Chapter 6 - Market Segmentation and the Marketing Mix
behavioristic segmentation
- grouping consumers by behavior - determined by many variables including: user status, usage rate, purchase occasion and benefits sought - tells us who the consumer is now, when and why they buy and how much they consume
purpose of VALS
- helps marketers identify who to target, uncover what the target group buys and does, locates where concentrations of the target group lives, identifies how to best communicate with them and gains insight into why the target group behaves the way it does
keys to ad success
- high primary demand trend - chance for significant product differentiation - hidden qualities that are important to consumers - opportunity to use emotional appeals - availability of substantial sums to support advertising
identifications
- high visibility penetrates shoppers' physiological screens - must reflect product concept to pass psychological screens
considerations in package design
- identification - containment - protection - convenience - consumer appeal - economy
business markets
- include manufacturers, government agencies, wholesalers, retailers, banks and institutions that buy goods and services to help them operate - many of the criteria used to identify consumer markets can also be used for business markets
communication element
- includes all marketing related communications between the seller and buyer - variety of marketing communications tools comprise the communications mix
price element
- influences consumer perceptions of the brand - prices are based on market demand, costs of production, competition and corporate objectives
economy
- investments in product packaging will be more than offset by increased customer appeal
direct marketing
- like taking the store to the customer - ex: mail-order house that communicates directly w/ consumers through ads and catalogs
private labels
- manufacture the product and sell it to resellers that put their own brand on the product - typically sold at lower prices in large retail store chains - 20% of grocery purchases
cooperative advertising
- manufacturer and retailer share ad costs
individual brand
- manufacturer may establish an individual brand for each product it produces - ex: Unilever has Aim, Pepsodent and Close-Up toothpastes - designate a distinct target market for each product and develop a separate personality and image for each brand - very costly
selective distribution
- manufacturers can cut their distribution and promotion costs by limiting the number of outlets - ex: many hardware tools are sold selectively thru discount chains - sales burden carried by retailer
user status variables
- many markets can be segmented by the user status of prospective customers - six categories: sole users, semi-sole users, discount users, aware nontriers, trial/rejectors, repertoire users
family brand
- market different products under the same umbrella name
benefits-sought variables
- marketers frequently segment according to the benefits being sought - consumers seek various benefits in the products they buy: high quality, low price, status, sex appeal, good taste, health consciousness - customers often motivated by symbolism: what the brand name means to them, to associates, or to some social reference group
psychographic segmentation
- marketers group people by their values, attitudes, personality and lifestyle - views people as individuals with feelings and inclinations - can classify peoples according to what they believe, the way they live, and the products, services and media they use
maturity stage
- marketplace saturated with competing products, sales reach plateau - companies increase promotional effort but emphasize selective demand: impress customers with the subtle advantages of their brand - market segmentation, product positioning and price promotion vital - must revitalize if beginning to fail
ways to classify tangible goods
- markets - purchasing habits of buyers - consumption rate - degree of tangibility - physical attributes
advertising
- mass or nonpersonal selling - purpose is to inform, persuade and remind customers about particular products
product element
- most important element of the marketing mix: the good or service being offered and the values associated with it- including the way the product is designed and classified, positioned, branded and packaged
selecting groups interested in product utility
- must decide if better to aim at whole market or cater to specific market segments
combining groups to build target market segments
- must find groups that are relatively homogeneous and offer potential for profit
hidden differences
- not so apparent - can enhance a product's desirability, IMC usually needed to let consumers know about them
decline stage
- obsolescence, new technology or changing consumer tastes leads to decline - companies may cease all promotions and phase out products or let them fade slowly w/ minimal ads
geographic segmentation
- people in one region of the world have needs, wants, and purchasing habits that differ from those in other regions - important even in local markets
salesmen
- people others find to be credible, trustworthy and authoritative - low key, attractive, influential
mavens
- people who spend the time and energy accumulating knowledge that most people can't be bothered to find out themselves - love sharing their information
connectors
- people with very wide social circles - ability to bridge different social groups that would not ordinarily interact w/ each other - transfers ideas between groups
repertoire users
- perceive two or more brands to have superior attributes and will buy at full price - primary brand switchers and respond to persuasive information based on their fluctuating wants and desires - primary target for brand messages
telemarketing
- person to person phone contact
distribution element
- place - must be consistent with brand image - two methods: direct and indirect
geodemographic segmentation
- provides info about markets but little about the psychology of individuals - people in the same demographic and geographic categories often have widely differing product preferences and TV viewing habits
MindBase
- psychographic segmentation scheme which divides consumers into 8 psychological categories - developed when realized consumers with similar demographic backgrounds were very different in motives and feelings
limitations of consumer segmentation models
- psychographics oversimplifies consumer personalities - typologies are criticized for being complicated and lack proper theoretical underpinnings
perceptible differences
- readily apparent to the consumer
market concentration
- reduces number of geographic targets for an audience - a firm may concentrate its ads on a few large customers or many small ones - can also segment by end users
people-based service
- relies on creative talents and skills of individuals
brand switching
- researchers determined that switching occurs in response to different need states that consumers may experience from one occasion to another
trial/rejectors
- responded to brand A's IMC messages but didn't like the product - more promoting won't help, only a reformulation of brand A will bring them back
franchising
- retail dealers pay a fee to operate under the guidelines and direction of the parent company
push strategy
- sales promotion efforts aimed at the retail trade encourage distributors and dealers to stock, display and advertise the new products
exclusive distribution
- select retailers granted exclusive rights to distribute a product - manufacturers + retailers work together to advertise
aggregating market segments
- selecting groups that have a mutual interest in the product's utility - reorganizing and aggregating them into larger market segments based on their potential for sales and profit
direct distribution
- sell directly to end users/consumers - ex: Avon, ordering from website
equipment-based service
- selling a service based on specialized equipment - ex: we pay to ride a train because it is equipment we don't have
product concept
- the consumer's perception of a product as a bundle of utilitarian and symbolic values that satisfy functional, social, psychological and other wants and needs
4 types of segmentation
1. behavioristic 2. geographic 3. demographic 4. psychographic
collateral materials
- the many accessory items companies produce to integrate and supplement their advertising or PR activities - ex: films, promotional products, brochures
benefit segmentation
- the prime objective of many consumer attitude studies and the basis for many successful ad campaigns - by measuring the importance of occasion-based motives, marketers can determine if a campaign needs to reposition the product
primary demand trend
- the projection of future consumer demand for a whole product category based on past demand and other market influences
discount users
- the semi-sole users of competing brand B - don't buy brand A at full price but will consider buying it at a discount
target marketing process
- the sequence of activities aimed at assessing various market segments, designating certain ones as the focus of marketing activities and designing marketing mixes to communicate with and make sales to these targets
bundle of values
- the total number of utilities perceived by the consumer
brand equity
- the totality of what consumers feel and think about the brand over an extended period of time - value of the brand's capital - high brand equity= customer loyalty, price inelasticity, long term profits - requires time, effort, money
marketing mix
- the way the marketer mixes and blends these different elements creates the company's marketing strategy (mix)
ways to position a product
- the way they are differentiated - the benefits they offer - the particular market segment to which they appeal - the way they are classified
semi-sole users
- typically use brand A but have and alternate selection if it is not available or if the alternative selection is promoted with a discount
nonpersonal communication
- use a medium as an intermediary for communicating - ex: advertising, PR
aware nontriers
- use competitive products in the category but haven't taken a liking to brand A - a different advertising message could help, but these people rarely offer much potential
Roper model
- uses 3 drivers of consumer behavior: nationality, life stage and values to define six consumer segments: creatives, fun seekers, intimates, strivers, devouts and altruists - discovered the top 10 values shared by people around the world
growth stage
- when sales rise rapidly - rapid market expansion, more customers, stimulated by mass advertising and word of mouth, multiple purchases - ad money decreases
product life cycle
- 4 stages like human life cycle - introduction, growth, maturity, decline
North American Industry Classification System
- NAICS - the census bureau classifies all US business using NAICS - organizes industries into 20 broad sectors subdivided into 4 hierarchical levels of classification - helps companies segment markets and do research
service
- a bundle of intangible benefits that satisfy some need or want
target market
- a group of segments the company wishes to appeal to, design products for and tailor its marketing activities toward
task utility
- ability of a service to help us complete a task
pull strategy
- advertisers must create enough consumer demand to pull the product through the channels of distribution - example: cell phones
sales promotion
- aimed at stimulating customers to some immediate, overt behavior - ex: deals, free samples, sweepstakes
national brands
- aka manufacturer's brand
network marketing
- aka multilevel marketing - individuals act as independent distributors for a manufacturer or private label marketer - ex: Rodan and Fields
distribution channel
- all firms and individuals that take title, or assist in taking title, to the product as it moves from the producer to the consumer - makes flow of products available to customers conveniently and economically
personal communication
- all person to person contact w/ customers
position
- basic goal is to own a word that ranks the product in the prospect's mind (Levis=jeans) - by developing a unique position for the brand in the consumer's mind, the marketer helps the consumer remember the brand and what it stands for
VALS
- best known psychographic classification system - values, attitudes, lifestyles - assigns consumers to one of eight groups based on two dimensions: primary motivation and resources - individuals are motivated by one of three things: ideals, achievement or self expression - people possess various levels of resources (which includes money, education or self confidence) - those with few resources are placed near the bottom of the VALS typology, those w/ the most are at the top
The Tipping Point
- book by Malcolm Gladwell - small groups of people can have a great impact on the rest of us - argues that certain types of people are involved in creating social epidemics: the almost overnight increase in popularity of a product, fashion or idea - social epidemics traceable to connectors, mavens and salesman
licensed brands
- brand names that other companies can buy the right to use
reseller
- business firm that operates between the producer and the consumer or industrial purchaser - deals in trade rather than production - wholesalers, retailers
purchase-occasion variables
- buyers can be distinguished by when they buy or use a product or service (the purchase occasion) - a marketer who discovers common purchase occasions for a group has a potential target segment and can better determine when to run specials and how to promote certain product categories
usage-rate variables
- by finding similarities among heavy users, marketers can define product differences and focus campaigns more effectively - usually easier to get a heavy user to use more than a light user - in volume segmentation, marketers measure people's usage rates to define consumers as light, medium or heavy users of products - 20% of users consume 80% of the product - marketers of one product sometimes find their customers are also heavy users of other products and can define target markets in terms of usage rates of the other products
vertical marketing system
- centrally managed distribution system that serves a group of stores or other businesses
sole users
- choose one brand exclusively - most brand loyal and require least amount of promotion
BehaviorGraphics
- classification scheme based on attitudes and lifestyle measures including information about the products that consumers like and the media they consume - aggregates consumers into 31 different segments
brand
- combination of name, words, symbols or design that identifies the product and its source and distinguishes it from competing products
introductory phase
- company incurs considerable costs for educating customers, building distribution and encouragin demand
primary demand
- consumer demand for the whole product category, not just the company's own brand
intensive distribution
- consumers can buy goods with minimal effort - low profit, high sales volume - ex: convenience goods available at every location (candy) - sales burden carried by manufacturer's national advertising
early adopters
- consumers willing to try new things
copy points
- copywriting themes in a product's advertising
product differentiation
- creates the perception that a brand offers something unique and desirable to a market segment - differences between products may be perceptible, hidden or induced
demographic segmentation
- defining population groups by their statistical characteristics: age, sex, ethnicity, education, occupation, income and other quantifiable factors - often combined w/ geographic segmentation: geodemographic segmentation - rarely demographic criteria alone can predict purchase behavior
induced differences
- differences in nearly identical products due to favorable publicity, successful ad campaigns, good word of mouth
market segmentation
identifying groups of people with certain shared needs and aggregating these groups into larger market segments according to their interests in the brand's utlity
2 goals of segmentation
1. identify people who are likely to be interested in a brand's benefits 2. develop a mix of effective messages that can help these customers understand the benefits
strategic options to enhance product concept and make sales
1. product 2. price 3. distribution 4. communication
four Ps
1. product 2. price 3. place 4. promotion
