©2002 South-Western Chapter 7 Version 6e1 chapter Segmenting and Targeting Markets 7 7

©2002 South-Western Chapter 7 Version 6e2 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. 1 1

©2002 South-Western Chapter 7 Version 6e3 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. 1 1

©2002 South-Western Chapter 7 Version 6e4 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 2 2

©2002 South-Western Chapter 7 Version 6e5 Criteria for Successful Segmentation Criteria for Market Segments Substantiality Identifiability Accessibility Responsiveness 3 3

©2002 South-Western Chapter 7 Version 6e6 Criteria for Segmentation SubstantialitySubstantialityIdentifiabilityMeasurabilityIdentifiabilityMeasurability AccessibilityAccessibility ResponsivenessResponsiveness 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. 3 3

©2002 South-Western Chapter 7 Version 6e7 Segmentation Bases Characteristics of individuals, groups, or organizations used to divide a total market into segments. (variables) 4 4

©2002 South-Western Chapter 7 Version 6e8 Bases for Segmentation Usage Rate Benefits Sought Psychographics Demographics Geography Bases Used to Segment Consumer Markets 4 4

©2002 South-Western Chapter 7 Version 6e9 Geographic Segmentation  Region of the country or world  Market size  Market density  Climate 4 4

©2002 South-Western Chapter 7 Version 6e10 Bases for Segmentation Usage Rate Benefits Sought Psychographics Demographics Geography Bases Used to Segment Consumer Markets 4 4

©2002 South-Western Chapter 7 Version 6e11 Bases for Demographic Segmentation 4 4  Age  Gender  Income  Ethnic background  Family Life Cycle

©2002 South-Western Chapter 7 Version 6e12 Bases for Segmentation Usage Rate Benefits Sought Psychographics Demographics Geography Bases Used to Segment Consumer Markets 4 4

©2002 South-Western Chapter 7 Version 6e13 Bases for Psychographic Segmentation Psychographic Segmentation Personality Motives Lifestyles Geodemographics 4 4

©2002 South-Western Chapter 7 Version 6e14 Geodemographic Segmentation 4 4 Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation.

©2002 South-Western Chapter 7 Version 6e15 VALS 2 Dimensions Principle-oriented Status-orientedAction-oriented Fulfillers Believers Actualizers Achievers Strivers Strugglers Experi- encers Makers Minimal Resources Abundant Resources 4 4

©2002 South-Western Chapter 7 Version 6e16 Bases for Segmentation Usage Rate Benefits Sought Psychographics Demographics Geography Bases Used to Segment Consumer Markets 4 4

©2002 South-Western Chapter 7 Version 6e17 Benefit Segmentation The process of grouping customers into market segments according to the benefits they seek from the product. 4 4

©2002 South-Western Chapter 7 Version 6e18 Bases for Segmentation Usage Rate Benefits Sought Psychographics Demographics Geography Bases Used to Segment Consumer Markets 4 4

©2002 South-Western Chapter 7 Version 6e19 Usage-Rate Segmentation Dividing a market by the amount of product bought or consumed. 4 4

©2002 South-Western Chapter 7 Version 6e20 The 80/20 Principle A principle holding that 20 percent of all customers generate 80 percent of the demand. 4 4

©2002 South-Western Chapter 7 Version 6e21 Business Marketing Segmentation Geographic Customer Type Customer Size Product Use BusinessMarketsBusinessMarkets Purchasing Criteria Purchasing Strategy Importance Personal Characteristics Micro- segmentation Micro- segmentation Macro- segmentation Macro- segmentation 5 5

©2002 South-Western Chapter 7 Version 6e22 Steps in Segmenting a Market Select a market for study Choose bases for segmen- tation Select descrip- tors Profile and analyze segments Select target markets Design, imple- ment, maintain mkting mix 6 6

©2002 South-Western Chapter 7 Version 6e23 Target Market 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. 7 7

©2002 South-Western Chapter 7 Version 6e24 Strategies for Selecting Target Markets Concentrated Strategy Concentrated Strategy Undifferentiated Strategy Undifferentiated Strategy Multisegment Strategy Multisegment Strategy 7 7

©2002 South-Western Chapter 7 Version 6e25 Undifferentiated Targeting Strategy Advantages Advantages :  Potential savings on production and marketing costs Disadvantages Disadvantages:  Unimaginative product offerings  Company more susceptible to competition 7 7

©2002 South-Western Chapter 7 Version 6e26 Concentrated Targeting Strategy Advantages Advantages:  Concentration of resources  Meets narrowly defined segment  Small firms can compete  Strong positioning Disadvantages Disadvantages:  Segments too small, or changing  Large competitors may market to niche segment 7 7

©2002 South-Western Chapter 7 Version 6e27 Advantages Advantages:  Greater financial success  Economies of scale Disadvantages Disadvantages:  High costs  Cannibalization Multisegment Targeting Strategy 7 7

©2002 South-Western Chapter 7 Version 6e28 Costs of Multisegment Targeting $ Product design costs $ Production costs $ Promotion costs $ Inventory costs $ Marketing research costs $ Management costs $ Cannibalization 7 7

©2002 South-Western Chapter 7 Version 6e29 Cannibalization Situation that occurs when sales of a new product cut into sales of a firm’s existing products. 7 7

©2002 South-Western Chapter 7 Version 6e30 Positioning Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. 8 8

©2002 South-Western Chapter 7 Version 6e31 Position The place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings. 8 8

©2002 South-Western Chapter 7 Version 6e32 Effective Positioning  Assess the positions of competing products  Determine the dimensions of these positions  Choose an effective market position 8 8

©2002 South-Western Chapter 7 Version 6e33 Product Differentiation A positioning strategy that some firms use to distinguish their products from those of competitors. 8 8

©2002 South-Western Chapter 7 Version 6e34 Perceptual Mapping A means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds. 8 8

©2002 South-Western Chapter 7 Version 6e35 Perceptual Mapping--Levi’s 8 8 High Price Low Price ClassicClassic DesignerDesigner Old product New product Vintage Red Line Silver Tab Slates Dockers Premium Dockers Classics 501 Red Tab Basics Red Tab Dry Goods L2 Red Tab Elesco

©2002 South-Western Chapter 7 Version 6e36 Positioning Bases Attribute Price and Quality Use or Application Product User Product Class Competitor Positioning Bases 8 8

©2002 South-Western Chapter 7 Version 6e37 Repositioning Changing consumers’ perceptions of a brand in relation to competing brands. 8 8