Marketing Chapter 8: Segmenting and Targeting Markets

Income segmentation

-Determines consumers' wants and buying power -High income = high buying power

Company characteristics

-Geographic location, type of company, company size, product use -Companies buy locally -Size affects purchasing procedures, types and quantities of products, and responses to different marketing mixes

What does segmentation do?

-Helps define people/organization's needs and preferences more precisely -Helps marketers more accurately define marketing objectives and better allocate resources

Ethnic segmentation

-Hispanics, African, and Asian Americans comprise big target market

Age segmentation

-Newborns -Young children: account for a good deal of consumption -Gen Y: huge purchasing power, want technology, do 'haul' videos, etc. -Gen X: disloyal to brands and make decisions on families -Baby boomers: half of all spending, want attention and service, spend a lot on cars, electronics, and travel -War generation: retirement is an active time to explore but may need product adaptation

Buying process

-Satisficers: business customers who place an order with the first familiar supplier to satisfy requirements -Optimizers: consider numerous suppliers, solicit bids, and study all proposals carefully before choosing one

Gender segmentation

-Women make over 70% of all purchases -Some companies can do well going after men in non-traditional areas

Why is market segmentation important?

1) Identify groups of customers with similar needs and analyze their characteristics and buying behavior 2) Provides marketers with information to help them design marketing mixes 3) Segmentation is consistent with marketing concept of satisfying customer wants and needs while meeting organization's objectives

What are the benefits of one to one marketing?

1) Personalization (target one customer's needs and wants) 2) Time savings (customers don't have time to shop) 3) Loyalty (customers will be loyal to brands that have reinforced loyalty in past) 4) Technology (can collect information about customers)

What are the steps in segmenting a market?

1) Select a defined market or product category for study 2) Choose basis for segmenting market 3) Select segmentation descriptors 4) Profile and analyze segment (size, growth, frequency of purchases, brand loyalty) 5) Select target markets 6) Design, implement, and maintain appropriate marketing mixes 7) Monitor the mix

What are the criteria for successful segmentation?

1) Sustainability (large enough to warrant developing and maintaining a special marketing mix) 2) Identifiability and measurability (data about population and number in it should be easily obtained) 3) Accessibility (reach members with mark mix) 4) Responsiveness (don't have to change mix for people in segment)

Market segment

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

What are positioning bases?

Attribute, price and quality, use or application, product user, product class, competitor, and emotion

Repositioning

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

Segmentation bases (variables)

Characteristics of individuals, groups, or organizations -Need ones to produce substantial, measurable, and accessible segments -Can use single variable, but multiple variable segmentation is more precise than single

Multisegment targeting strategy

Chooses two or more well defined market segments and develops a distinct marketing mix for each -May need more money to target them -Cannibalization: sales of a new product cut into sales of a firm's existing products (may keep competitors out)

What are the bases for segmenting business markets?

Company characteristics or buying process

Positioning

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

Usage rate segmentation

Dividing a market by the amount of product bought or consumed -80/20 principle: 20% of the consumers generate 80% of the demand

What are the types of segmentation?

Geographic, demographic (age, gender, income, ethnic, family life cycle), psychographic, benefit, or usage rate

Target market

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

One to one marketing

Individualized marketing method that utilizes customer information to build long term personalized and profitable relationships with each customer, replacing the notion of mass marketing

Perceptual mapping

Means of displaying, in two or more dimensions, location of products, brands, or groups of products in consumers' minds

Market

People (consumer markets) or organizations (business markets) with needs or wants and the ability and willingness to buy

Position

Place a product, brand, or group of product occupies in consumers' minds relative to competing offerings -Need to look at competing products, decide the important dimensions behind these, and choose a position

Product differentiation

Position strategy that some firms use to distinguish their products from those of competitors

Market segmentation

Process of dividing a market into meaningful, relatively similar, and identifiable segments or groups

Demographic segmentation

Segmenting markets based on 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 Can take a regional approach because... -Many firms need new ways to generate sales -Checkout scanners give retailers accurate assessment of best selling goods in the region -Packaged goods manufacturers are introducing new regional brands -More regional approach allows consumer goods companies to react quicker to competition

Psychographic segmentation

Segmenting markets on the basis of personality, motives, lifestyles, an geodemographics (can combine with other things) 1) Personality (traits, attitudes, and habits) 2) Motives (status, economy, reliability, and dependability) 3) Lifestyles (way you spend your time, importance of things around you, etc.) 4) Geodemographic (segmenting potential customers into neighborhood lifestyle categories)

Family life cycle segmentation

Series of stages determined by a combination of age, marital status, and the presence or absence of children in the house -Single adults are the majority

Concentrated targeting strategy

Strategy used to select one segment of a market for marketing strategies -Niche: one segment of a market -Concentrate on needs, motives, and satisfactions of that segment's members and develop and maintain a highly specialized marketing mix

Benefit segmentation

The process of grouping customers into market segmetns according to the benefits they seek from products

What are the target marketing strategies?

Undifferentiated, concentrated, multisegment

Undifferentiated targeting strategy

marketing approach that vies the market as one big market with no segment and one marketing mix -save on production costs -Usually has no appeal and does bad