1. Chapter 6 Targeting Attractive Market Segments

2. Decision Processes Market segmentation Target marketing Positioning
Market segmentation - Process by which a market is divided into distinct subsets of customers with similar needs and characteristics that lead them to respond in similar ways to a particular product offering and marketing program.
Target marketing - Evaluating the relative attractiveness of various segments in terms of:
Market potential, growth rate, competitive intensity, and other factors, along with the firm’s mission and capabilities to deliver what each segment wants, in order to choose which segments it will serve.
Brand positioning - Designing product offerings and marketing programs that can establish an enduring competitive advantage in the target market by creating a unique brand image, or position, in the customer’s mind.

3. Most Markets are Heterogeneous
Variation among market segments affect the differences and
response rates
Markets - Complex entities that can be defined in a variety of ways
Variation among market segments is in:
Product preferences
Size and growth in:
Demand, media habits, and competitive structures.

4. Importance of Market Segmentation
Population growth has slowed and more product markets are maturing
Social and economic forces have produced customers
with more varied and sophisticated needs
Increasing importance toward microsegmentation
Implementing sharply focused marketing programs

5. Steps in the Market Segmentation Process
Identify a homogeneous segment that differs from other segments
Specify criteria that define the segment
Determine segment size and potential

6. How are Market Segments Best Defined?
Segmentation decisions are based on:
Who the customers are?
Where they are?
How they behave?

7. Demographic Segmentation
Common attributes
Age
Sex
Income
Occupation
Education
Race and ethnic origin
Instructor: Refer to Exhibit 6.2

8. Demographic Segmentation
Industrial market segmentation
Macro-segmentation
Micro-segmentation

9. Geographic Segmentation
Trade area: Area within a geographically defined region
Geodemographic segmentation
Involves both demographic and geographic factors
Geodemographics attempts to predict consumer behavior by making demographic, psychographic, and consumer information available at the block and zip code or postcode levels.

10. Behavioral Segmentation
Consumer needs
Product usage and purchase influence
Lifestyle
Organizational behavioral attributes
Consumer needs
Customer needs are expressed in benefits sought from a particular product or service.
Choice criteria: Consumers evaluate product or brand alternative on the basis of desired characteristics.
Product usage and purchase influence
Importance of product usage
In many markets a small proportion of potential customers makes a high percentage of all purchases.
Market segmentation based on sources of purchase influence for the product category is relevant for both consumer and organizational markets.
Lifestyle
Segmentation by lifestyle, or psychographics, segments markets on the basis of consumers’ activities, interests, and opinions—what they do or believe.
Organizational behavioral attributes
Purchasing structure: Degree to which the purchasing activity is centralized.
Buying situation: Three distinct types of situations
Straight rebuy - Recurring situation handled on a routine basis.
Modified rebuy - Occurs when some element has changed in a client–supplier relationship.
New buying situation - Requires the gathering of considerable information and an evaluation of alternative suppliers.

11. Innovative Segmentation
Uses combination of different attributes to precisely target an
attractive segment

12. Exhibit Steps in Constructing a Market Attractiveness /Competitive Position Matrix for Evaluating Potential Target Markets

13. Exhibit 6.8 - Factors Underlying Market Attractiveness and Competitive Position

14. Exhibit 6.8 - Factors Underlying Market Attractiveness and Competitive Position

15. Exhibit 6.10 - Market Attractiveness/ Competitive- Position Matrix

16. Exhibit Implications of Alternative Positions within the Market-Attractiveness/Competitive-Position Matrix
Sources: Adapted from George S. Day, Analysis for Strategic Market Decisions (St. Paul: West, 1986), p. 204; and S. J. Robinson, R. E. Hitchens, and D. P. Wade, “The Directional Policy Matrix: Tool for Strategic Planning,” Long Range Planning 11 (1978), pp. 8–15.

17. Niche-Market Strategy
Serves one or more segments with sufficient number of customers seeking specialized benefits
Designed to avoid direct competition with larger firms

18. Mass-Market Strategy
Captures sufficient volume to gain economies of scale and a cost advantage
Requires:
Substantial resources
Production capacity
Good mass-marketing capabilities

19. Mass-Market Strategy
Differentiated marketing: Design separate products and marketing programs for differing segments

20. Growth-Market Strategy
Targets one or more fast-growth segments
Favored by smaller companies to avoid direct confrontations
Requires strong R&D and marketing capabilities

21. Global Market Segmentation
Traditional approach - View a country as a single segment
comprising all consumers
Is flawed
Intercountry segmentation enables a company to develop reasonably standardized programs