1. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Market Segmentation, Targeting, and Positioning Chapter 8

2. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Objectives 1.Identify the essential components of a market. 2.Outline the role of market segmentation in developing a marketing strategy. 3.Describe the criteria necessary for effective segmentation. 4.Explain each of the four bases for segmenting consumer markets. 5.Identify the steps in the market segmentation process. 6.Discuss four basic strategies for reaching target markets. 7.Summarize the types of positioning strategies. 8.Explain the reasons for positioning and repositioning products.

3. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. How Products are Classified Consumer products—those bought by consumers for personal use. Business products—goods and services purchased for use either directly or indirectly in the production of other goods and services for resale. Most goods and services are purchased by individual consumers.

4. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Product Classification CATTLEMEN'S® Barbecue Sauce was introduced more than 40 years ago to meet the special needs of foodservice operators who wanted an exceptionally thick and rich sauce, with big, bold flavor and outstanding cling. Source: Cattlemen's web site Product Targeted at the Business Market: Comes in 1 and 5 Gallon Containers

5. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Market Segmentation Both profit-oriented and not-for-profit organizations practice market segmentation. The division of the total market into smaller, relatively homogeneous groups is called market segmentation.

6. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Segmentation: Four Basic Requirements 1.Must present measurable purchasing power and size. 2.Must find a way to promote effectively to and service the market segment. 3.Must then identify segments that are sufficiently large enough to give them good profit potential. 4.Must aim for segments that match its marketing capabilities.

7. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Four Common Bases for Segmenting Consumer Markets Geographic Segmentation Demographic Segmentation Psychographic Segmentation Product-Related Segmentation

8. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Dividing 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. Four Common Bases for Segmenting Consumer Markets Geographic Segmentation

9. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Segmenting This ad is an example of geographic segmentation. When visiting the web site look for the different countries Pampers markets to.

10. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Defines consumer groups according to variables such as:  Gender  Age  Income  Occupation  Education  Household size  Stage in the family life cycle. This is sometimes called socioeconomic segmentation. Four Common Bases for Segmenting Consumer Markets Geographic Segmentation Demographic Segmentation

11. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Gender Segmenting

12. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Demographic/Boomers Segmentation Seniors—By 2025, Americans who are over age 65 will make up nearly 20 percent of the population. The current median age is now 35.2 years, up from 32.8 years a decade ago. The average life expectancy in the U.S. is 74 for men and to age 79 for women. In the U.S., heads of households aged 55-plus control about three- quarters of the country’s total financial assets. Boomers—People born from 1946 until 1965. Nearly 42 percent of U.S. adults were born in this period. Values of this age group were influenced both by the Vietnam War and the career-driven era. Baby boomers over the age of 50 will have a total disposable income of $1 trillion. Demographic/Seniors Segmentation Four Common Bases for Segmenting Consumer Markets Geographic Segmentation

13. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Demographic/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. Four Common Bases for Segmenting Consumer Markets Geographic Segmentation

14. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Demographic/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. Four Common Bases for Segmenting Consumer Markets Geographic Segmentation

15. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Demographic/Income- Expenditure Segmentation Engel’s Laws—As family income increases, the following will take place: 1.A smaller percentage of expenditures go for food. 2.The percentage spent on housing and household operations and clothing remains constant. 3.The percentage spent on other items (such as recreation and education) increases. Four Common Bases for Segmenting Consumer Markets Geographic Segmentation

16. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Divides a population into groups that have similar psychological characteristics, values, and lifestyles The most common method for developing psychographic profiles of a population is to conduct a large-scale survey. VALS stands for “values and lifestyles.” VALS 2 is based on two key concepts: resources and self-motivation. VALS 2 divides consumers into eight psychographic categories Four Common Bases for Segmenting Consumer Markets Geographic Segmentation Demographic Segmentation Psychographic Segmentation

17. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Psychographic Segmentation of Global Markets Strivers, the largest segment, value professional and material goals more than the other groups. Devouts value duty and tradition. Altruists emphasize social issues and societal well- being. Intimates value family and personal relationships. Fun seekers, as you might guess from their name, focus on personal enjoyment and pleasurable experiences. Creatives. This groups seeks education, technology, and knowledge, and their male-female ratio is roughly equal. Many creatives live in Western Europe and Latin America.

18. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. This segmentation approach can take several forms: 1.Segmenting based on the benefits that people seek when they buy a product 2.Segmenting based on usage rates for a product 3.Segmenting according to consumers’ brand loyalty toward a product Four Common Bases for Segmenting Consumer Markets Geographic Segmentation Demographic Segmentation Psychographic Segmentation Product-Related Segmentation

19. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Four Basic Strategies for Achieving Consumer Satisfaction Undifferentiated Marketing Differentiated Marketing Concentrated Marketing Micromarketing

20. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Basic Determinants of a Market- Specific Strategy 1.Company resources 2.Product homogeneity 3.Stage in the product life cycle 4.Competitors’ strategies

21. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Positioning Strategies 1.Attributes 2.Price/quality 3.Competitors 4.Application 5.Product user 6.Product class