1. Chapter 8: Segmenting and Targeting Markets
Introduction to
Chapter 8: Segmenting and Targeting Markets
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2. Copyright Cengage Learning 2013
Chapter 8 Segmenting and Targeting Markets
Learning Outcomes
Describe the characteristics of markets
and market segments
Explain the importance of market segmentation
Discuss criteria for successful market segmentation
Describe the bases commonly used to segment consumer markets
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3. Copyright Cengage Learning 2013
Chapter 8 Segmenting and Targeting Markets
Learning Outcomes
Describe the bases for segmenting business markets
List the steps involved in segmenting markets
Discuss alternative strategies for selecting target markets
Explain one-to-one marketing
Explain how and why firms implement positioning strategies and how product differentiation plays a role
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4. Copyright Cengage Learning 2013
Chapter 8 Segmenting and Targeting Markets
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.
Notes:
The term market means different things to different people. Consider supermarket, stock market, labor market, fish market, and flea market. All these types of markets share several characteristics.
Markets are composed of people or organizations with needs and wants that can be satisfied by particular product categories.
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5. The Importance of Market Segmentation
Chapter 8 Segmenting and Targeting Markets
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.
Notes:
Market segmentation was rare before the 1960’s. Consider Coca-Cola with its one product aimed at the entire soft drink market. Today over a dozen different products are marketed by the company to different market segments.
Market segmentation plays a key role in the marketing strategy of organizations, leading to competitive advantage. The benefits are described on this slide.
Discussion/Team Activity:
Discuss how Coca-Cola’s product lines fit the needs of different market segments.
Name different fashion retailers and identify their marketing segmentation strategies.
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6. Criteria for Segmentation
Chapter 8 Segmenting and Targeting Markets
Criteria for Segmentation
Substantiality
Segment must be large enough to warrant a special marketing mix.
Identifiability and
Measurability
Segments must be identifiable and their size measurable.
Accessibility
Members of targeted segments must be reachable with marketing mix.
Notes:
Markets are segmented for three reasons:
Segmentation enables the identification of groups of customers with similar needs, and the analysis of the buying behavior of these groups.
Segmentation provides information for the specific matching of the design of marketing mixes with the characteristics of the segment.
Segmentation helps marketers satisfy customers wants and needs while meeting the organization’s objectives.
A segmentation scheme must produce segments that meet the four basic criteria as defined above.
Responsiveness
Unless segment responds to a marketing mix differently, no separate treatment is needed.
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7. Bases for Segmentation
Chapter 8 Segmenting and Targeting Markets
Bases for Segmentation
Usage Rate
Benefits Sought
Psychographics
Demographics
Geography
Notes:
Marketers use segmentation bases, or variables, to divide a total market into segments. Segmentation Bases are characteristics of individuals, groups, or organizations used to divide a total market into segments (variables).
Markets can be segmented using a single variable or multiple variables. Today’s trend is to use more rather than fewer variables to segment a market.
One or more of the characteristics listed above is used to segment markets.
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8. Bases for Psychographic Segmentation
Chapter 8 Segmenting and Targeting Markets
Bases for Psychographic Segmentation
Personality
Motives
Lifestyles
Geodemographics
Notes:
Psychographic Segmentation is market segmentation on the basis of personality, motives, lifestyles, and demographics.
Demographic segmentation provides the “skeleton,” but psychographic segmentation adds “meat to the bones.”
Personality reflects a person’s traits, attitudes, and habits. Consider the personality types that describe segmented Porsche buyers.
Motives: Carmakers appeal to customers with status-related motives, whereas baby products appeal to emotional motives.
Lifestyles and geodemographics are described on subsequent slides.
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9. Benefit Segmentation Benefit segmentation- The process of
Chapter 8 Segmenting and Targeting Markets
Benefit Segmentation
Benefit segmentation- The process of
grouping customers into market
segments according to the benefits
they seek from the past.
Notes:
Benefit segmentation is different from other segmentation bases because it groups potential customers on the basis of their needs and wants instead of some other characteristic.
For example, Exhibit 8.3 in the textbook shows the lifestyle segmentation of the snack food market.
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10. Usage-Rate Segmentation
Chapter 8 Segmenting and Targeting Markets
Usage-Rate Segmentation
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.
Notes:
Most segmentation is based on the assumption that the selected variable(s) and customers’ needs are related. On the other hand, benefit segmentation groups potential customers on the basis of their needs or wants only.
Segmenting by usage rate enables marketers to focus efforts on heavy users or to develop multiple marketing mixes aimed at different segments.
The focus of marketing is often on the heavy-user segment, based on the 80/20 principle.
Discussion/Team Activity:
What programs do companies use to develop customers into heavy users? The list should include airline frequent flyer programs and in-store coupon dispensing.
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11. Bases for Segmenting Business Markets
Chapter 8 Segmenting and Targeting Markets
Bases for Segmenting Business Markets
Producers
Resellers
Government
Institutions
Notes:
Company characteristics include geographic location, type of company, company size, and product use.
Marketers may also segment customers on the basis of how they buy. Take, for example, key purchasing criteria, such as price, quality, technical support, and service.
Personal characteristics of the buyers influence their buying behavior.
Company
Characteristics
Buying
Processes
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12. Bases for Segmenting Business Markets
Chapter 8 Segmenting and Targeting Markets
Bases for Segmenting Business Markets
Company Characteristics
Geographic location
Type of company
Company size
Volume of purchase
Product use
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13. Buyer Characteristics
Chapter 8 Segmenting and Targeting Markets
Demographic characteristics
Decision style
Tolerance for risk
Confidence level
Job responsibilities
Notes:
The personal characteristics of the buyers influence their buying behavior and offer a viable basis for segmenting some business markets.
Two purchasing profiles are satisficers and optimizers:
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.
Satisficers contact familiar suppliers and place the order with the first one to satisfy product and delivery requirements. Optimizers consider numerous suppliers, obtain bids, and study all proposals before selecting one.
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14. Strategies for Selecting Target Markets
Chapter 8 Segmenting and Targeting Markets
Concentrated
Strategy
Undifferentiated
Multisegment
Notes:
Undifferentiated Strategy is a marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix. An undifferentiated targeting strategy is essentially a mass-market philosophy—viewing the market as one big market and using one marketing mix.
Concentrated Targeting Strategy is a strategy used to select one segment of a market for targeting efforts, often a niche – One segment of a market.
Multisegment Strategy is a strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.
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15. Information-Intensive
Chapter 8 Segmenting and Targeting Markets
One-to-One Marketing
Information-Intensive
Long-Term
One-to-One
Marketing is...
Individualized
Cost Reduction
Has a Goal of…
Customer Loyalty
Increased Revenue
Personalized
Customer Retention
Notes:
One-to-one marketing focuses on understanding customers as individuals instead of as part of a group. It is an individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer. The goal is to reduce costs through customer retention and increase revenue through customer loyalty.
Most businesses use a mass marketing approach to increase market share by selling their products to the greatest number of people. However, one-to-one marketing is used to increase share of customer--to sell more products to each customer.
Instead of wide-spread, scattered messages across the spectrum of mass media, one-to-one marketers look for ways to communicate with each individual customer.
Discussion/Team Activity:
Discuss how Amazon.com has developed one-to-one marketing. What other companies use one-to-one marketing successfully?
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Chapter 8 Segmenting and Targeting Markets
One-to-One Marketing
Trends
One-size-fits all marketing no longer effective
Direct and personal marketing 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.
Notes:
Even though one-to-one marketing represents a huge commitment and a different way of thinking for marketers, it will grow. The trends shown on this slide illustrate why.
Although mass marketing will continue to be used to create brand awareness or remind consumers of a product, the advantages of one-to-one marketing are strong.
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17. Positioning Developing a specific marketing mix to influence
Chapter 8 Segmenting and Targeting Markets
Positioning
Developing a specific
marketing mix to influence
potential customers’
overall perception of a brand,
product line, or organization
in general.
Notes:
Position is the place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings.
Positioning assumes that consumers compare products on the basis of important features. Effective positioning requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions, and choosing a position in the market where the marketing efforts will have the greatest impact.
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18. Product Differentiation
Chapter 8 Segmenting and Targeting Markets
Product Differentiation
A positioning strategy that
some firms use to
distinguish their products
from those of their competitors.
Distinctions can be real
or perceived.
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Positioning Bases
Chapter 8 Segmenting and Targeting Markets
Attribute
Price and Quality
Use or Application
Product User
Product Class
Competitor
Emotion
Notes:
The following bases for positioning are used:
Attribute: Association of a product with a product feature, an attribute, or customer benefit.
Price and quality: High price as a symbol of quality, or low price as an indicator of value may be used to position a product.
Use or application: Stressing use or applications.
Product user: Positioning base focuses on a personality or type of user.
Product class: Product is positioned as associated with a particular category of products.
Competitor: Positioning against competitors is a part of any positioning strategy.
Emotion: Positioning using emotion focuses on how the product makes customers feel.
One or more positioning bases is often used.
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20. Changing perceptions of a
Chapter 8 Segmenting and Targeting Markets
Repositioning
Changing perceptions of a
brand in relation to
competing brands.
Notes:
Products are repositioned to sustain growth in slow markets or to correct positioning mistakes
A good example of repositioning was the Proctor & Gamble’s baby-care business when they changed Pampers’ position from emphasizing dryness to focusing on helping Mom with her baby’s development.
Also, consider the expansion of Wal-Mart into the supermarket industry. A consultant predicts that two supermarkets will go out of business for every Wal-Mart superstore that opens in the U.S.
Discussion/Team Activity:
As giant Wal-Mart expands into the supermarket industry, what repositioning strategies should its competitors consider? How do you compete with the low-price position of Wal-Mart?
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