Fundamentals of Marketing Chapter 1, Section 3

10/24/2015Page 2 Critical Thinking… Take 2-3 minutes to reflect on one recent marketing trend you have noted (either through the media or by your own observation) You will share your observation in a few minutes!

10/24/2015Page 3 Key Terms Market Consumer market Industrial market Market share Target market Customer profile Marketing mix

10/24/2015Page 4 Market and Market Identification FYI: There are A LOT of terms in this section that are important for your future studies in Marketing…PAY ATTENTION AND TAKE GOOD NOTES!

10/24/2015Page 5 The Reality… Marketers know that their products or services cannot appeal to EVERYONE It is essential that marketers look for people who: –A) have an interest or need for their product and, –B) have the ability to pay for their product

10/24/2015Page 6 Market All people who share similar needs and wants and who have the ability to purchase a given product

10/24/2015Page 7 Consumer versus Industrial Markets Consumer Market –Consists of consumers who purchase goods and services for personal use –Consumers’ purchase goods and services based on these main areas: Save money Make life easier Improve appearance Create status in the community Provide satisfaction related to some other personal motivation

10/24/2015Page 8 Consumer Versus Industrial Market Industrial Market –Also called business-to-business (B2B) market, includes all businesses that buy products for use in their operations. –Goals are different in this market: Increase profits Improve productivity Increase sales Decrease expenses Make their work more efficient

10/24/2015Page 9 Consumer versus Industrial Market Companies producing products for the consumer market classify resellers as a part of the industrial market Therefore, these companies require two distinct marketing plans to reach each market!

10/24/2015Page 10 Market Share A market is further defined by the total sales in the product category Market Share –A company’s percentage of total sales volume generated by all companies that compete in a given market

10/24/2015Page 11 Market Share, cont. Knowing one’s market share helps marketers analyze their competition and their status in a given market Market shares change all the time as new competitors enter the market and the size of the market increases or decreases in volume

10/24/2015Page 12 Target Market and Market Segmentation Businesses know that not EVERYONE will buy their products or services They look for ways to offer their products or services to the people who are most likely to be interested This involves segmenting, or breaking the market into smaller groups that have similar wants and needs

10/24/2015Page 13 Target Market and Market Segmentation Segmentation goes beyond classification into the consumer or industrial market Market segmentation seeks to find the group of people most likely to become customers The group that is identified for a specific marketing program is the target market

10/24/2015Page 14 Target Marketing – Why? Identifying a target market is very important because all marketing strategies are directed at this group. When a business fails to identify a target market, its marketing plan has no focus. Identifying a target market correctly is a key to success.

Businesses look for ways to connect to their current and potential customers The surest way to do this is to know them well When factors like this are analyzed, they can identify groups of people who have many things in common Identifying and Analyzing Markets

Knowing and Selecting Your Target Market 1 st step = Market Segmentation –Classifying people who form a given market into even smaller groups Example: –Who buys jeans? –At what price? –What special features do they want?

Marketing Segmentation for Jeans By age: –Jeans for kids, teens, and adults By price: –Marketers need to reach different socio-economic groups –Mossimo vs. Banana Republic vs. 7 For All Mankind By desired feature: –Tight fit vs. comfortable fit –Newest fashion vs. classic favorite –Unique design vs. basic styling

Selecting a Target Market It is usually too expensive to target all the potential target markets Must identify the markets where it has an advantage –It will enable it to survive against its competition for a long time –Called “sustainable competitive advantage”

Ways to Describe a Target Market Demographics –Statistics that describe personal characteristics such as: Age Gender Income Marital Status Ethnic Background Education Occupation

Age as a Factor Easy to segment a market by age U.S. Census provides information that might help in deciding on the age categories U.S. Census There are common labels that are used in segmenting the population by generation

Gender Another key ingredient Case Study Example: –Jockey was once just a men’s underwear company –Added a women’s line and doubled its sales

Income – Marketers look at two different kinds Disposable income – the money left after taking out taxes –Marketers of products that are necessities are interested in this Discretionary income – money left after paying for basic living necessities such as food, shelter, and clothing –Marketers who sell luxury and premium products are interested in this

Marital Status Important factor because it plays a role in lifestyle and buying habits Food for thought: –U.S. Census shows that married couples slipped to 50.7% of total households (2006) –In the 1950’s, it was at 80%

Ethnic Background U.S. population is becoming more ethnically diverse Marketers must take growing ethnic groups into consideration when crafting their campaignsethnic groups Case Study Example: –HP’s “You on You” campaign softly showcases a multicultural message –

Geographics Segmentation of the market based on where people live Close to demographic data because it is fairly certain Can refer to local, regional, national, or global markets

Psychographics Involves grouping people based on lifestyle similarities, as well as shares attitudes, values, and opinions Consumer lifestyles include how people spend their time and money

Attitudes, Values, & Opinions Require special research to learn about a group’s personality traits, values, and motivation (focus groups)focusgroups

Behavioral Based on product-related behavior –Look at benefits desired by consumers –Shopping patterns –Usage rate Case study example: MasterCardMasterCard

How Marketers Use Consumers’ Behavioral Patterns Marketers study shopping patterns to determine usage rates Example: –Studies show that most teenagers spend less than $50 a month on entertainment The 80/20 Rule –Means that 80% of a company’s sales come from 20% of its most loyal customers

Mass Marketing When products have universal appeal and few features to differentiate them from competitors Not as popular as it once was Niche marketing has taken over –Markets are narrowed down and defined with extreme precision –

10/24/2015Page 31 Consumers versus Customers A product may have more than one target market Case Study Example: Build-a-Bear knows they need to target children and parents differently.

10/24/2015Page 32 Consumers versus Customers, cont. Case Study Example, cont.: Children are the consumers, the ones who will ask for the bears and play with them Parents are the customers, the ones who need to approve it, and the ones who will pay

10/24/2015Page 33 Customer Profiles Lists information about the target market such as –Age –Income Level –Ethnic Background –Occupation –Attitudes –Lifestyle –Geographic Residence Businesses develop these to get a clear picture of their target market

10/24/2015Page 34 Think Critically & Discuss… Work in a group of four (4) to build a customer profile for Dierberg’s You will share with the class in 10 minutes Be prepared to back up your ideas!

10/24/2015Page 35 Marketing Mix These are the tools marketing professionals use and control to influence potential customers Include the four basic P’s of marketing strategies: –Product –Place –Price –Promotion

10/24/2015Page 36 Marketing Mix, cont. Some would add a 5 th “P”, PEOPLE, as it is necessary to have a clearly defined target market before you can create marketing strategies All of the “P’s” are interconnected –Actions in one area, affect decisions in another

10/24/2015Page 37 Product This “P” revolves around making decisions about what to make and sell Some marketing strategy examples of this P include: –Features of the new iPhone –The brand name of a new Nabisco breakfast food –How to package a new organic Hershey candy bar –What the warranty of a Sony Bravia LCD will entail –How to update and improve the Ford Focus so it can remain competitive

10/24/2015Page 38 Place The means of getting the product into the consumer’s hands It is important to know where one’s target market shops! Examples of marketing decisions based on place include: –Whether a local bakery should build additional stores on the Illinois side of the river –Whether Build-a-Bear should create a website where customers can purchase their products –Whether Tropicana should have products shipped via air or rail

10/24/2015Page 39 Price What is exchanged (monetarily) for the product This strategy must consider what customers are willing and able to pay Examples of pricing strategy decisions include –Toyota’s suggested manufacturer’s retail price on the Camry –Wal-Mart offering credit terms (i.e., their own credit card) at their stores –Hollister having an “End of Summer Sale” on select items

10/24/2015Page 40 Promotion Deal with how potential customers will be told about a company’s products Examples of promotion strategy include –The 2010 Nike Shox campaign: The message used (language, style, approach) The media that is used to spread the word about the shoe The special offers Nike will employ to create buzz and business The timing of the campaigns and the product roll-out

10/24/2015Page 41 Quick Review… What is the difference between the consumer and industrial markets? What is the relationship among market segmentation, target markets, and customer profiles? Name the four P’s of the marketing mix and explain the importance of a target market for each of them.