Chapter 8: Segmenting and Targeting Markets:

Steps in Segmenting a Market:

1. Selecting a market or product category for study 2. Choosing a basis or bases for segmentation 3. Selecting segmentation descriptors 4. Profiling and analyzing segments 5. Selecting markets 6. Designing, implementing, and maintaining appropriate marketing mixes

Perceptual Mapping: EX: Hand Soap Industry Two attributes of soap that account for the greatest difference in consumer perceptions:

A means of displaying or graphing the location of products or brands in customers' minds. degree to which the soap is a deodorant soap. degree to which the soap is a moisturizing soap. The closer that any two dots are to each other, the more similar those brands are in the minds of consumers. Each segment may have its own preferences. The circles refer to the size of market attracted to a combination of attributes.

Demographic Segmentation: Demographic information is widely available and often related to consumers' buying and consuming behavior

Age Gender Income Ethic background Family Life cycle

Effective Positioning: (EX: Enterprise "Pick enterprise, We'll pick you up")

Assess the positions occupied by competing products Determine the important dimensions underlying these positions Choose a market position where marketing efforts will have the greatest impact

Positioning Bases: Attribute: Price and quality: Use or application: Product class: Competitor: Emotion:

Association of a product with an attribute, product feature, or customer benefit High price as a signal of quality or low price as an indicator of value Stresses on uses or applications Product user: Focuses on a personality or type of user Positioning a product as being associated with a particular category Positioning against competitors is part of any positioning strategy. Focuses on how the product makes customers feel

Repositioning: Products are repositioned to sustain growth in slow markets or to correct positioning mistakes

Changing consumers' perceptions of a brand in relation to competing brands

Target Marketing Strategies: Undifferentiated targeting strategy: Concentrated targeting strategy: Multi-segment Targeting Strategy:

Essentially a mass-market philosophy—viewing the market as one big market and using one marketing mix The first firm in an industry sometimes uses this strategy. With no competition, the firm may not need to tailor marketing mixes to the preferences of market segments. Too often, it emerges by default rather than by design, reflecting a failure to consider the advantages of a segmented approach. The result is often sterile, unimaginative product offerings that have little appeal to anyone. CTS: A firm selects a niche for targeting its marketing efforts. Because the firm is appealing to a single segment, it can concentrate on understanding the needs, motives, and satisfactions of that segment's members and on developing and maintaining a highly specialized marketing mix. MTS: A firm that chooses to serve two or more well-defined market segments and develops a distinct marketing mix for each (Example - P&G offers 18 different laundry detergents, each targeting a different segment of the market.)

B2B Marketing Segment by Company Characteristics Important segmentation variables:

Geographic location Type of company Company size Product use

Bases for Segmentation:

Geography Demography Psycho graphics Benefits sought Usage rate

Strategies for Selecting Target Markets: Market segmentation is the first step in determining whom to approach about buying a product. The next task is to choose one or more target markets. Because most markets will include customers with different lifestyles, backgrounds, and income levels, it is unlikely that a single marketing mix will attract all segments of the market.

Group of similar people (segment) for which a firm creates and implements a marketing mix To meet the specific needs of that group Strategies for selection Undifferentiated targeting Concentrated targeting Multisegment targeting

Segmentation Process Example: B. Product-market showing 6 segments Criteria for segmenting:

Homogeneous (similar) within—the customers in a market segment should be as similar as possible with respect to their likely responses to marketing mix variables and their segmenting dimensions. Heterogeneous (different) between—the customers in different segments should be as different as possible with respect to their likely responses to marketing mix variables and their segmenting dimensions. Substantial—the segment must be big enough to be profitable.

Demographic Segmentation: Income Segmentation

Income level: influences consumers' wants determines their buying power Retailers can appeal to: Low-income High-income Both

Positioning: Perceptual Mapping: Re-positioning:

Influences potential customers' overall perception of a brand, product line, or organization in general Means of displaying or graphing the location of products, brands, or groups of products in customers' minds Changing consumers' perceptions of a brand in relation to competing brands

Advantages and Disadvantages of Target Marketing Strategies: Undifferentiated targeting strategy: Concentrated targeting strategy:

Marketers of commodity products, such as flour and sugar, are likely to use this strategy. Small stores in small towns with no competition may offer one marketing mix and be successful. Focusing on a narrow market is sometimes more profitable than spreading resources over several different segments. It often enables small firms to compete effectively with much larger firms. However, it can also be disastrous for a firm that is not successful in its narrowly defined target market.

The Importance of Market Segmentation: Why Segment? Until the 1960s, market segmentation was not used extensively. Consider Coca-Cola with its one product aimed at the entire soft drink market. Today over a dozen different products are marketed by the company to different market segments. Market segmentation plays a key role in the marketing strategy of organizations, leading to competitive advantage. The benefits are described on this slide.

Markets have groups of consumers with distinctly different needs and preferences. Marketers can better define customer needs if they segment them based on: -- similarities within a segment -- differences between segments Marketing mix can be "fine-tuned" to meet each segment's needs

Usage-Rate Segmentation: Dividing a market by the amount of product bought or consumed. The focus of marketing is often on the heavy-user segment, based on the 80/20 principle:

Most segmentation is based on the assumption that the selected variable(s) and customers' needs are related. On the other hand, benefit segmentation groups potential customers on the basis of their needs or wants only. Segmenting by usage rate enables marketers to focus efforts on heavy users or to develop multiple marketing mixes aimed at different segments. 80/20 Principle: 20% of all customers generate 80% of the demand

Product differentiation:

Positioning strategy used by firms to distinguish their products from those of competitors

Geographic Segmentation: Segments markets by: (EX: Campbell soup)

Segment markets by region or world Market size Market density Number of people within a unit of land Impacts choice of promotional media Climate Impacts purchasing behavior packaging

Criteria for Segmentation: Sustainability: Identifiable and measurability Accessibility: Responsiveness:

Segment must be large enough to warrant a special marketing mix must be identifiable and their size measurable members of targeted segments must be reachable w/ marketing mix unless segment responds to a marketing mix different, no separate treatment is needed.

Criteria for Segmentation: Markets are segmented for three reasons:

Segmentation enables the identification of groups of customers with similar needs, and the analysis of the buying behavior of these groups. Segmentation provides information for the specific matching of the design of marketing mixes with the characteristics of the segment. Segmentation helps marketers satisfy customers wants and needs while meeting the organization's objectives. A segmentation scheme must produce segments that meet the four basic criteria.

Demographic Segmentation: Age Segmentation:

Segments markets by age into the following cohorts: Tweens Teens Millennials Generation X Baby boomers War generation

Demographic Segmentation: In the past, ethnic groups in the United States were expected to conform to a homogenized, Anglo-centric ideal. Increasing numbers of ethnic minorities and increased buying power have changed this.

Some companies make products geared toward specific ethnic groups To meet the needs and wants of expanding populations Largest ethnic groups in the United States: Hispanic Americans African Americans Asian Americans

Demographic Segmentation: Gender Segmentation: Women tend to view money and wealth differently than men do. They don't seek to accumulate money, but see it as a way to care for their families, improve their lives, and find security. Thus, financial advisors need to use different strategies to appeal to women.

Women make 75 percent of consumers goods purchases annually Purchasing in formerly "male product markets" Some marketers in female-markets focusing on males

The family life cycle:

is a series of stages determined by a combination of age, marital status, and the presence or absence of children.

EXAM Bases for Psycho-graphic Segmentation: Personality - Motives - (elegance-status) (rational/logical-prius) Lifestyle segmentation - Geo-demographic segmentation -

reflects a person's traits, attitudes, and habits. (Doesn't help marketers) (Example - People buy clothes that they feel represent their personalities and give others an idea of who they are.) Marketers might appeal to emotional, rational, or status-related motives, among others. (Example - Car-makers might appeal to customers with status-related motives, whereas makers of baby product might appeal to emotional motives.) Divides people into groups according to the way they spend their time, the importance of the things around them, their beliefs, and socioeconomic characteristics such as income and education. Segmenting potential customers into neighborhood lifestyle categories. It helps marketers develop marketing programs tailored to prospective buyers who live in small geographic regions, such as neighborhoods, or who have very specific lifestyle and demographic characteristics. It combines geographic, demographic, and lifestyle segmentation.