CHAPTER 6: Identifying Market Segments and Targets

Segment Identification

For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable)

need-based segmentation

Group customers into segments based on similar needs and benefits sought by customers in solving a particular consumption problem.

threat of potential entrants

High barriers to entry = higher profitability

marketers must avoid consumer backlash

Vulnerable groups Disadvantaged groups Potentially harmful products

selective segmentation

a firm select a subset of all the possible segment, each objectively attractive and appropriate

supersegment

a set of segment sharing some exploitable similarity

segment profitability

determine segment profitability

geographic segmentation

divides the market into nations, state, regions, counties, cities and neighbourhood

demographic segmentation

dividing the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation

Segment Positioning

for each segment, create a "value proposition" and product-price positioning strategy based on that segment's unique customer needs and characteristics

market segment

it consist of group of customers who share a similar set of needs and wants

multicultural marketing

it is a approach recognizing that different ethnic and cultural segments have sufficiently different needs and wants to require target marketing activities and that a mass market approach is not refined enough for the diversity of the marketplace

psychographic segmentation

it is the science of using psychology and demographics to better understand consumers

regional marketing

marketing strategy developed for each major region

niche

narrow defined groups seeking a distinctive mix of benefits within a segment

User and Usage Related Variables

occasions user status usage rate, buyer readiness stage, loyalty status, attitude.

Generation X (Gen X)

people born between 1965 and 1977

examples of psychographic segmetation

personality traits, lifestyle or values

threat of buyer growing bargaining power

segment is unattractive if it has a high bargaining power

full market coverage

serve all customer groups with all the products they might need

single segment concentration

the firm markets to only one particular segment

product specialization

the firm sells a certain product to several different market segments *microscope manufacturer sells to universities, government, commercial laboratories

differentiated marketing

the firm sells different products to all the different segments of the market

accesible

the segment can be effectively reached and served

differentiable

the segments are conceptually distinguishable and respond differently to different marketing mix elements and programs

substantial

the segments are large and profitable enough to serve. a segment should be the largest possible homogenous group worth going after with the tailored marketing program

Measurable

the size, purchasing power, and profiles of the segments can be measured

Mass Marketing

using a single marketing strategy to reach all customers

4 levels of segmentation

1. Full Market Coverage 2. Multiple Segment Specialization 3. Single-Segment Specialization 4. Individual Marketing

Bases for Segmenting Consumer Markets

1. Geographic 2. Demographic 3. Psychographic 4. Behavioral

Segment Attractiveness

1. Identifiable 2. Substantial 3. Reachable 4. Responsive 5. Profitable

how marketers identify niche?

1. by dividing segment into subsegments

advantages of differentiated marketing

1. creates more total sales 2. higher sales 3. higher costs

PRISZM 5 formula

1. education and affluance 2. family life cycle 3. urbanization 4. race and ethnicity 5. mobility

5 forces to determine long term attractiveness

1. industry competitors 2. potential entrants 3. substitute 4. buyer 5. supplier

5 criteria of how well does a potential segment score

1. low risk 2. scale economies 3. profitability 4. size 5. growth

rating segment

1. measurable 2. substantial 3. accessible 4. differentiable 5. actionable

examples of behavioral segmentation

1. needs and benefit 2. decision role 3. user and usage-related variables

examples of behavioral segmentation

1. needs or benefits 2. decisional role 3. user and usage

2 factors in evaluating marketing segment

1. the segment overall attractiveness 2. company objectives and resources

characteristic of niche

1. their customer have distinct set of needs 2. they will pay a premium to the company that best satisfies them 3. niche is relatively small but size, profit and growth potential and is unlikely to attract many competitors 4. gains certain economies from specialization

Silent Generation

1925-1945

Baby Boomers

1946-1964

millenials (Gen Y)

1977-2000

market

A group of customers who share a similar set of needs and wants

threat of intense segment rivalry

A segment is unattractive if it already contains numerous, strong, or aggressive competitors

segment "acid test"

Create "segment storyboard" to test the attractiveness of each segment's positioning strategy.

bases for segmenting business market

Demographic Operating variables Purchasing approaches Situational factors Personal characteristics

actionable

Effective programs can be formulated for attracting and serving the segments

marketing-mix strategy

Expand segment positioning strategy to include all aspects of the marketing mix: product, price, promotion, and place.

Decisional Roles

Initiator Influencer Decider Buyer User

behavioral segmentation

Marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product

Grassroot marketing

Marketing activity on a local community level

PRISZM

Potential rating index by zip market

Threat of Suppliers

Powerful suppliers can "squeeze" (lower profits) from the firm

market specialization

The firm gains marketing synergy through providing a complete product line for the city market segment, but R&D-manufacturing has the difficulty of developing and producing three different products.

Threat of Substitutes

The threat posed to a company when buyers can choose alternatives that provide the same item or service, often at attractive savings. This is one of Porter's five competitive forces.