CHAPTER 8 - SEGMENTING AND TARGETING MARKETS Exam 2

*Key Concept: Discuss the criteria for successful market segmentation. Successful market segmentation depends on four basic criteria:

(1) a market segment must be substantial and have enough potential customers to be viable (2) a market segment must be identifiable and measurable (3) members of a market segment must be accessible to marketing efforts (4) a market segment must respond to particular marketing efforts in a way that distinguishes it from other segments.

*Key concept: Describe the characteristics of markets and market segments.

A market is composed of individuals or organizations with the ability and willingness to make purchases to fulfill their needs or wants. A market segment is a group of individuals or organizations with similar product needs as a result of one or more common characteristics.

substantiality

A segment must be large enough to warrant developing and maintaining a special marketing mix. market segment needs many potential customers to make commercial sense

*Key Concept: Explain the importance of market segmentation.

Before the 1960s, few businesses targeted specific market segments. Today, segmentation is a crucial marketing strategy for nearly all successful organizations. Market segmentation Enables Marketers to Tailor the Marketing Mixes to meet the needs of particular population segments. Segmentation helps marketers Identify Consumer Needs and Preferences, areas of declining demand, and new marketing opportunities.

**Repositioning

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

**Key Concept: Describe the Bases commonly used to Segment Consumer Markets.

Five bases are commonly used for segmenting consumer markets. -Geographic segmentation is based on region, size, density, and climate characteristics. -Demographic segmentation is based on age, gender, income level, ethnicity, and family life cycle characteristics. -Psychographic segmentation includes personality, motives, and lifestyle characteristics. -Benefits sought is a type of segmentation that identifies customers according to the benefits they seek in a product. -Finally, Usage Segmentation divides a market by the amount of product purchased or consumed.

**Key Concept: Discuss alternative Strategies for Selecting Target Markets.

Marketers select target markets using three different strategies: undifferentiated targeting, concentrated targeting, and multisegment targeting. An Undifferentiated targeting strategy assumes that all members of a market have similar needs that can be met with a single marketing mix. A Concentrated targeting strategy Focuses All Marketing Efforts on a Single market Segment. Multisegment targeting is a strategy that uses Two or More marketing mixes to target Two or More market Segments.

*age segmentation

Marketers use a variety of terms to refer to different age groups.

*Key Concept: Explain how and why firms implement Positioning Strategies and how Product Differentiation plays a role.

Positioning is used to influence consumer perceptions of a particular brand, product line, or organization in relation to competitors. The term position refers to the place that the offering occupies in consumers' minds. To establish a unique position, many firms use product differentiation, emphasizing the real or perceived differences between competing offerings. Products may be differentiated on the basis of attribute, price and quality, use or application, product user, product class, competitor, or emotion. Some firms, instead of using product differentiation, position their products as being similar to competing products or brands. Sometimes products or companies are repositioned in order to sustain growth in slow markets or to correct positioning mistakes.

*Select markets:

Selecting markets is not a part of but a natural outcome of the segmentation process. It is a major decision that influences and often directly determines the firm's marketing mix. This topic is examined in greater detail later in this chapter.

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

80/20 principle

a principle holding that 20 percent of all customers generate 80 percent of the demand

family life cycle (FLC)

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

cannibalization

a situation that occurs when sales of a new product cut into sales of a firm's existing products

*positioning developing

a specific marketing mix to influence potential customers' overall perception of a brand, product line, or organization in general

*concentrated targeting

advantages: Concentration of resources, Can better meet the needs of a narrowly defined segment, Allows some small firms to better compete with larger firms, Strong positioning disadvantages: Segments too small or changing and Large competitors may more effectively market to niche segment

multisegment targeting

advantages: Greater financial success and Economies of scale in producing/marketing disadvantages: High costs and Cannibalization

Optimizers

business customers who Consider Numerous Suppliers (both familiar and unfamiliar), solicit bids, and study all proposals carefully before selecting one

Satisficers

business customers who place an order with the First Familiar supplier to satisfy product and delivery requirements

lifestyles

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

*usage-rate segmentation

dividing a market by the amount of product bought or consumed

*income segmentation

income level influences consumers' wants and determines their buying power.

The choice of segmentation bases is crucial because an inappropriate segmentation strategy may lead to

lost sales and missed profit opportunities.

*Because market segments differ in size and potential, segmentation helps decision makers to

more accurately define marketing objectives and Better Allocate Resources

*demographic segmentation

segmenting markets by age, gender, income, ethnic background, and family life cycle

*geographic segmentation

segmenting markets by region of a country or the world, market size, market density, or climate

*psychographic segmentation

segmenting markets on the basis of personality, motives, life-styles, and geodemographics

*geodemographic segmentation

segmenting potential customers into neighborhood lifestyle categories

*position

the place a product, brand, or group of products occupies in consumers' minds relative to competing offerings

*market segmentation

the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups The purpose of market segmentation is to enable the marketer to tailor marketing mixes to meet the needs of one or more specific segments.

*benefit segmentation

the process of grouping customers into market segments according to the benefits they seek from the product is different because it groups potential customers on the basis of their needs or wants rather than on some other characteristic, such as age or gender.

*gender segmentation

women tend to buy more than men.