Chapter 10 Target Markets: Segmentation, Evaluation, and Positioning

Objectives Learn what a market is Understand differences among targeting strategies Become familiar with segmentation variables Know what segment profiles are and how they are used Evaluate market segments Identify factors that influence selection of specific market segments Understand positioning Become familiar with sales forecasting methods

What are Markets Group of people seeking products in a specific product category (see Ch. 2 definition) Can be… specific location (flea market) large geographic area relationship between supply and demand (market for given product) action word, as in market a product

Market Requirements Need/desire for a particular product Have ability to purchase product Willing to use buying power Have authority to buy specific products

Target Market Selection Process

Step 1: Targeting Strategy

Undifferentiated Targeting Strategy A strategy in which an organization defines an entire market for a particular product as its target market, designs a single market mix, and directs it at that market.

Homogeneous Market A market in which a large portion of customers have similar needs for a product.

Concentrated Targeting Strategy Through Market Segmentation

Heterogeneous Market A market made up of individuals or organizations with diverse needs for products in a specific product class.

Market Segmentation The process of dividing a total market into groups with relatively similar product needs to design a marketing mix that matches those needs.

Market Segment Individuals, groups, or organizations sharing one or more similar characteristics that cause them to have similar product needs.

Conditions For Successful Market Segmentation Customer product needs are heterogeneous Segments identifiable and divisible Market divided so segments can be compared on sales potential, costs, and profits At least one segment has potential to justify marketing expense Segment can be reached with a particular marketing mix

Concentrated Target Strategy Market segmentation strategy in which an organization targets a single market segment using one marketing mix

Differentiated Targeting Strategy Through Market Segmentation

Differentiated Targeting Strategy A strategy in which an organization targets two or more segments by developing a marketing mix for each segment.

Step 2: Determine Which Segmentation Variables to Use characteristics of individuals, groups, or organizations used to divide a market into segments

Variables for Segmenting Consumer Markets

Demographic Variables Age Gender Race Ethnicity Income Education Occupation Family size Family life cycle Religion Social class

Age Group Spending Levels

Life Cycle Stages

Family Life Cycle Stages Source: Jason Fields, “America’s Families and Living Arrangements: 2003,” Current Population Reports, U.S. Census Bureau, 2003.

Geographic Variables Climate Terrain City size Population density Urban/rural areas Getty Images

Market Density The number of potential customers within a unit of land area.

Geodemographic Segmentation A method of market segmentation that clusters people in zip code areas and smaller neighborhood units based on lifestyle and demographic information.

Micromarketing An approach to market segmentation in which organizations focus precise marketing efforts on very small geographic markets.

Psychographic Variables Personality characteristics Motives Lifestyles

VALS Types Take the VALS Survey

Behavioristic Variables Dividing a market according to some feature of consumer behavior toward a product

Benefit Segmentation The division of a market according to benefits that consumers want from the product.

Segmenting Business Markets Geographic Location Type of Organization Customer Size Product Use

Step 3: Develop Market Segment Profiles Similarities among potential customers Differences among people and organizations in different segments

Step 4: Evaluate Relevant Market Segments Sales Estimates Market potential Company sales potential (breakdown and buildup) Competitive Assessment Cost Estimates © Microsoft

Step 5: Select Specific Target Markets Choose market segmentation Available resources to compete in market segmentation Confirm requirements of market segment Long-term growth of market segment

Product Positioning and Repositioning creating and maintaining a certain concept of a product in customers minds. Perceptual Mapping Bases for Positioning Repositioning

Toothpaste Product Positions

Perceptual Map For Pain Relievers

Developing Sales Forecast The amount of a product a company expects to sell during a specific period at a specified level of marketing activities.

Executive Judgment A sales forecasting method based on the intuition of one or more executives.

Surveys Customer Forecasting Sales Force Forecasting Expert Forecasting Delphi Technique Time Series Analysis Trend Analysis Regression Analysis

Time Series Analysis Time series analysis – historical sales data used to discover patterns in sales over time Trend analysis – aggregate sales data over many years to determine trends in annual sales Cycle analysis – analysis over 3-5 years to ascertain whether sales fluctuate in a consistent manner

Time Series Analysis (cont’d) Seasonal analysis – daily, weekly, or monthly sales figure to evaluate sales influences of seasonal factors Random factor analysis – attributing erratic sales variations to random events

Regression Analysis Predicting sales based on finding a relationship between past sales and one or more independent variables, such as population or income

Market Test Making a product available to buyers in one or more test areas and measuring purchases and consumer responses to marketing efforts. McDonald’s Market Tests Chicken Breast Strips

Using Multiple Forecasting Methods Diverse product lines Product sold to different market segments Variation in length of needed forecasts Verifying results of one method by using others