Chapter 8 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 8 Segmenting and Targeting Markets © Gary Yeowell/Getty Images

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2 Describe the characteristics of markets and market segments Market Segmentation LO 1

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3 A Market Is... 1) people or organizations with 2) needs or wants, and with 3) the ability and 4) the willingness to buy. A group of people that lacks any one of these characteristics is NOT a market. LO 1

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4 Market Segmentation 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. LO 1

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5 The Concept of Market Segmentation LO 1 Beyond the Book

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6 Explain the importance of market segmentation The Importance of Market Segmentation LO 2

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7 The Importance of Market Segmentation  Markets have a variety of product needs and preferences  Marketers can better define customer needs  Decision makers can define objectives and allocate resources more accurately LO 2

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8 Discuss criteria for successful market segmentation Criteria for Successful Segmentation LO 3

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9 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. LO 3

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10 Describe the bases commonly used to segment consumer markets Bases for Segmenting Consumer Markets LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11 Bases for Segmentation Usage Rate Benefits Sought Psychographics Demographics Geography LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12 Geographic Segmentation  Region of the country or world  Market size  Market density  Climate LO 4 © iStockphoto.com/Pawel Gaul / © iStockphoto.com/Contour99

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13 Benefits of Regional Segmentation  New ways to generate sales in sluggish and competitive markets  Scanner data allow assessment of best selling brands in region  Regional brands appeal to local preferences  Quicker reaction to competition LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14 Demographic Segmentation Age Gender Income Ethnic Family life cycle LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15 Ethnic Segmentation  Largest ethnic markets are:  Hispanic Americans  African Americans  Asian Americans Companies must make products geared toward specific ethnic groups as they continue to expand. LO 4 © Foodpix/Jupiterimages/Getty Images

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16 Family Life Cycle Age Marital Status Children LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17 Exhibit 8.1 Family Life Cycle LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18 Psychographic Segmentation Market segmentation on the basis of personality, motives, lifestyles, and geodemographics. LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19 Bases for Psychographic Segmentation Personality Motives Lifestyles Geodemographics LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20 Personality and Motive Segmentation Reflects a person’s traits, attitudes, and habits. Personality Motives Marketers might appeal to emotional, rational, or status motives, among others. LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21 Lifestyle Segmentation  How time is spent  Importance of things around them  Beliefs  Socioeconomic characteristics LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22 Geodemographic Segmentation Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation. Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation. Geodemographic Segmentation Geodemographic Segmentation LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23 Benefit Segmentation The process of grouping customers into market segments according to the benefits they seek from the product. Benefit Segmentation LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24 Usage-Rate Segmentation Dividing a market by the amount of product bought or consumed. 80/20 Principle A principle holding that 20 percent of all customers generate 80 percent of the demand. LO 4

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25 Describe the bases for segmenting business markets Bases for Segmenting Business Markets LO 5

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26 Bases for Segmenting Business Markets Company Characteristics Company Characteristics Buying Processes Buying Processes Producers Resellers Government Institutions LO 5

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27 Company Characteristics Important segmentation variables:  Geographic location  Type of company  Company size  Product use LO 5

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28 Buyer Characteristics Satisficers Business customers who place an order with the first familiar supplier to satisfy product and delivery requirements. Optimizers Business customers who consider numerous suppliers, both familiar and unfamiliar, solicit bids, and study all proposals carefully before selecting one. LO 5

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29 Buyer Characteristics Demographic characteristics Decision style Tolerance for risk Confidence level Job responsibilities LO 5

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30 List the steps involved in segmenting markets Steps in Segmenting a Market LO 6

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31 Select a market for study Choose bases for segmen- tation Select descriptors Profile and analyze segments Select target markets Design, implement, and maintain marketing mix Note that steps 5 and 6 are actually marketing activities that follow market segmentation (steps 1 through 4). Steps in Segmenting Markets LO 6

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32 Discuss alternative strategies for selecting target markets Strategies for Selecting Target Markets LO 7

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33 Target Market Strategies for Selecting Target Markets A group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges. LO 7

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34 Strategies for Selecting Target Markets Concentrated Strategy Undifferentiated Strategy Multisegment Strategy LO 7

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35 Undifferentiated Targeting Strategy A marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix. LO 7

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36 Undifferentiated Strategy Advantage:  Potential savings on production and marketing costs Disadvantages:  Unimaginative product offerings  Company more susceptible to competition Undifferentiated Targeting Strategy LO 7

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37 Concentrated Targeting Strategy A strategy used to select one segment of a market for targeting marketing efforts. Niche One segment of a market. LO 7 Concentrated Targeting Strategy

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 38 Concentrated Strategy Advantage:  Concentration of resources  Meets narrowly defined segment  Small firms can compete  Strong positioning Disadvantages:  Segments too small, or changing  Large competitors may market to niche segment LO 7 Concentrated Targeting Strategy

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 39 Multisegment Targeting Strategy A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each. LO 7 Multisegment Targeting Strategy

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 40 Multisegment Strategy Advantage:  Greater financial success  Economies of scale Disadvantages:  Higher costs  Cannibalization LO 7 Multisegment Targeting Strategy

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 41  Product design costs  Production costs  Promotion costs  Inventory costs  Marketing research costs  Management costs  Cannibalization Multisegment Strategy LO 7 Costs of Multisegment Targeting Strategy

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 42 Explain one-to-one marketing One-to-One Marketing LO 8

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 43 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 LO 8

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 44 One-to-One Marketing One-size-fits all marketing no longer relevant Direct and personal marketing efforts will grow to meet needs of busy consumers. Consumers will be loyal to companies that have earned—and reinforced—their loyalty. Mass-media approaches will decline as technology allows better customer tracking. Trends LO 8

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 45 Explain how and why firms implement positioning strategies and how product differentiation plays a role Positioning LO 9

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 46 Positioning LO 9 developing a specific marketing mix to influence potential customers’ overall perception or a brand, product line, or organization in general. Positioning is…

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 47 LO 9 Positioning of Procter & Gamble Detergents Brand Positioning Tide Tough, powerful cleaning Cheer Tough cleaning, color protection Bold Detergent plus fabric softener Gain Sunshine scent and odor-removing formula Era Stan treatment and stain removal Dash Value brand Solo Detergent and fabric softener in liquid form Dreft Outstanding cleaning for baby clothes, safe Ivory Fabric and skin safety on baby clothes Ariel Tough cleaner, aimed at Hispanic market Beyond the Book

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 48 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 LO 9

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 49 Product Differentiation LO 9 a positioning strategy that some firms use to distinguish their products from those of competitors. Product Differentiation is… © SuperJam

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 50 Perceptual Mapping LO 9 a means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds. Perceptual Mapping is…

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 51 Exhibit 8.3 Perceptual Map and Positioning Strategy for Saks’ Department Stores SOURCE: Vanessa O’Connell, “Park Avenue Classic or Soho Trendy?” Wall Street Journal, April 20, 2007, B1. LO 9

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 52 Attribute Price and Quality Use or Application Product User Product Class Competitor Emotion Positioning Bases LO 9

Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 53 Repositioning LO 9 changing consumers’ perceptions of a brand in relation to competing brands. Repositioning is…