentifiabilityMeasurability AccessibilityAccessibility ResponsivenessResponsiveness 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. Criteria for Segmentation

Segmentation Variables: Customer Characteristics Geographic-Location 1)Region of he world 2)Market size 3)Market density 4)Climate Demographic-Household 1)Age & Gender 2)Income 3)Ethnic Background 4)Family Life Cycle Psychographic- Lifestyles 1)How time is spent 2)Values and Beliefs 3)Spending habits 4)Education

FIGURE 9-B FIGURE 9-B Segmentation variables and breakdowns for U.S. consumer markets

Segmentation Variables: Usage 80/20 Rule Usage Rate The 80/20 rule is a concept that suggests 80% of a firm’s sales are obtained from 20 % of its customers. Usage rate is the quantity consumed or patronage (store visits) during a specific period of time.

Comparison of users and nonusers for Wendy’s,Burger King, and McDonald’s

Ways to Segment Organizational Markets Customer Characteristics  Geographic: Statistical Area  Demographic: NAICS Code  Demographic: Number of Employees  Benefits Sought: Product Features

Chart Products to be Sold & Estimate of the size of the market Selecting a target market for Wendy’s near a city university ?

Criteria used to Select the Target Market Market Size Expected Growth Cost of Reaching Segment Compatibility with the Organization’s Objectives and Resources Competitive Position

Wendy’s How can Wendy’s target different market segments with different advertising programs?

FIGURE 9-6 FIGURE 9-6 Advertising actions to reach specific student segments

Market-Product Strategies Benefits & drawbacks of a co’s market-product strategies

POSITIONING THE PRODUCT Product Positioning- Using Perceptual MapsProduct Positioning- Using Perceptual Maps  Identify Important Attributes for a Product Class  Judgments of Existing Brands on These Important Attributes  Ratings of an “Ideal” Brand’s Attributes  Perceptual Map Perceptual Map

Product Positioning using Perceptual Maps

Market Segmentation Market segmentation involves aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marketing action.

Market Segments Market segments are the relatively homogeneous groups of prospective buyers that result from the market segmentation process.

Product Differentiation Product differentiation is a strategy that involves a firm’s using different marketing mix activities to help consumers perceive the product as being different and better than competing products.

Market-Product Grid A market-product grid is a framework to relate the market segments of potential buyers to products offered or potential marketing actions by the firm.

Usage Rate Usage rate is the quantity consumed or patronage (store visits) during a specific period of time.

80/20 Rule The 80/20 rule is a concept that suggests 80 percent of a firm’s sales are obtained from 20 percent of its customers.

Product Positioning Product positioning refers to the place an offering occupies in consumers’ minds on important attributes relative to competitive products.

Perceptual Map A perceptual map is a means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how consumers perceive competing products or brands relative to its own and then take marketing actions.