Identifying Market Segments and Targets Marketing Management, 13 th ed 8

As a marketer… Can you satisfy all customers with a single product? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-2

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-3 Ford’s Model T Followed a Mass Market Approach

Henry Ford epitomized this strategy when he offered the Model T Ford “in any color, as long as it is black.” Coca-Cola also used mass marketing when it sold only one kind of Coke in a 6.5-ounce bottle. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-4

Customers are too numerous and diverse in their buying requirements. This is why successful marketers look for specific market segments that they can serve more effectively.

Can you tell me a product that can not be differentiated? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-6

salt sugar oil gasoline Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-7 car computer Smart phone jean perfume

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-8

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-9

Some observers even claim that mass marketing is dying. Therefore, to stay focused rather than scattering their marketing resources, more marketers are using market segmentation. mass marketing = one size fits all

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-11 What is a Market Segment? A market segment consists of a group of customers who share a similar set of needs and wants.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-12 Chapter Questions What are the different levels of market segmentation? How can a company divide a market into segments? How should a company choose the most attractive target markets? What are the requirements for effective segmentation?

Target marketing requires marketers to take three major steps: (1) Identify and profile distinct groups of buyers who might require separate products or marketing mixes (market segmentation); (2) select one or more market segments to enter (market targeting); (3) establish and communicate the products’ key distinctive benefits in the market (market positioning).

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-14 Effective Targeting Requires… Identify and profile distinct groups of buyers who differ in their needs and preferences Select one or more market segments to enter Establish and communicate the distinctive benefits of the market offering

A market segment consists of a large identifiable group within a market, with similar wants, purchasing power, geographical location, buying attitudes, or buying habits For example, an automaker may identify four broad segments in the car market: buyers who are primarily seeking (1) basic transportation, (2) high performance, (3) luxury, (4) safety.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-16 Segmenting Consumer Markets Geographic Demographic Psychographic Behavioral

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-17 Demographic Segmentation Age and Life Cycle Life Stage Gender Income Generation Social Class

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-18 Toyota Scion Targets Gen Y Consumers

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-19 Dove Targets Women

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-20 Behavioral Segmentation Decision Roles Initiator Influencer Decider Buyer User Behavioral Variables Occasions Benefits User Status Usage Rate Buyer-Readiness Loyalty Status Attitude

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-21 Loyalty Status Switchers Shifting loyals Split loyals Hard-core

Segment marketing allows a firm to create a more fine-tuned product or service offering and price it appropriately for the target audience. The choice of distribution channels and communications channels becomes much easier, and the firm may find it faces fewer competitors in certain segments. What are the advantages of market segmentation?

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-23 Steps in Segmentation Process Needs-based segmentation Segment identification Segment attractiveness Segment profitability Segment positioning Segment acid test Marketing-Mix Strategy

Niche Marketing A niche is a more narrowly defined group, typically a small market whose needs are not being well served. Marketers usually identify niches by dividing a segment into subsegments or by defining a group seeking a distinctive mix of benefits. For example, a tobacco company might identify two subsegments of heavy smokers: those who are trying to stop smoking, and those who don’t care.

Whereas segments are fairly large and normally attract several competitors, niches are fairly small and may attract only one or two rivals. Still, giants such as IBM can and do lose pieces of their market to nichers: Dalgic labeled this confrontation guerrillas against gorillas.” “guerrillas against gorillas.”

Ramada Franchises Enterprises, for example, offers lodgings in several niches : Ramada Limited for economy travelers; Ramada Inn as a mid-price, full-service hotel; Ramada Plaza for the upper-mid-price niche; Ramada Renaissance hotels, offering excellent, four-star service. Some larger firms have therefore turned to niche marketing.

Segmenting Consumer Markets Geographic segmentation Demographic Segmentation Psychographic Segmentation Behavioral Segmentation

Geographic segmentation Geographic segmentation calls for dividing the market into different geographical units such as nations, states, regions, counties, cities, or neighborhoods. The company can operate in one or a few geographic areas or operate in all but pay attention to local variations.

Demographic Segmentation In demographic segmentation, the market is divided into groups on the basis of age and the other variables in table. One reason this is the most popular consumer segmentation method is that consumer wants, preferences, and usage rates are often associated with demographic variables. Another reason is that demographic variables are easier to measure.

Psychographic Segmentation Buyers are divided into different groups on the basis of lifestyle or personality and values. People within the same demographic group can exhibit very different psychographic profiles.

Behavioral Segmentation In behavioral segmentation, buyers are divided into groups on the basis of their knowledg of, attitude toward, use of, or response to a product. Many marketers believe that behavioral variables—occasions, benefits, user status, usage rate, loyalty status, buyer-readiness stage, and attitude—are the best starting points for constructing market segments.

Six steps in market segmentation, targeting and positioning

Effective Segmentation To be useful, market segments must be: Measurable ➤ Measurable: The size, purchasing power, and characteristics of the segments can be measured. Substantial: ➤ Substantial: The segments are large and profitable enough to serve. A segment should be the largest possible homogeneous group worth going after with a tailored marketing program. Accessible ➤ Accessible: The segments can be effectively reached and served. Differentiable: ➤ Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mixes. If two segments respond identically to a particular offer, they do not constitute separate segments. Actionable: ➤ Actionable: Effective programs can be formulated for attracting and serving these segments.

MARKET TARGETING STRATEGIES Once the firm has identified its market-segment opportunities, it is ready to initiate market targeting. Here, marketers evaluate each segment to determine how many and which ones to target and enter. target market A set of buyers sharing common needs or characteristics that the company decides to serve.

Evaluating Market Segments In evaluating different market segments, the firm must look at two factors: (1) the segment’ overall attractiveness, (2) the company’s objectives and resources. First, the firm must ask whether a potential segment has the characteristics that make it generally attractive, such as size, growth, profitability, scale economies, and low risk.

Undifferentiated marketing A market-coverage strategy in 'which a firm decides to ignore market segment differences and go after the whole market 'with one offer.

Differentiated Marketing A market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each.

Concentrated Marketing A market-coverage strategy in which a firm goes after a large share of one or a few submarkets.

mass marketing Using almost the same product, promotion and distribution for all consumers. micromarketing Aform of target marketing in which tailor their marketing programmes to the needs and wants of narrowly defined geographic, demographic, psychographio or behavioural segments. individual marketing Tailoring products and marketing programmes to the needs and, preferences of individual customers. niche marketing Adapting a company's offerings to more closely match the needs of one or more subsegments there is often little competition.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8-46 Crest Whitestrips Follows a Multisegment Strategy