chapter 8

steps in segmentation

1. Selecting a market or product category for study 2. Choosing a basis or bases for segmenting the market 3. Selecting segmentation descriptors 4. Profiling and analyzing segments 5. Selecting markets 6. Designing, implementing, and maintaining appropriate marketing mixes Markets are dynamic, so it is important that companies proactively monitor their segmentation strategies over time market segmentation is to identify marketing opportunities.

target market

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. 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.

undifferentiated strategies

A marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix. The first firm in an industry sometimes uses an undifferentiated targeting strategy. With no competition, the firm may not need to tailor marketing mixes to the preferences of market segments. Too often, an undifferentiated strategy 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. Marketers of commodity products, such as flour and sugar, are likely to use this strategy. Additionally, small stores in small towns with no competition may offer one marketing mix and be successful

Perceptual Mapping

A means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers' minds.

Product Differentiation

A positioning strategy that some firms use to distinguish their products from those of competitors. distinguish their products from competitors is based on product differentiation. The distinctions between products can be either real or perceived.

Multisegment Targeting Strategy

A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each. For example, P&G offers 18 different laundry detergents, each targeting a different segment of the market.

Concentrated Targeting Strategy, Niche

A strategy used to select one segment of a market for targeting marketing efforts. Niche- One segment of a market. 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.

Concentrated advantages and disadvantages

Advantage: 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

multisegment advantages and disadvantages

Advantage: Greater financial success economies of scale Disadvantages: Higher costs Cannibalization

undifferentiated advantages and disadvantages

Advantage: Potential savings on production and marketing costs Disadvantages: Unimaginative product offerings Company more susceptible to competition

effective postioning

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

positioning bases

Attribute: Association of a product with an attribute, a product feature, or customer benefit. Price and quality: High price as a symbol of quality, or low price as an indicator of value may be used to position a product. Use or application: Stressing use or applications. Product user: Positioning base focuses on a personality or type of user. Product class: Product is positioned as associated with a particular category of products. Competitor: Positioning against competitors is a part of any positioning strategy. Emotion: Positioning using emotion focuses on how the product makes customers feel. One or more positioning bases is often used.

Repositioning

Changing consumers' perceptions of a brand in relation to competing brands. Products are repositioned to sustain growth in slow markets or to correct positioning mistakes.

family life cycle

Consumption patterns among people of the same age and gender differ because they are in different stages of the family life cycle stage. The family life cycle is a series of stages determined by a combination of age, marital status, and the presence or absence of children.

usage rate segmenation

Dividing a market by the amount of product bought or consumed. Segmenting by usage rate enables marketers to focus efforts on heavy users or to develop multiple marketing mixes aimed at different segments. The focus of marketing is often on the heavy-user segment, based on the 80/20 principle. 80/20 Principle- A principle holding that 20 percent of all customers generate 80 percent of the demand.

positioning

Explain how and why firms implement positioning strategies and how product differentiation plays a role Developing a specific marketing mix to influence potential customers' overall perception or a brand, product line, or organization in general. Positioning assumes that consumers compare products on the basis of important features. Effective positioning requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions, and choosing a position in the market where the marketing efforts will have the greatest impact.

Psychographic Segmentation

Market segmentation on the basis of personality, motives, lifestyles, and geodemographics. Demographics provide the skeleton, but psychographics add meat to the bones.

Benefits-Sought Segmentation

Markets can be segmented based on the benefits that consumers desire from using a specific product

Costs of Multisegment Targeting Strategy

Product design costs, Production costs, Promotion costs, Inventory costs, Marketing research costs, Management costs, Cannibalization Before deciding on this strategy, firms should compare the benefits and costs of multisegment targeting to those of undifferentiated and concentrated targeting. Cannibalization is a situation that occurs when sales of a new product cut into sales of a firm's existing products.

geographic segmentation

Region of the country or world Market size Market density- number of people within a unit of land Climate

Geodemographic Segmentation

Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation. Geodemographic segmentation 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.

Benefit Segmentation

The process of grouping customers into market segments according to the benefits they seek from the product. Notes: 1. Benefit segmentation is different from other segmentation bases because it groups potential customers on the basis of their needs and wants instead of some other characteristic. 2. Customer profiles can be developed by examining demographic information associated with people seeking certain benefits. 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.

Demographic

age, gener, family cycle, income, ethnic background Demographic information is widely available and often related to consumer behavior and buying.

market segmentation and three important reasons

diving a market into meaningful, relatively similar, and identifiable segments or groups Markets have a variety of product needs and preferences. Segmentation enables the identification of groups of customers with similar needs, and the analysis of the buying behavior of these groups. Marketers can better define customer needs. Segmentation provides information for the specific matching of the design of marketing mixes with the characteristics of the segment. Decision makers can define objectives and allocate resources more accurately. Segmentation helps marketers satisfy customers wants and needs while meeting the organization's objectives. Market segmentation plays a key role in the marketing strategy of organizations, leading to competitive advantage. The benefits are described on this slide.

bases for segmenation

geographic- When an organization localizes its marketing efforts to accommodate the unique needs of specific geographic regions demographic psychographic benefit usage rate

market

means different things to different people. We are all familiar with the supermarket, stock market, labor market, fish market, and flea market. All these types of markets share several characteristics. In sum, 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.

market segment

subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs

criteria for segmentation

sustainability- Segment must be large enough to warrant a special marketing mix. indentifiableility and measurability- Segments must be identifiable and their size measurable. accessibility- Members of targeted segments must be reachable with marketing mix. responsiveness- Unless segment responds to a marketing mix differently, no separate treatment is needed. A segmentation scheme must produce segments that meet the four basic criteria as defined above.

three general strategies for selecting target markets

undifferentiated, concentrated, and multisegment targeting.