Target Marketing Strategies Chapter 8 Lecture Slides Solomon, Stuart, Carson, & Smith Your name here Course title/number Date

Chapter Learning Objectives When you have completed your study of this chapter, you should be able to: Explain how marketers develop a targeting strategy. Understand how a firm develops and implements a positioning strategy. Understand the three steps of developing a target marketing strategy. Understand the need for market segmentation in today’s business environment. Know the different dimensions marketers use to segment consumer markets. Understand the bases for segmentation in business-to-business markets. Explain how marketers evaluate and select potential market segments. http://www.ford.ca/ ©Copyright 2003 Pearson Education Canada Inc.

Introduction to the Topic If your product: is completely unique, has no substitute, people need it to survive, you have no competition, and demand is without limits, then market segmentation is not likely to interest you. Figure 8.1 http://www.acnielsen.com/research/segmentation.htm However, if your products are like the other 99.9% in the market place, then listen up! This topic forms the basis for the vast majority of marketing efforts by organizations, hence its importance to our study. ©Copyright 2003 Pearson Education Canada Inc.

Selecting and Entering a Market “You can have it any colour you want, as long as it is black.” This famous quote is attributed to Henry Ford, who was providing his opinion about the necessity of offering the customer a choice. Market fragmentation: creation of many consumer groups due to a diversity of distinct need and wants in modern society. “Having it your way” is a good way to describe the consumer’s desire for products that more closely suit their tastes, rather than putting up with only one version. Target marketing strategy: dividing the total market into different segments based on customer characteristics, selecting one or more segments, and developing products to meet the needs of those specific segments. market fragmentation p202 target marketing strategy p203 http://www.burgerking.com/ ©Copyright 2003 Pearson Education Canada Inc.

Segmentation, Targeting, and Positioning Identify bases for segmenting market Market Segmentation Develop profiles of resulting segments Develop measures of segment attractiveness Market targeting Select the target segment(s) diagram of market segmentation, targeting, and positioning Develop positioning for each segment Market positioning Develop marketing mix for each segment ©Copyright 2003 Pearson Education Canada Inc.

The Process of Segmentation Segmentation: the process of dividing a larger market into smaller pieces, based on one or more meaningful, shared characteristics. The purpose of segmenting a market is to design a separate marketing mix tailored to the specific desires of each segment. Segmentation variables: bases for dividing the total market into fairly homogeneous groups, each with different needs and preferences. Segmentation strategies can be based on demographic, psychographic, or behavioural factors. segmentation p203 segmentation variables p203 http://www.vans.com/index4.html ©Copyright 2003 Pearson Education Canada Inc.

Segmentation by Demographics Demographics: statistics that measure observable aspects of a population, including age, gender, ethnic group, income, education, occupation, and family structure. Demographic factors are attractive to use as segmentation variables because they are (relatively) easy to identify and measure. Segmenting by age is interesting due to Canada’s unusual population distribution, caused by our recent history. demographics p76 baby boomers p204 http://www.statcan.ca/ ©Copyright 2003 Pearson Education Canada Inc.

Segmentation by Demographics (continued) Baby boomers: the largest age group in Canada, it includes people born between 1947 and 1966. This trend is also repeated in the United States, only ten times larger. Due to their numbers, the needs of the baby boomers have dominated the marketplace and our culture for the past 50 years, and will continue to do so for another 30 years. Just be careful about calling them old! demographics p76 baby boomers p204 http://demography.anu.edu.au/VirtualLibrary/ ©Copyright 2003 Pearson Education Canada Inc.

Segmentation by Demographics (continued) Segmenting by gender will work for many products that are actually gender-specific, but one must be careful not to make too many assumptions in today’s politically correct marketplace. Family structure is a useful base for segmentation as consumption changes in relatively predictable ways as a family begins and grows. The only problem is that today’s definition of what a family is has changed due to a number of social trends. Income and social class can be useful bases, but difficult to define precisely. demographics p76 baby boomers p204 http://family.go.com/ ©Copyright 2003 Pearson Education Canada Inc.

Segmentation by Demographics (continued) Segmenting by ethnic origin can be useful, if we know that consumption behaviour is different between groups. Canada has a diverse population by ethnic origin, and this trend will continue in the future as the majority of population growth continues to be due to immigration, and not birth rate. table of ethnic groups in Canada http://www.chumlimited.com/ ©Copyright 2003 Pearson Education Canada Inc.

Segmentation by Demographics (continued) Segmenting by geography means using different marketing mixes to appeal to different regional tastes, such as offering stronger tasting coffee in Western Canada. For most companies, segmenting by geography in Canada may be impractical due to the small size of our regional markets. Geodemography: a segmentation technique that combines geography with demographics. The basic assumption of geodemography is that people who live near one another tend to share similar characteristics. geodemography p209 http://www.polk.ca/flash.htm ©Copyright 2003 Pearson Education Canada Inc.

Segmentation by Psychographics Psychographics: information about the activities and interests, and opinions of consumers that is used to construct market segments. VALS™ (Values and Lifestyles): psychographic system that divides people into eight segments. The dimensions used are based on psychological characteristics, such as willingness to take risks and innovativeness, and access to resources. You can take the survey by clicking on the link. psychographics p158 VALS (Values and Lifestyles) p210 http://future.sri.com/VALS/ ©Copyright 2003 Pearson Education Canada Inc.

Segmentation by Behaviour Behavioural segmentation: technique that divides consumers into segments on the basis of how they act toward, feel about, or use a product or service. Usage occasions: indicator used in one type of market segmentation based on when consumers use a product most. 80/20 Rule: a marketing rule of thumb that 20% of purchasers account for 80% of a product’s sales. Also known as the concentration principle. This explains why beer companies seem to be preoccupied with under-25 year old males! behavioural segmentation p211 80/20 rule p211 usage occasions p211 http://www.soyaworld.com/ ©Copyright 2003 Pearson Education Canada Inc.

Segmenting Business Markets Segmenting business customers can be done by industry using the NAICS classification system (Chapter 7), or by their consumption behaviour using various operating variables. Operating variables: the production technology used, the business customer’s degree of technical, financial, or operations expertise,and whether the prospect is a current user or non-user of the product. Companies will also differentiate customers based on how they buy, such as the competitive bidding systems used by governments. NAICS p212 operating variables p212 http://www.dell.ca/ ©Copyright 2003 Pearson Education Canada Inc.

©Copyright 2003 Pearson Education Canada Inc. Targeting Target market: group or groups that a firm selects to turn into customers as a result of segmentation and targeting. The objective of targeting is to choose the segment(s) that the company can most profitably serve, given its resources and capabilities. Segment profile: a description of the “typical” customer in a segment. This is done to help determine the best way to reach them. Market potential: the maximum demand expected among consumers in a segment for a product or service. target market p212 segment profile p214 market potential p214 http://www.royalbank.ca/ ©Copyright 2003 Pearson Education Canada Inc.

Criteria for Evaluating Segments Measurable: can the buyer characteristics be easily identified and segmented into groups at reasonable cost? Similarity of needs: buyers within the group have similar needs and wants. Distinctness of needs: buyers in each group have distinct needs and wants. Profit potential: is there greater potential for profit by segmenting a market than attempting to serve the mass market? Accessible: can the buyers in the segment be reached effectively with a simple marketing action? Capability: does the company have the resources and capability of satisfying the segment? criteria for evaluating segments p213-4 http://www.beefinfo.org/ ©Copyright 2003 Pearson Education Canada Inc.

Choosing a Targeting Strategy Differentiated targeting strategy: developing one or more products for each of several distinct customer groups and making sure these offerings are kept separate in the marketplace. Example: Black & Decker sell under own brand name to homeowners and the DeWalt line to professional contractor users. Undifferentiated targeting strategy: appealing to a broad spectrum of people. Example: selling one version of the product to many different markets, such as baking soda. Concentrated targeting strategy: focusing a form’s efforts on offering one or more products to a single segment. Example: Burton snowboards differentiated targeting strategy p216 undifferentiated targeting strategy p216 concentrated targeting strategy p216 http://www.burton.com/ ©Copyright 2003 Pearson Education Canada Inc.

Choosing a Targeting Strategy (continued) Custom marketing strategy: approach that tailors specific products and the messages about them to individual customers. As practiced by most professional service providers, and some on-line retailers. Mass customization: approach that modifies a basic product or service to meet the needs of an individual. “Made to measure” has traditionally meant expensive and low volume. Mass customization uses technology to take this idea to a larger scale to bring the costs down to a more affordable level. You can have a mountain bike built to your exact measurements! custom marketing p217 mass customization p217 http://www.ticycles.com/ ©Copyright 2003 Pearson Education Canada Inc.

©Copyright 2003 Pearson Education Canada Inc. Positioning Positioning: developing a marketing strategy aimed at influencing how a particular market segment perceives a product or service in comparison to the competition. Repositioning: redoing a product’s position to respond to marketplace changes. Brand personality: a distinctive image that captures a product or service’s character and benefits. Perceptual map: a picture of where products or brands are “located” in consumers minds. positioning p217 repositioning p218 brand personality p219 perceptual map p219 Figure 8.4 ©Copyright 2003 Pearson Education Canada Inc.

©Copyright 2003 Pearson Education Canada Inc. Famous Last Words… The three processes of segmentation, targeting, and positioning form the essence of marketing in today’s competitive environments. Without them, mass marketing would be our only alternative, and we know how boring that can be! ©Copyright 2003 Pearson Education Canada Inc.