1. Chapter 8 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 8 Segmenting and Targeting Markets © Gary Yeowell/Getty Images

2. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2 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. LO 1

3. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3 Market Segmentation Market Segment Market Segment Market Segmentation Market Segmentation People or organizations with needs or wants and the ability and willingness to buy. A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The process of dividing a market into meaningful, relatively similar, identifiable segments or groups. LO 1

4. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4 The Concept of Market Segmentation LO 1 Beyond the Book

5. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5 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 LO 2

6. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6 Criteria for Segmentation Substantiality Identifiability and Measurability Accessibility Responsiveness Segment must be large enough to warrant a special marketing mix. Segments must be identifiable and their size measurable. Members of targeted segments must be reachable with marketing mix. Unless segment responds to a marketing mix differently, no separate treatment is needed. LO 3

7. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7 Bases for Segmentation Usage Rate Benefits Sought Psychographics Demographics Geography LO 4

8. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8 Geographic Segmentation  Region of the country or world  Market size  Market density  Climate LO 4 © iStockphoto.com/Pawel Gaul / © iStockphoto.com/Contour99

9. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9 Benefits of Regional Segmentation  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 LO 4

10. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10 Demographic Segmentation Age Gender Income Ethnic Family life cycle LO 4

11. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11 Family Life Cycle LO 4

12. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12 Bases for Psychographic Segmentation Personality Motives Lifestyles Geodemographics LO 4

13. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13 Personality and Motive Segmentation Reflects a person’s traits, attitudes, and habits. Personality Motives Marketers might appeal to emotional, rational, or status motives, among others. LO 4

14. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14 Lifestyle Segmentation  How time is spent  Importance of things around them  Beliefs  Socioeconomic characteristics LO 4

15. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15 Biz Flix LO 4 The Breakfast Club

16. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16 Benefit Segmentation The process of grouping customers into market segments according to the benefits they seek from the product. Benefit Segmentation LO 4

17. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17 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. LO 4

18. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18 Bases for Segmenting Business Markets Company Characteristics Company Characteristics Buying Processes Buying Processes Producers Resellers Government Institutions LO 5

19. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19 Company Characteristics Important segmentation variables:  Geographic location  Type of company  Company size  Product use LO 5

20. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20 Buyer Characteristics 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. LO 5

21. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21 Buyer Characteristics Demographic characteristics Decision style Tolerance for risk Confidence level Job responsibilities LO 5

22. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22 Select a market for study Choose bases for segmen- tation Select descriptors Profile and analyze segments Select target markets Design, implement, and maintain marketing mix 1 23 4 56 Note that steps 5 and 6 are actually marketing activities that follow market segmentation (steps 1 through 4). Steps in Segmenting Markets LO 6

23. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23 Target Market Strategies for Selecting Target Markets A group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges. LO 7

24. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24 Strategies for Selecting Target Markets Concentrated Strategy Undifferentiated Strategy Multisegment Strategy LO 7

25. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25 Undifferentiated Strategy Advantage:  Potential savings on production and marketing costs Disadvantages:  Unimaginative product offerings  Company more susceptible to competition Undifferentiated Targeting Strategy LO 7 A marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix.

26. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26 Concentrated or Niche Strategy Advantages:  Concentration of resources  Meets narrowly defined segment  Small firms can compete  Strong positioning Disadvantages:  Segments too small, or changing  Large competitors may market to niche segment LO 7 Concentrated Targeting Strategy A strategy used to select one segment of a market for targeting marketing efforts.

27. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27 Multisegment Strategy Advantages:  Greater financial success  Economies of scale Disadvantages:  Higher costs  Cannibalization LO 7 Multisegment Targeting Strategy A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.

28. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28 One-to-One Marketing Information-Intensive Long-Term One-to-One Marketing is... One-to-One Marketing is... Individualized Cost Reduction Has a Goal of… Customer Loyalty Increased Revenue Personalized Customer Retention LO 8

29. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29 One-to-One Marketing One-size-fits all marketing no longer relevant Direct and personal marketing efforts 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. Trends LO 8

30. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30 Positioning LO 9 developing a specific marketing mix to influence potential customers’ overall perception or a brand, product line, or organization in general. Positioning is…

31. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31 LO 9 Positioning of Procter & Gamble Detergents Brand Positioning Tide Tough, powerful cleaning Cheer Tough cleaning, color protection Bold Detergent plus fabric softener Gain Sunshine scent and odor-removing formula Era Stan treatment and stain removal Dash Value brand Solo Detergent and fabric softener in liquid form Dreft Outstanding cleaning for baby clothes, safe Ivory Fabric and skin safety on baby clothes Ariel Tough cleaner, aimed at Hispanic market Beyond the Book

32. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32 Product Differentiation LO 9 a positioning strategy that some firms use to distinguish their products from those of competitors. Product Differentiation is… © SuperJam

33. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33 Perceptual Mapping LO 9 a means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds. Perceptual Mapping is…

34. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34 Attribute Price and Quality Use or Application Product User Product Class Competitor Emotion Positioning Bases LO 9

35. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35 Repositioning LO 9 changing consumers’ perceptions of a brand in relation to competing brands. Repositioning is…

36. Chapter 7 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36 Assignment In groups of 5-7, discuss and then answer the following question: Mercedes is thinking about advertising its cars to college students. Do you think that college students are a viable potential market for Mercedes? Why or why not?