1. Chapter 7 Segmenting and Targeting Markets

2. What are Markets?
Market: people or institutions with sufficient purchasing power, authority, and willingness to buy
Types of Markets

3. Requirements of a Markets
Need
Ability
Willingness
Authority +

4. Role of Market Segmentation
Market Segmentation: division of the total market into smaller, relatively homogeneous groups
Why?
Levels – Mass, Segment, and Niche

5. Why segment? Most efficient Most effective Many Groups of One One Mass
Market

6. 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.

7. No Market Segmentation

8. Segmented by Gender

9. Segmented by Age

10. Segmentation Process
Marketers follow two methods to determine the bases on which to identify markets:
Segments are predefined by managers based on their observation of the behavioral and demographic characteristics of likely users
Segments are defined by asking customers which attributes are important and then clustering the responses

11. Criteria for Effective Segmentation
Substantiality
Measurability / Identifiability
Accessibility
Responsiveness

12. Most important point Homogeneous within Heterogeneous between
In relation to responsiveness to different marketing mixes, segments must be:
Homogeneous within
Heterogeneous between

13. Bases for Segmenting Consumer Markets
LO4
Characteristics of individuals, groups, or organizations used to divide a total market into segments. (variables)

14. Bases for Segmentation
Chapter 7 Segmenting and Targeting Markets
LO4
Bases for Segmentation
Usage Rate
Benefits Sought
Psychographics
Demographics
Geography
Notes:
One or more of the characteristics listed above is used to segment markets and described on subsequent slides.

15. Segmenting Consumer Markets
Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locations
Metropolitan Statistical Area (MSA)

16. Segmenting Consumer Markets
Demographic segmentation: dividing consumer groups according to characteristics such as gender, age, income, occupation, education, ethnicity, household size, and stage in the family life cycle.

17. Family Life Cycle
Age
Marital Status
Children

18. Psychographic Segmentation
Psychographic Segmentation: dividing a population into groups that have similar psychological characteristics, and lifestyles.
Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities

19. Geodemographic Segmentation
LO4
Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and psychographic segmentation.

20. Benefit Segmentation
LO4
The process of grouping customers into market segments according to the benefits they seek from the product.

21. Usage Rate Segmentation
Dividing a market by the amount of product bought or consumed.

22. Bases for Segmenting Business Markets
Producers
Resellers
Government
Institutions
Company
Characteristics
Buying
Processes

23. 1 2 3 4 5 6 LO6 Steps in Segmenting Markets Select a market for study
Chapter 7 Segmenting and Targeting Markets
LO6
Steps in Segmenting Markets 1 2 3 4 5 6
Select a market for study
Choose bases for segmen-tation
Select descriptors
Profile and analyze segments
Select target markets
Design, implement, maintain marketing mix
Slide Animation:
The purpose of market segment is to identify marketing opportunities. This slide traces the steps in segmenting a market.
(1) selecting a market or product category for study;
(2) choosing a basis or bases for segmenting the market;
(3) selecting segmentation descriptors;
(4) profiling and evaluating segments;
(5) selecting target markets; and
(6) designing, implementing, and maintaining appropriate marketing mixes.
Note that steps 5 and 6 occur after the segmentation scheme is developed.
Keep in mind that markets are dynamic and must be monitored proactively for changes in age, etc. Even though the segmentation classifications are static, the customers and prospects are changing.
Note that steps 5 and 6 are actually marketing activities that follow market segmentation (steps 1 through 4).

24. Targeting
Choosing one or more segments for which to design your marketing operations

25. Undifferentiated Strategy Differentiated Concentrated
Identify the Appropriate Targeting Strategy
Undifferentiated Strategy Differentiated Concentrated

26. Undifferentiated Strategy
Single Marketing Mix
Organization
Target Market

27. Differentiated Strategy
Marketing Mix 1
Marketing Mix 2
Organization
Target Market

28. Concentrated Strategy
Single Marketing Mix
Organization
Target Market

29. Cannibalization Cannibalization
Chapter 7 Segmenting and Targeting Markets
Cannibalization
Cannibalization
Situation that occurs when sales of a new product cut into sales of a firm’s existing products.
Notes:
Although introduction of a new product may cut into a firm’s existing product sales, companies are stealing sales from their own brands rather than lose to a competitor.

30. STRATEGIES FOR REACHING TARGET MARKETS
No single, best choice strategy suits all firms
Determinants of a market-specific strategy:
Company resources
Product homogeneity
Competitors’ strategy

31. One-to-One Marketing
An individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer.
- ‘share of customer’

32. Product Positioning
Positioning starts with a product. A Piece of merchandise, a service, a company, an institution, or even a person... But positioning is not what you do to a product. Positioning is what you do to the mind of the prospect. That is, you position the product in the mind of the prospect.
Al Ries and Jack Trout (1981)

33. Positioning of Procter & Gamble Detergents
Chapter 7 Segmenting and Targeting Markets
Positioning of Procter & Gamble Detergents
LO9
0.7%
Fabric & skin safety on baby clothes
Ivory Snow
0.1%
Tough cleaner, aimed at Hispanic market
Ariel
1.0%
Outstanding cleaning for baby clothes, safe
Dreft
1.2%
Detergent and fabric softener in liquid form
Solo
1.4%
Bleach-boosted formula, whitening
Oxydol
1.8%
Value brand
Dash
2.2%
Stain treatment and stain removal
Era
2.6%
Sunshine scent and odor-removing formula
Gain
2.9%
Detergent plus fabric softener
Bold
8.2%
Tough cleaning, color protection
Cheer
31.1%
Tough, powerful cleaning
Tide
Market Share
Positioning
Brand

34. Product Positioning Dimensions
Product Attributes / Differences / Benefits
Product User / Usage
By Association
Problem Solution
Against a Competitor / Away from Competitors
Honda Civic -- low price
Wal Mart -- low price
Arm and Hammer -- deoderizer for referigerator
VISA and American Express
Avis and Hertz
7-up uncola

35. 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.

36. Perceptual Maps Expensive Inexpensive Conservative Sporty Celica Camry
Corolla
Avalon

37. Product Positioning using perceptual maps
High moisturizing
Low moisturizing
Nondeodorant
Deodorant 1 2 3 4 5 7 6 8
Safeguard
Lever 2000
Zest
Coast
Lux
Dove
Tone
Lava
Lifebuoy
Dial

38. Repositioning
Changing consumers’ perceptions of a brand in relation to competing brands.

39. Positioning and Product Differentiation
Chapter 7 Segmenting and Targeting Markets
Positioning and Product Differentiation
Notes:
In this perceptual map for Cadillac, see how Cadillac is repositioning itself as a car for younger drivers.