1. Identifying Market Segments and Selecting Target Markets

2. Kotler on Marketing
“Don’t buy market share. Figure out how to earn it.”
What dose he mean ?!

3. Chapter Objectives We focus on the following questions:
How can a company identify the segments that make up a market?
What criteria can a company use to choose the most attractive target markets?

4. Target Marketing
Target marketing requires marketers to take three major steps:
Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation).
Select one or more market segments to enter (market targeting).
For each target segment, establish and communicate the key distinctive benefit(s) of the company’s market offering (market positioning).

5. Steps in Segmentation, Targeting, and Positioning
This CTR corresponds to Figure 7-1 on p. 196 and relates to the material on pp. 196.
Steps in Segmentation, Targeting, and Positioning
6. Develop Marketing
Mix for Each Target Segment
Market
Positioning
Steps in Segmentation, Targeting, and Positioning
Market Segmentation. Market segmentation is the process of dividing a market into distinct groups of buyers who might require separate products or marketing mixes. All buyers have unique needs and wants. Still it is usually possible in consumer markets to identify relatively homogeneous portions or segments of the total market according to shared preferences, attitudes, or behaviors that distinguish them from the rest of the market. These segments may require different products and/or separate mixes.
Market Targeting. Market targeting is the process of evaluating each market segment's attractiveness and selecting one or more segments to enter. Given effective market segmentation, the firm must choose which markets to serve and how to serve them.
Discussion Note: In targeting markets to serve the firm must consider its resources and objectives in setting strategy.
Market Positioning. Market positioning is the process of formulating competitive positioning for a product and a detailed marketing mix. Marketers must plan how to present the product to the consumer.
Discussion Note: The product's position is defined by how consumers view it on important attributes.
5. Develop Positioning
for Each Target Segment
4. Select Target
Segment(s)
Market
Targeting
3. Develop Measures
of Segment Attractiveness
2. Develop Profiles
of Resulting Segments
Market Segmentation
1. Identify Bases
for Segmenting the Market

6. Step 1. Market Segmentation Levels of Market Segmentation
Mass Marketing
Same product to all consumers
(no segmentation)
Segment Marketing
Different products to one or more segments
(some segmentation)
Step 1. Market Segmentation Levels of Market Segmentation
Stages in Market Orientation
This CTR relates to the discussion on pp
Niche Marketing
Different products to subgroups within segments
( more segmentation)
Micromarketing
Products to suit the tastes of individuals or locations
(complete segmentation)
Stages in Market Orientation
Sellers traditionally have passed through three stages of orientation or philosophy of identifying markets that lead to greater use of segmentation, targeting, and positioning strategies:
Mass Marketing. In mass marketing, the seller produces, mass distributes, and mass promotes one product to all buyers. The argument for mass marketing is that it [should] lead to the lowest costs (through economies of scale) and prices and create the largest potential market.
Segment Marketing. Here the seller identifies market segments, selects one or more of them, and develops products and marketing mixes tailored to meeting the needs of those selected segments. As more competitors adopt this practice, fragmentation of the market leads to
Niche Marketing. Here the seller focuses on subgroups within market segments who may seek a special combination of benefits.
Micromarketing. This is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.

7. Definition Market Segmentation:
The act of dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who might require separate products and/or marketing mixes.
If all consumers respond the same way, then there should be no need to segment a market

8. Levels and Patterns of Market Segmentation
Levels of Market Segmentation:
Mass marketing: one product for all buyers (Coke)
Micromarketing: segments, niches, local areas, and individuals.
Segment marketing:
Market segment: a group of customers who share a similar set of wants (car buyers: low cost VS luxurious).
Sector: young and middle-income buyers
Marketer doesn’t create the segment but identify & target it.
Flexible market offering
Naked solution: product and service elements all segment’s members value.
Discretionary options: some segment’s members value. (Mobile)
Segment marketing offers several benefits over mass marketing (best product, distrib. and comm. channels, understand competitors well).

9. Niche Marketing Local Marketing
Niche: customers with distinct set of needs.
Niches attract smaller competitors than segments.
Niche has size, profit and growth potential.
Local Marketing
Tailored marketing programs fit the local needs and wants.
Has several problems: more costs, logistical problems, affect company’s brand image.

10. Individual Customer Marketing
Mass-customization: Individually designed products, services, programs and comm. To meet each customer’s requirements.
Choiceboard: interactive online services.
Choiceboard advantages include: facilitate selling, real-time market research, reduces company’s costs.
Customization: allow customers to design their own products and services of their choice.

11. Patterns for Market Segmentation
Preference segments
Homogeneous preferences: all customers have roughly the same preferences.
Diffused preferences: customers vary greatly in their preferences.
Clustered preferences:
Natural market segments: distinct preference clusters.
Concentrated marketing: to be positioned in the largest market segment.

12. BASIC MARKET PREFERENCE PATTERNS
::::::::::::::::::::::::::::
Attribute Y
::::::::::::::::::::::::::::
Attribute Y
Attribute Y
::::::::::::::::::::::::::::
::::::::::::::::::::::::::::
::::::::::::::::::::::::::::
Attribute X
Attribute X
Attribute X
A.Homogeneous Preferences
B.Diffused Preferences
C.Clustered Preferences

13. Market Segmentation Procedure
Needs-based market segmentation approach
Grouping customers into segments based on similar needs and benefits sought by them.
Market partitioning: to investigate the hierarchy of attributes consumers examine in choosing a brand (example: nation, manufacturer, product).
Brand-dominant hierarchy
Nation-dominant hierarchy
The hierarchy of attributes can reveal customer segments (price, type, brand).

14. Requirements for Effective Segmentation
Measurable
Effective Segmentation
This CTR relates to the material on pp. 215.
Requirements for Effective Segmentation
Accessible
Substantial
Size, purchasing power, profiles of segments can be measured.
Differential
Segments must be effectively
reached and served.
Requirements for Effective Segmentation
Measurability . This refers to the degree to which the size and purchasing power of the segments can be measured. The accuracy and availability of measures of market potential are important.
Accessibility. This refers to the degree to which a market segment can be reached and served. Identifying a segment is useless if the marketer has limited access to the customer.
Substantiality. This refers to the degree to which the segments are large or profitable enough to service.
Actionability. This is the degree to which an effective marketing program can be designed for attracting and serving segments. Company resource limitations figure prominently in actionability issues.
Segments must be large or profitable enough to serve.
Actionable
Segments must respond differently to different marketing mix elements & actions.
effective programs can be
designed for attracting and
serving the segments.

15. Segmenting Consumer Markets
Market Segmentation
This CTR relates to Table 7-1 on p. 203 and the material on pp
Segmenting Consumer Markets
Geographic
Nations, states,
regions or cities
Demographic
Bases for Segmenting Consumer Markets
Geographic Segmentation. Geographic segmentation divides the market into different geographic units based upon physical proximity. While location determines how geographic segmentation is done, it is also true that many consumer products have attribute differences associated with regional tastes.
Demographic Segmentation. Dividing the market into groups based upon variables such as sex, age, family size, family life cycle, income, education, occupation, religious affiliation, or nationality are all demographic segmentations. Consumer needs often vary with demographic variables. Demographic information is also relatively easy to measure. Age and life-cycle stage, sex, and income are three major demographic bases for segmentation.
Psychographic Segmentation. Psychographic Segmentation divides the market into groups based on social class, life style, or personality characteristics. Psychographic segmentation cuts across demographic differences. Social class preferences reflect values and preferences that remain constant even as income increases. Life style describes helps group markets around ideas such as health, youthful, or environmentally conscious. Personalities may transcend other differences in markets and may be transferred to products themselves.
Behavioral Segmentation. Behavioral Segmentation divides markets into groups based on their knowledge, attitudes, uses, or responses to a product. Types of of behavioral segmentation are based upon occasions, benefits sought, user status, usage rates, loyalty, buyer readiness stage, and attitude.
Age, gender, family size and life cycle, or income
Psychographic
Social class, lifestyle, or personality
Behavioral
Occasions, benefits, uses, or responses

16. The Classic Segmentation Variables for Consumer Markets
FIGURE 7.3

17. Segmenting Consumer Markets
Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locations
Does not ensure that all consumers in a location will make the same buying decision.
Help in identifying some general patterns.
( Where they live ? )

18. Segmenting Consumer Markets
Demographic segmentation:
(Who they are )

19. Segmenting by gender
Marketers must ensure that traditional assumptions are not false
Other firms start by targeting one gender and then switch to both
To some companies market successfully to both genders

20. Segmenting by age
Many firms identify market segments on the basis of age
Products are often designed to meet the specific needs of certain age groups
Examples: baby food and denture cream. Dole: Developing a Product Specifically for Children

21. Ethnic Group Segmentation
Census Bureau projects that by 2050, nearly half of the population of the US will belong to nonwhite minority groups.
The three largest and fastest-growing racial/ethnic groups in the US are African Americans, Hispanics, and Asian Americans.

22. Family Life Cycle Stages Segmentation
The process of family formation and dissolution.
The underlying theme is that life stage, not age per se, is the primary determinant of many consumer purchases.
Today, the average woman gives birth to two children .
She usually has her children at a later age—about 35.

23. Segmenting by household type
The “traditional family” has declined over the years
Single-parent families, single-person households, and non-family group households have more than doubled during the same time
Non-traditional households make likely buyers of single-serving and convenience foods

24. Jaguar
Segmentation based on income

25. Demographic Segmentation Variables
Goal 2: Understand the major bases for segmentation

26. Psychographic Segmentation Variables
Psychographics is the science of using psychology and demographic to better understand consumer.
Divides Buyers Into Different Groups Based on:
Social Class
Lifestyle
Personality
(How they behave ? )

27. Psychographic Segmentation
Divides a population into groups that have similar psychological characteristics, values, and lifestyles
Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities
The most common method for developing psychographic profiles of a population is to conduct a large-scale survey: VALS and VALS 2. “Values and Lifestyles”

28. Product-related segmentation:
dividing a consumer population into homogeneous groups based on characteristics of their relationships to the product
Can take the form of segmenting based on:
Benefits that people seek when they buy
Usage rates for a product
Consumers’ brand loyalty toward a product
(Why they buy ? )

29. Behavioral Segmentation Variables
Benefits Sought:
Buyers can be classified according to the benefits they seek.
Usage Rates
Segmenting by grouping people according to the amounts of a product that they buy and use
Markets often divided into heavy-user, moderate-user, and light-user segments
Goal 2: Understand the major bases for segmentation

30. Brand Loyalty
Segmenting consumers grouped according to the strength of brand loyalty felt toward a product
A practical example of this would be the frequent flyer programs of airlines and many hotels

31. Behavioral Segmentation Variables
Loyalty Status:
Buyers can be divided into four groups according to brand loyalty status:
1- Hard core loyals : consumers who buy only one brand all the time.
2-Split loyals:consumers who are loyal to two or three brands.
3-Shifting loyals : consumers who shift loyalty from one brand to another.
4-Switchers:consumers who show no loyalty to any brand.

32. Behavioral Segmentation Variables
Occasions:
Special promotions and labels for holidays.
Special products for special occasions.
(e.g., Kodak disposable cameras)
Goal 2: Understand the major bases for segmentation

33. Behavioral Segmentation Variables
Attitude:
Five attitude groups can be found in a market:
1-Enthusiastic
2-Positive
3-Indifferent
4-Negative
5-Hostile
Goal 2: Understand the major bases for segmentation

34. Segmenting Business Markets
Demographics
Operating Variables
Purchasing Approaches
Situational Factors
Personal Characteristics
Business Marketers Use Many of the Same Consumer Variables, Plus:

35. Segmenting Business Markets
Demographic segmentation
1-Industry:Which industries should we serve?
2- company size: What size companies should we serve?
3- location : What geographical areas should we serve?

36. Segmenting Business Markets
Operating variables
1-Technology: What customer technologies should we focus on?
2- User or non-user status: Should we serve heavy users, medium user, light users, or nonusers?
3- Customer capabilities: Should we serve customers needing many or few services?

37. Segmenting Business Markets
Purchasing Approaches
1-Purchasing-function organization: Should we serve companies with highly centralized or decentralized purchasing organizations?
2- Power structure: Should we serve companies that are engineering dominated,financially dominated and so on?
3- Nature of existing relationships: Should we serve companies with which we have strong relationships or simply go after the most desirable companies?
4- General purchase policies: Should we serve companies that prefer leasing?service contracts? System purchase?
5- Purchasing criteria: Should we serve companies that are seeking quality? Service? Price?

38. Segmenting Business Markets
Situational factors
1-Urgency: Should we serve companies that need quick and sudden delivery or service?
2-specific application: Should we focus on certain application of our product of our product rather than all applications?
3- size of order: Should we focus on large or small orders?

39. Segmenting Business Markets
Personal characteristics
1-Buyer-seller similarity: Should we companies whose people and values are similar to ours?
2- Attitudes toward risk: Should we serve risk-taking or risk-avoiding customers?
3-loyalty: Should we serve companies that show high loyalty to their suppliers?

40. Evaluating Market Segments
Segment Size and Growth
Analyze current segment sales, growth rates, and expected profitability.
Segment Structural Attractiveness
Consider effects of: competitors, existence of substitute products, and the power of buyers & suppliers.
Company Objectives and Resources
Examine company skills & resources needed to succeed in that segment.
Offer superior value and gain advantages over competitors.

41. Target Marketing Strategies

42. Market Targeting Evaluating and Selecting the Market Segments
Single-Segment Concentration
Selective Specialization
Product Specialization
Market Specialization
Full Market Coverage
Undifferentiated marketing
Differentiated marketing

43. Market Targeting Higher costs using differentiated marketing include:
Product modification cost
Manufacturing cost
Administrative cost
Inventory cost
Promotion cost

44. Target Marketing Target Market
Consists of a set of buyers who share common needs or characteristics that the company decides to serve
Goal 3: Know how companies identify and target attractive segments

45. Target Marketing Evaluating Market Segments Segment size and growth
Segment structural attractiveness
Level of competition
Substitute products
Power of buyers
Powerful suppliers
Company objectives and resources
Goal 3: Know how companies identify and target attractive segments

46. Target Marketing Selecting Target Market Segments
Undifferentiated (mass) marketing
Differentiated (segmented) marketing
Concentrated (niche) marketing
Micromarketing (local or individual)
Goal 3: Know how companies identify and target attractive segments

47. Choosing a Target Marketing Strategy
Considerations include:
Company resources
The degree of product variability
Product’s life-cycle stage
Market variability
Competitors’ marketing strategies
Goal 3: Know how companies identify and target attractive segments

48. Targeting Strategies
Classic mass marketing, all things to all people approach
Ignore segments
One mm for all customers
Rarely used today – Name an undifferentiated product?
FIGURE 7.2

49. FIGURE 7.2

50. Differentiated Strategy (cont.)
The firm targets several separate segments and designs separate marketing strategies for each
GM’s “a car for every purpose, purse, and personality”
vs. Fords one car for every purpose for every purse for every personality”
For most firms, this means they go for a small share of the larger, total aggregate market (one or two mm for one or two segments (out of maybe six or seven)

51. Concentrated Marketing
The firm goes for a large share of a single (or very few) segments
Jeep vs. GM
Can be niched or larger
FIGURE 7.2

52. IT IS CRITICAL TO UNDERSTAND THAT
Mass marketers do not often practice mass marketing today
They practice differentiated marketing
Often they do not change the product to appeal to different segments
They change price, place, and promotion

53. Target Marketing Socially Responsible Targeting
Some segments, especially children, are at special risk
Many potential abuses on the Internet, including fraud Internet shoppers
Controversy occurs when the methods used are questionable
Goal 3: Know how companies identify and target attractive segments

54. Positioning Positioning:
The place the product occupies in consumers’ minds relative to competing products.
Typically defined by consumers on the basis of important attributes.
Involves implanting the brand’s unique benefits and differentiation in the customer’s mind.
Positioning maps that plot perceptions of brands are commonly used.
Goal 4: Realize how companies position their products