1. Segmenting & Targeting Markets
Strategic Marketing
Chapter 7

2. Characteristics of Markets & Market Segments
A Market is
Comprised of people or organizations (Consumer or Business)
Have needs, abilities, and willingness to buy
Markets have market segments
A Market Segment consists of a subgroup of people who share one or more common characteristic that causes them to have similar product needs
Theoretically anything can be grouped together
Market segmentation is only valuable if the group is meaningful to the marketer
The marketing mix is tailored to the market segment defined

3. The Concept of Market Segmentation
Chapter 7 Segmenting and Targeting Markets
The Concept of Market Segmentation
LOI
Notes:
Exhibit 7.1 illustrates the concept of market segmentation, using age and gender as the bases.
Discussion/Team Activity:
Discuss other ways of segmenting the market in addition to age and gender.

4. Market Segmentation
Market Segmentation helps marketers define customer needs and wants more precisely
Segments differ in size & potential so companies look at particular segments and determine more accurate marketing objectives
Accurate marketing objectives lead to:
Improved allocation of resources
Better marketing results

5. Market Segmentation Review
Market Segmentation accomplishes the following:
Identify specific groups that you can analyze characteristics & buying behavior of
Design marketing mixes specific to segmented groups
Allows you to meet customer needs & wants while meeting company objectives

6. Market Segmentation
To be useful, a segmentation scheme must produce segments that meet four basic criteria:
Sustainability
Needs to be large enough to matter. Not enough potential; it wont last.
Identifiability & Measurability
Need to be able to identify the group being targeted & its size
Easy to determine amount of people in certain subgroups; not easy to determine willingness or interest
Accessibility
Important to devise marketing mixes that allow your segments to access your product
Seniors citizens, Disabled, Language deficient, etc…don’t access information or products as easily as everyone else
Responsiveness
If the majority of customers respond positively to a marketing mix; then creating a separate marketing mix strategy for “unresponsive” group may not be necessary

7. Market Segmentation Bases
Segmentation Bases (Variables)
Characteristics of individuals, groups, or organizations used to divide a total market into segments
Marketers choose “bases” that are
Substantial
Identifiable
Measurable
Accessible
Responsive

8. Market Segmentation
One Base or Variable is not as precise but is simple and easy
Multiple variables allows for precision but
Is Harder to use
Usable secondary resources are less likely
The size of group gets smaller
Current trend is to use more variables then less variables

9. Market Segmentation Examples
One Variable
Segment a population based on gender
Multiple Variable
Gender
Age
Race
Education
Marital status
Geographics
Interests

10. Market Segmentation Most Common Variables used to segment markets
Geography
Demographics
Psychographics
Benefits Sought
Usage Rate(s)

11. Geographics Segment by: Region Country World Market size
Market density
# of people within a unit of land
Climate
Important because purchasing needs vary based on weather conditions

12. Why Segment with Geographics?
New ways to generate sales in sluggish and competitive markets
Scanner data allow assessment of best selling brands in region
Regional brands appeal to local preferences
Quicker reaction to competition

13. Examples of Geogrpahic Marketing
Restaurants offering menu items that reflect local taste interest
Cracker Barrel & McDonald’s alters menu to reflect local tastes
Menu in south is different than menu in Northeast
Miller Lite developed a True to Texas Marketing Campaign
Magazines like Midwest or Southwest Living
Pepsi packaging products based on NFL Cities

14. Examples of Geogrpahics: Local Retailers

15. Demographic Segmentation
Easy to obtain demographic information
Correlates to consumer buying
Age
Gender
Income
Ethnic Background
Family Life Cycle

16. Age Demographics

17. Gender Segmentation Facts About Female Consumers
75% of Family Finances
51% of new electronics sold
75% over-the-counter drugs
65% of new cars
Companies are realizing that women buy more than packaged goods
Ace Hardware:
42% of customers are female who spend 30% - 40% more than men per visit
Wider, well-lit aisles, clear signage, instructions on product use.

18. Gender Segmentation

19. Income Segmentation
Income segmentation tells marketers what consumers can afford
Segment by wants & buying power
Examples:
Housing
Clothing
Automobiles
Food

20. Income

21. Ethnic Segmentation
In the past marketers would present ads as anglo-centric
White all-American family
Mass marketing approach
In large part this occurred because the majority of the population fit this mold
1970’s a shift in culture started
Ethnic Foods started to be introduced into stores
Roles in music, movies, & politics became more prominent
As population of minorities increases so does marketing efforts towards them
A lot of marketers are choosing to target urban areas versus specific ethnic groups

22. La Raza: Hispanic Rights Organization

23. Ethnic Segmentation Ads
Geely Automobile Holdings Ltd
Pantene Pro-V

24. Family Life-Cycle Segmentation
Family Life Cycle is a series of stages determined by a combination of age, marital status, & presence or absence of children
46% of households are maintained by unmarried men or women
102 unmarried Americans over the age of 18
million people living in the United States over the age of 18
A families needs, income, resources, & expenditures differ at each stage of the life cycle

25. Family Life Cycle LO4 Chapter 7 Segmenting and Targeting Markets
Notes:
Exhibit 7.2 demonstrates both traditional and contemporary FLC patterns and shows how families’ needs, incomes, etc. differ at each stage.
Married couples make up just 50.7% of the U.S. population. Unmarried Americans make up 42% of the workforce and 40% of home buyers.
Discussion/Team Activity:
Find examples of advertisements that target different stages of the family life cycle.

26. Life Cycle Buying Habits

27. Targeting Age, Marital Status & Children Factor

28. Psychographic Factors

29. Psychographic Segmentation
Psychographics is segmenting based on
Personality
Motives
Emotional: Caring for others
Rational: Appeals to economy, Reliability, & Dependability
Status-Related: Customers want to look a certain way
Lifestyle:
Way consumers spend their time
Importance of things around them
Beliefs
Socioeconomic Factors: Income & Education
Explorers, Achievers, Builders, & Masters
Geodemographics: Combines geographic, demographic, & lifestyle segments

30. Claritas PRIZM Lifestyle Software http://www. claritas

31. 28277: Market Segmentation

32. 85365: Market Segmentation

33. Psychographic Ads

34. Benefit Segmentation Benefit Segmentation:
Process of grouping customers into market segments according to the benefits they seek from a product
Segmentation typically connects variables to needs
If you are this age, living in this city, & you like to do….then this is the product you want
Benefit segmentation is different because it is based on their needs and wants
Advertises the benefit of a product
Start with a product and break it down into the benefits it offers
Healthy product, Better tasting, Low price, etc….

35. Low Carb v. High Protein v. Energy

36. Usage-Rate Segmentation
Dividing a market by the amount of product bought or consumed.
Examples of markets:
Former users
Potential users
First-time users
Light or irregular users
Medium users
Heavy users
Heavy users are the group most commonly marketed towards

37. Useage Rate Segmentation
80/20 Principle
A principle holding that 20 percent of all customers generate 80 percent of the demand.
Time Warner Cable Example
Fewer than 10% of its subscribers consume 75% of its bandwidth
The goal is to turn customers into heavy users
Frequency & customer loyalty programs are designed around this concept

38. Useage Rate Ads

39. Cell Phone Use Useage Rate Ads

40. Bases for Segmenting Business Markets

41. Business Markets Business Market consists of four broad segments:
Producers
Profit-oriented individuals & organizations that use purchased goods to produce other products
Examples: Construction, Manufacturing, Transportation, Finance, Real Estate, & Food Services
Resellers
Wholesalers & Retailers
Buy & resell products
Government
Selling to Federal, Municipal, & Local officials.
Most lucrative industry. Usually requires bids
Institutions
Schools, churches, civic clubs, hospitals, unions, colleges, nonbusiness organizations, etc..

42. Business Market Segmentation
The four types of business segments that are marketed towards are broken down by Company Characteristics & Buying Process
Company Characteristics
Geographic location
Vendors close by may have advantage because it is usually cheaper
Type of company
Target companies specifically based on a company's particular need
Company size
Larger companies may get different opportunities because they buy more
Volume of purchase
Heavy, Moderate, or light users of a product
Product use
Targeting a company based on what they are producing, purchasing & using

43. Business Buyer Characterisitcs
Buying Process deals with how a company purchases products
Two main purchasing profiles that have been identified are:
Satisficers:
Choosing what company to place an order with based on their ability to satisfy product & delivery requirements
Optimizers:
Consider numerous suppliers (both familiar and unfamiliar), solicit bids, & study all proposals carefully before selecting one.

44. Buyer Characteristics
Buyer characteristics can also be determined by
Demographic Characteristics
Decision-Style
Tolerance for risk
Confidence Level
Job responsibilities

45. Steps in Segmenting a Market

46. Steps in Segmenting a Market
Select a market or product category for study
Can be a market they are currently in or a product category they are interested in joining
Anheuser-Busch looked at market closely before introducing Light Beers
Anheuser-Busch looked at snack food market closely prior to introducing Eagle Brand
Choose a “base” for segmenting the market
Choosing between demographics, geographics, psychographics, usuage-rate, & benefits sought
Whatever segmentation is chosen must meet be sustainable, identifiable, measurable, accessible & responsive

47. Steps in Segmenting a Market
Select Segmentation Descriptors
After choosing segmentation bases; the marketer must choose a descriptor
Descriptors identify the specific segmentation variables being used
Example:
Company selects demographics as its base; Descriptors could be
Age
Gender
Occupation
Education
Income

48. Steps in Segmenting a Market
Profile & Analyze Segments
Profile includes the segments size, expected growth, purchase frequency, current brand usage, brand loyalty, & long-term sales and potential profit.
Allows firm to look at information and rank them according to potential
Profit
Opportunity
Risk
Consistency with organizational goals

49. Steps in Segmenting a Market
Select Target Markets
Natural outcome of segmentation process
Determines companies Marketing Mix
Design, Implement, & Maintain Appropriate Marketing Mixes
Strategies created for:
Product
Place
Price
Promotional

50. Market Segmentation Markets are dynamic Classification is static
Dynamic = Changing
Classification is static
Static = Consistent. No Change
Consumers will move in and out of the classifications so marketers have to make adjustments and proactively monitor their segmentation strategies
People in classification will not always stay there
If you target year-olds a person can only be in that group at most for 15 years

51. Strategies for Selecting Target Markets
A target market is a group of people for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.
Most markets will include customers with different buying characterisitcs, lifestyles, backgrounds, & income levels; it is unlikely that a single marketing mix will attract all segments of the market
Example:
Chevy sells cars that sell for $13,000 & for $60,000

52. Strategies for Selecting Target Markets
The three general strategies for selecting target markets are:
Undifferentiated
Concentrated
Multi-segment Targeting

53. Strategies for Selecting Target Markets
Undifferentiated Targeting
A marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix.
Requires a product that has little competition & no substitutes.
Examples of Product Segmented this way:
Flour
Sugar

54. Strategies for Selecting Target Markets
Concentrated Targeting
A strategy used to select one segment of a market for targeting marketing efforts.
Companies select a marketing niche to target and they focus on the needs, motives, & satisfactions of that group
Examples:
Starbucks – Gourmet coffee
Rolex – High priced watch
OshKosh B’Gosh – Kids clothes

55. Strategies for Selecting Target Markets
Multisegment Targeting
A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.
Example:
A College offering a variety of programs
Day Programs
MBA Degrees
Evening programs
Weekend programs

56. Multi-Segment Target Strategies
A Business can choose to create a product that meets these specific customer bases & descriptors
Different product for each classification
Businesses can also create promotional strategies geared towards each base
Similar to consumer market
Anheuser-Busch sells beer to different ethnic groups. Ad changes; product doesn’t

57. Multisegment Targeting
Product Design Costs
Production Costs
Promotion Costs
Inventory Costs
Marketing Research Costs
Management Costs
Cannibalization
Situation that occurs when sales of a new product cut into sales of a firm’s existing products.
Example: Code Red Mountain Dew took away 25% of Mountain Dew Drinkers

58. REVIEW LEARNING OUTCOME Alternatives for Selecting Target Markets
Chapter 7 Segmenting and Targeting Markets
REVIEW LEARNING OUTCOME Alternatives for Selecting Target Markets
Undifferentiated
Multisegment
Concentrated

59. One-to-One Marketing
One-to-One Marketing is an individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer.
Goal is to sell multiple products to one customer
Reduces customer retention costs
Increases customer loyalty and revenue
Provides a more focused marketing approach
Personalized marketing that encourages communication between company & consumer
Allows for customized products to be made

60. One-to-One Marketing Four Trends Leading Towards One-to-One Marketing
One Size fits all approach to marketing no longer works.
Customers want to be treated as individuals not as part of a large group
Direct and personal marketing will grow to meet needs of busy consumers.
Takes less time for a consumer to make a purchasing decision
Consumers will be loyal to companies that have earned—and reinforced—their loyalty.
One-to-One marketing focuses on pleasing the firms best customers so they are happy
Mass-media approaches will decline as technology allows better customer tracking.
One-to-One marketing is more personalized and cost-effective with improved technology

61. Positioning Positioning Position
Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general.
Position
The place a product, brand, or group of products occupies in consumers’ minds relative to company offerings
Companies assume that consumers compare products on the basis of important features. If features being emphasized are unimportant then consumer will not buy and brand will take a hit.
Consumer Goods marketers are extremely concerned with positioning.

62. Positioning of Procter & Gamble Detergents
Chapter 7 Segmenting and Targeting Markets
Brand
Positioning
Market Share
Tide
Tough, powerful cleaning
31.1%
Cheer
Tough cleaning, color protection
8.2%
Bold
Detergent plus fabric softener
2.9%
Gain
Sunshine scent and odor-removing formula
2.6%
Era
Stain treatment and stain removal
2.2%
Dash
Value brand
1.8%
Oxydol
Bleach-boosted formula, whitening
1.4%
Solo
Detergent and fabric softener in liquid form
1.2%
Dreft
Outstanding cleaning for baby clothes, safe
1.0%
Ivory Snow
Fabric & skin safety on baby clothes
0.7%
Ariel
Tough cleaner, aimed at Hispanic market
0.1%
Notes:
Exhibit 7.6 compares the unique positions for Procter & Gamble’s laundry detergents.
Discussion/Team Activity:
Discuss specific advertisements for these detergents and how these ads illustrate the unique positions listed on this slide.
Examine the positioning message of other product advertisements.

63. Effective Positioning
Effective Positioning Requires Companies to:
Assess the positions occupied by competing products
Determine the dimensions underlying these positions
Choose a market position where marketing efforts will have the greatest impact
Example:
Campbell’s Select Soup is targeted towards upscale adults who are willing to try something new.

64. Positioning Strategy
Product Differentiation is a positioning strategy that some firms use to distinguish their products from those of competitors.
Distinction can either be real or perceived
Most consumer goods are very similar therefore their distinction is more perceived than real
Companies will try to make consumer believe that they really need the product being advertised
Occurs also when companies try to emulate other products

65. Product Differentiation Ads

66. Perceptual Mapping
Perceptual Mapping is a means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds.
Example is of Levi’s Jeans
Sell to teens
Sell to high-end consumers

67. Positioning Methods
Firms use a variety of variables to determining positioning approach:
Attribute: Product features & benefits
Price & Quality: High Price = Quality; Low Price = Value
Use or Application: Emphasize how a product can be used
Product User: Personality or type of user is focused on.
Product Class: Positioned in accordance to other products.
Can be done to compare or prove difference
Competitor: Comparing products to their competitors.
In reality all companies do this on some level
Emotion: Positioned based on how it makes the customer feel.

68. Multiple Positioning Methods
Each Product Positioning Approach is Used in the Got Milk Ad on right
Product Attribute
Use or Application
Product User
Product Class
Competitor
Emotion

69. Repositioning
Repositioning involves changing consumers’ perceptions of a brand in relation to competing brands.
Grocery Stores v. Walmart
Every time a Walmart opens; two grocery stores close in that community
Harris Teeter does not position itself directly against Walmart