Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 8 Market Segmentation, Targeting, and Positioning

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-2 Selecting a Target Market Before a marketing mix strategy can be implemented, the marketer must identify, evaluate, and select a target market. Market Market Target market Target market

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-3 Types of Markets Consumer products Consumer products Business products Business products The key to classification is to identify the purchaser and the reasons for buying the goods.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-4 KC Masterpiece Product Targeted at Selected Consumers

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-5 Cattlemen’s Product Targeted at the Business Market

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-6 An example of a consumer product is the following advertisement for Kenmore from Sears.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-7 The Role of Market Segmentation Market Segmentation: Market Segmentation: division of the total market into smaller, relatively homogeneous groups

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-8 No Market Segmentation

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-9 Segmented by Sex

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmented by Age

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Tom’s of Maine Targeting a Specific Marketing Segment

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Understanding market segmentation plays an important role in developing a firm’s successful marketing strategy. While there are several means available to segmenting the market place the one described in this Kellogg's advertisement is…..?

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Criteria for Effective Segmentation The market segments must be measurable. Marketers must be able to effectively promote to and serve a market segment. Market segments must be sufficiently large. The number of segments must match the firm’s capabilities.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Is segmentation for nonprofit marketers of more, less, or the same importance than for profit- oriented marketers? Class Discussion

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting Consumer Markets

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting Consumer Markets Geographic Segmentation: Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locations

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Pampers This ad is an example of geographic segmentation.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Crunch Fitness Centers Using Geographic Segmentation

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Using Geographic Segmentation Demand for some goods and services can vary according to the geographic region Most major brands get percent of their sales from core regions Climate is an important segmentation factor

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Kubota Segmentation by Residence Location

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting Consumer Markets Demographic segmentation: Demographic segmentation: dividing consumer groups according to characteristics such as sex, age, income, occupation, education, household size, and stage in the family life cycle

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting by gender Segmenting by gender Marketers must ensure that traditional assumptions are not false Some firms start by targeting one gender and then switch to both Some companies market successfully to both genders

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmentation by Gender: Oxygen.com. Advertisement for its website for women.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting by age Segmenting by age Many firms identify market segments on the basis of age Products are often designed to meet the specific needs of certain age groups

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting by age Segmenting by age Sociologists attribute different consumer needs and wants among various age groups to the cohert effect

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Boomers Boomers—People born from 1946 until 1965.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmentation by Age, specifically Boomers. Diet Pepsi brings together two generations.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Seniors Seniors—By 2025, Americans who are over age 65 will make up nearly 20 percent of the population.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Targeting Seniors: America Online’s ad aimed at older computer users.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Ethnic Group Segmentation Ethnic Group Segmentation Census Bureau projects that by 2050, nearly half of the population of the US will belong to nonwhite minority groups.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Who do you think this advertisement is directed to?

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Family Life Cycle Stages Segmentation Family Life Cycle Stages Segmentation The process of family formation and dissolution. The underlying theme is that life stage, not age per se, is the primary determinant of many consumer purchases.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Segmenting by household type Segmenting by household type The “traditional family” has declined over the years

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Engel’s law: Engel’s law: As family income increases: A smaller percentage of expenditures go for food The percentage spent on housing and household operations and clothing remains constant The percentage spent on other items increases

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Jaguar Segmentation based on income

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Demographic Segmentation Abroad Demographic Segmentation Abroad Obtaining the data necessary for global demographic segmentation is often difficult Many countries do not operate regularly scheduled census programs Daily life cycle data is difficult to apply in global demographic segmentation efforts

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Give three examples of how OCCUPATION could effect buying behavior? Class Discussion

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Psychographic Segmentation Psychographic Segmentation Divides a population into groups that have similar psychological characteristics, values, and lifestyles The most common method for developing psychographic profiles of a population is to conduct a large-scale survey

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved A lifestyle advertisement. PlanetRX.com’s ad aimed at busy moms.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Shedd Aquarium Service Appealing to Creatives and Fulfilleds

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Principle Oriented Status Oriented FULFILLED 11% BELIEVERS 16% ACTUALIZERS 8% ACHIEVERS 13% STRIVERS 13% STRUGGLERS 12% Abundant Resources Minimal Resources Action Oriented EXPERIENCERS 12% MAKERS 13% VALS 2 - Network

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Psychographic Segmentation of Global Markets Psychographic Segmentation of Global Markets like those done by Roper Starch can paint useful pictures of the residents of various countries.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Roper Starch Roper Starch Strivers Devouts Altruists Intimates Fun seekers Creatives

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Using Psychographic Segmentation Psychographic profiles produce rich descriptions of potential target markets

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Product-related segmentation: Product-related segmentation: dividing a consumer population into homogeneous groups based on characteristics of their relationships to the product

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Benefits Benefits Focuses on the attributes that people seek in a good or service and the benefits that they expect to receive from that good or service

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Eclipse Segmenting by Benefits Sought

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Benefit segmentation: Maybelline’s “Express 3 in 1 Makeup” ad stresses ease of use.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Usage Rates Usage Rates Markets often divided into heavy-user, moderate-user, and light-user segments The 80/20 principle holds that a big percentage of a product’s revenues comes from a relative small, loyal percentage of total customers

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Brand Loyalty Brand Loyalty Segmenting consumers grouped according to the strength of brand loyalty felt toward a product

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved The Market Segmentation Process Stage I: Identify Segmentation Process Stage II: Develop Relevant Profile Stage III: Forecast Market Potential Stage IV: Forecast Market Share Stage V: Select Specific Segment

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Stage I: Identify Segmentation Process Stage I: Identify Segmentation Process Two methods:  Segments are predefined by managers based on their observation of likely users  Segments are defined by asking customers which attributes are important

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Stage II: Develop Relevant Profile Stage II: Develop Relevant Profile Must develop a profile of the typical consumer and each segment Helps to accurately match consumer needs with the firm’s marketing offers

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Stage III: Forecast Market Potential Stage III: Forecast Market Potential Market segmentation and market opportunity analysis combine to produce a forecast of market potential within each segment

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Stage IV: Forecast Market Share Stage IV: Forecast Market Share The next step is to forecast the firm’s probable market share A specific marketing strategy must be designed to serve the targeted segments The firm determines the expected level of resources it must commit to tap the potential demand in each segment

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Stage V: Select Specific Segment Stage V: Select Specific Segment The preceding steps allow management to assess the potential for achieving company goals and to justify committing resources in developing one or more segments Marketers also weigh more than monetary costs and benefits at this stage

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Strategies for Reaching Target Markets Undifferentiated Marketing Differentiated Marketing Concentrated Marketing Micromarketing

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Undifferentiated marketing: Undifferentiated marketing: when a firm produces only one product or product line and promotes it to all customers with a single marketing mix Sometimes called mass marketing Much more common in the past Undifferentiated Marketing

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Example of an ad using undifferentiated marketing. Ad’s copy states “A wireless phone for everyone”

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Differentiated marketing: Differentiated marketing: when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments Differentiated Marketing

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Differentiated Marketing Procter and Gamble Practicing Differentiated Marketing

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Lunchables Using a Differentiated Marketing Strategy

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Concentrated marketing: Concentrated marketing: when a firm commits all of its marketing resources to serve a single market segment Concentrated Marketing

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Micromarketing: Micromarketing: involves targeting potential customers at a very basic level GeneSolutions targeting a specific occupation

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Selecting and Executing a Strategy Selecting and Executing a Strategy No single, best choice strategy suits all firms Determinants of a market-specific strategy:  Company resources  Product homogeneity  Stage in the product life-cycle  Competitors’ strategy

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Positioning: Positioning: a marketing strategy that emphasizes serving a specific market segment by achieving a certain position in buyers’ minds Positioning map Positioning map Reposition Reposition

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Hypothetical Competitive Positioning Map for Selected Retailers

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Where would you position these automobiles on this Positioning Map? Class Discussion Expensive Inexpensive Conservative Sporty TaurusAccordCorollaBMW

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved Expensive Inexpensive Conservative Sporty Taurus Accord Corolla BMW Where would you place other cars? Class Discussion