Chapter 7: Segmentation, Target Marketing and Positioning

Trend related to gender segmentation fueled by recession and its aftermath

Men are now increasingly likely to marry wives with more education and income than they have and the reverse is true for women

Marketers avidly court the

Teen market

Digital natives

individuals who spend a big chunk of their time online, so they expect brands to engage them in two-way digital conversations

Generational marketing

marketing to members of a generation, who tend to share the same outlook , values and priorities

Mature consumers (senior market)

Enjoy leisure time and continued good health, perhaps lifestyle factors, including mobility best define this group (not age)

1) Analyze Competitors' Positions

Know what competitions are out there and how does the target market perceive them; must think directly and indirectly about competitors

Baby boomers born in first half of generation

Leading edge boomers;

Young biculturals

Many Latino consumers; bounce back and forth between rich, en Espanol, blend Mexican rice with spaghetti, etc

To position a brand

Marketers must clearly understand the criteria target consumers use to evaluate competing products and then convince them that their product, service, or organization will meet those needs; has to come up with a plan to communicate this position to its target marker

4. Evaluate Responses and Modify as Needed

Marketers must evaluate the target market responses so they can modify strategies if necessary

Targeting

A strategy in which marketers evaluate the attractiveness of each potential segment and decide in which of these groups they will invest resources to try to turn them into customers.

Segmenting Consumer Markets

-Geographic -Demographic (age, gender, family life cycle, income and social class, and ethnicity), -Psychographic -Behavioral

Hispanics

-brand loyal -highly concentrated by national origin -young (23.6 average age) -average household contains 3.5 people( spend 15-20% more of disposable income) -receptive to relationship-building approaches to marketing and selling

Steps in Positioning

1. Analyze Competitors Prices 2. Define Your Competitive Advantage 3. Finalize the Marketing Mix 4. Evaluate Responses and Modify as Needed

Gen Yers are

Tech savvy, more racially diverse compared to past generations, and more highly educated, also a greater proportion has never been married compared to other generations.

Buying power

A concept in segmentation that can help marketers to determine how to better match different products and versions of products to different consumer groups based on an understanding of what discretionary and nondiscretionary allocations of funds they are able to make.

Customer loyalty (the 80/20 rule brings this concept)

A customers low likelihood of switching to a competitors offerings, especially because of being highly engaged and connected with their current brand

VALS

A psychographic segmentation system that divides U.S. adults into eight groups according to what drives them psychologically as well as by their economic resources.

Young and Influential

A segment younger, lower middle class households that might not have high income a but influential in their communities and social networks and are tech savvy

Generation Z (iGen)

The group of consumers born after 1994; first generation of the 21st century and its most diverse; accustomed to blurred gender roles, where household responsibilities don't split along traditional lines (their peers inspire many purchases so online and social media reviews are more important than ever to retailers)

Generation Y (Millennials)

The group of consumers born between 1979 and 1994; ("echoboomers"); first generation to grow up online, about 25% of population with free-spending nature

Hispanics have taken over African Americans as

The nations largest minority group (growth rate has leveled off);

The idea of segmenting markets

To identify groups of consumers with similar needs so that marketing to them can be fine more efficiently and effectively versus a mass market approach (not a form of stereotyping)

Develop Segment Profiles (step 2)

To understand segment members needs and to look for business opportunities

CLV

Tracks data at individual customer level

Mass market

all possible customers in a market, regardless of the differences in their specific needs and wants; costs much less no need to separate advertising campaigns

Geographic segmentation

an approach in which marketers tailor their offerings to specific geographic areas because people's preferences often vary depending on where they live

Mass customization

an approach that modifies a basic good or service to meet the needs of an individual

customized marketing strategy

an approach that tailors specific products and the messages about them to individual customers (services from doctors, lawyers and hairstylists)

Positioning statement

an expression of a product's positioning that is internally developed and maintained in order to support the development of marketing communication that articulates the specific value offered by a product

Usage occasions

an indicator used in behavioral market segmentation based on when consumers use a product most

undifferentiated targeting strategy

appealing to a broad spectrum of people (Walmart)

Repositioning

redoing a product's position to respond to marketplace changes

Demographics

statistics that measure observable aspects of a population, including size, age, gender, ethnic group, income, education, occupation, and family structure

micromarketing

the ability to identify and target very small geographic segments that sometimes amount to individuals; similar to one-to-one marketing

bottom of the pyramid (BOP)

the collective name for the group of consumers throughout the world who live on less than $2 a day

Segment consumer markets

Consider income, gender, and into smaller components such as demographic, psychographic, and behavioral differences.

80/20 rule

A marketing rule of thumb that 20 percent of purchasers account for 80 percent of a product's sales; makes more sense to focus on the smaller number of people who are really into a product rather than on the larger number who are just causal users

3. Finalize the Marketing Mix

The good or service must deliver benefits that the segment values, such as convenience or status ; the positioning strategy translates into the organizations marketing mix (product, price, physical distribution, and promotion)

Generation X

The group of consumers born between 1965 and 1978; came to be called "slackers" or "busters" (for baby bust that followed the baby boom). Tough reputation, entrepreneurial group

Market

all the customers and potential customers who share a common need that can be satisfied by a specific product, who have the resources to exchange for it, who are willing to make the exchange, and who have the authority to make the exchange

PRIZM

popular geodemographic technique that stands for Potential Ratings Index by ZIP Market; classifies the US population into 68 segments based on various social economic data, such as income, age, race, occupation, education and household composition as well as lifestyle attributes, shopping patterns (where they vacation, what they drive, and their favorite brands and media preferences)

me-too products

products essentially similar to something already on the market; induce buyers to buy for a lower price

Steps in the target marketing process

1. Segmentation (identify and describe market segments) 2. Targeting (evaluate segments and decide which to go after) 3. Positioning (develop a marketing mix that will create a competitive advantage in the minds of the selected target market)

Choose a Targeting Strategy (Step 3 of Targeting)

1. Undifferentiated 2. Differentiated 3. Concentrated 4. Customized

Phases of Targeting

1. evaluate market segments 2. develop segment profiles 3. choose a targeting strategy

Evaluate Target Segments (step 1)

A viable target segment are similar in needs at the same time, can measure the segment, large enough to be profitable, market communications can reach the segment, adequately serve the needs of segment

ROMI

About the success of marketing investments on a large scale at the overall firm level

Subcategories of Demographics

Age (including generational differences), gender, family life cycle, income and social class, ethnicity, and place of residence (geographic segmentation)

Neglected segment

An unserved or underserved market segment for which an opportunity may exist for a new product entry; want to move quickly to capture the segment and define the standards of comparison for the category (minivan market for soccer moms)

Fastest growing minority in US

Asian Americans; substantial buying power

Children

Attractive age segment for many marketers; influence purchases of toys and games and other purchases as well

One of the most useful and more sophisticated methods to segment customers

By psychographics

Segment B2B Markets

Classifying the larger market into manageable pieces would get share relevant characteristics

Key goals of the marketer

Create value, building customer relationships, and satisfy needs

Experiential loyalty

Customer loyalty that results not just in increased purchases but also in an enhanced broader experience for the customer;

The distribution of wealth

Great interest to marketers bc it determines which groups have the greatest buying power

Customer stickiness

Highly cultivated customers that are likely to follow through in an intended purchase, buy the product repeatedly, and recommend it to others (Starbucks rewards); having a strong bond between customers and a brand

Hispanic market caution

Hispanic is a misnomer; marketing to them as a homogeneous market can be a big mistake

Geotargeting

Marketing to set of specific users based on their current real time location

North American Industry Classification System (NAICS)

Obtain information about the size and number of companies operating in a particular industry

2. Define Your Competitive Advantage

Offer a good or service with a competitive advantage to show consumers who will perceive the product as better than the competition

Baby boomers born in second half of generation

Trailing edge boomers; find themselves spending significantly more on non discretionary items (house maintenance, groceries, etc); May have reached a point where they're no longer paying off mortgages or higher education debts

Gamer segment

a consumer segment that combines a psychographic/lifestyle component with a heavy dose of generational marketing; video gamer

Segment profile

a description of the "typical" customer in a segment (can include demographics, location, lifestyle information and how frequently they buy the product)

Cultural diversity

a management practice that actively seeks to include people of different sexes, races, ethnic groups, and religions in an organization's employees, customers, suppliers, and distribution channel partners

Usage rate

a measurement that reflects the quantity purchased or frequency of use among consumers of a particular product or service

Badge

a milestone or reward earned for progressing through a video game

Long tail

a new approach to segmentation based on the idea that companies can make money by selling small amounts of items that only a few people want, provided they sell enough different items; the selling of digital products on internet helps its support

Retro brands

a once-popular brand that has been revived to experience a popularity comeback, often by riding a wave of nostalgia

Geodemography

a segmentation technique that combines geography with demographics; ex PRIZM

Metrosexual

a straight, urban male who is keenly interested in fashion, home design, gourmet cooking, and personal care

Geographic Information System (GIS)

a system that combines a geographic map with digitally stored data about the consumers in a particular geographic area

Behavioral Segmentation

a technique that divides consumers into segments on the basis of how they act toward, feel about, or use a good or service

Perceptual map

a technique to visually describe where brands are "located" in consumers' minds relative to competing brands

Positioning

developing a marketing strategy to influence how a particular market segment perceives a good or service in comparison to the competition; it's in the eye of the beholder

differentiated targeting strategy

developing one or more products for each of several distinct customer groups and making sure these offerings are kept separate in the marketplace (General Motors); can also involve connecting one product with multiple segments by communicating differently to appeal to those segments

Segmentation variables

dimensions that divide the total market into fairly homogeneous groups, each with different needs and preferences

target marketing strategy

dividing the total market into different segments on the basis of customer characteristics, selecting one or more segments, and developing products to meet the needs of those specific segments

concentrated targeting strategy

focusing a firm's efforts on offering one of more products to a single segment (Jitterbug phone to seniors)

Organizational demographics

organization-specific dimensions that can be used to describe, classify, and organize different organizations for the purpose of segmenting business-to-business markets

Market fragmentation

the creation of many consumer groups due to a diversity of distinct needs and wants in modern society; people diverse interests and backgrounds naturally divide them into numerous groups with distinct needs and wants (the same good or service will not appeal to everyone)

Target market

the market segments on which an organization focuses its marketing plan and toward which it directs its marketing efforts

Gamification

the process of building customer loyalty through the offering of free apps; rewarding points or badges to nongame experiences to drive consumer behavior

Segmentation

the process of dividing a larger market into smaller pieces based on one or more meaningfully shared characteristics

Baby boomers

the segment of people born between 1946 and 1964; so many of them who have a lot of money; occurred when soldiers came home after WWII and rushed to get married and start families (the kids resulted in more single family homes, more schools, migration to the suburbs, and freeways)

Content marketing

the strategy of establishing thought leadership in the form of bylines, blogs, commenting opportunities, videos, sharable social images, and infographics; resonate with specific customer groups

Psychographics

the use of psychological, sociological, and anthropological factors to construct market segments; segment consumers in terms of psychological and behavioral similarities, such as shared activities, interests, and opinions or AIOs

Social class segments

upper class, middle class, lower class; however many consumers buy not according to where they actually fall but rather according to the image they wish to portray