Lamb Hair Mc Daniel 2011 2012 CHAPTER 8
Lamb, Hair, Mc. Daniel 2011 -2012 CHAPTER 8 Chapter 8 Copyright © 2012 by Cengage Learning Inc. All rights reserved 1 © Gary Yeowell/Getty Images Segmenting and Targeting Markets
Learning Outcomes LO 1 Describe the characteristics of markets and market segments LO 2 Explain the importance of market segmentation LO 3 Discuss criteria for successful market segmentation LO 4 Describe the bases commonly used to segment consumer markets LO 5 Describe the bases for segmenting business markets Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 2
Learning Outcomes LO 6 List the steps involved in segmenting markets LO 7 Discuss alternative strategies for selecting target markets LO 8 Explain one-to-one marketing LO 9 Explain how and why firms implement positioning strategies and how product differentiation plays a role Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 3
Market Segmentation Describe the characteristics of markets and market segments LO 1 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 4
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. LO 1 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 5
Market Segmentation Market Segment People or organizations with needs or wants and the ability and willingness to buy. A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The process of dividing a market into Market meaningful, relatively similar, identifiable Segmentation segments or groups. LO 1 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 6
The Importance of Market Segmentation Explain the importance of market segmentation LO 2 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 7
The Importance of Market Segmentation u Markets have a variety of product needs and preferences u Marketers can better define customer needs u Decision makers can define objectives and allocate resources more accurately LO 2 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 8
Criteria for Successful Segmentation Discuss criteria for successful market segmentation LO 3 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 9
Criteria for Segmentation Substantiality Segment must be large enough to warrant a special marketing mix. Identifiability and Measurability Segments must be identifiable and their size measurable. Accessibility Responsiveness Members of targeted segments must be reachable with marketing mix. Unless segment responds to a marketing mix differently, no separate treatment is needed. LO 3 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 10
Bases for Segmenting Consumer Markets Describe the bases commonly used to segment consumer markets LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 11
Bases for Segmentation Geography Demographics Psychographics Benefits Sought Usage Rate LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 12
Geographic Segmentation u Market size u Market density u Climate LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 13 © i. Stockphoto. com/Pawel Gaul / © i. Stockphoto. com/Contour 99 u Region of the country or world
Benefits of Regional Segmentation New ways to generate sales in sluggish and competitive markets u Scanner data allow assessment of best selling brands in region u Regional brands appeal to local preferences u Quicker reaction to competition u LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 14
Demographic Segmentation Age Gender Income Ethnic LO 4 Chapter 7 Family life cycle Copyright © 2012 by Cengage Learning Inc. All rights reserved 15
Ethnic Segmentation u Largest ethnic markets are: LO 4 Chapter 7 © Foodpix/Jupiterimages/Getty Images u Hispanic Americans u African Americans u Asian Americans Companies must make products geared toward specific ethnic groups as they continue to expand. Copyright © 2012 by Cengage Learning Inc. All rights reserved 16
Family Life Cycle Age Marital Status Children LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 17
LO 4 Exhibit 8. 1 Family Life Cycle Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 18
Psychographic Segmentation Market segmentation on the basis of personality, motives, lifestyles, and geodemographics. LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 19
Bases for Psychographic Segmentation Personality Motives Lifestyles Geodemographics LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 20
Personality and Motive Segmentation Personality Reflects a person’s traits, attitudes, and habits. Motives Marketers might appeal to emotional, rational, or status motives, among others. LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 21
Lifestyle Segmentation u How time is spent u Importance of things around them u Beliefs u Socioeconomic characteristics LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 22
Geodemographic Segmentation Segmenting potential customers into neighborhood lifestyle categories. LO 4 Chapter 7 Combines geographic, demographic, and lifestyle segmentation. Copyright © 2012 by Cengage Learning Inc. All rights reserved 23
Benefit Segmentation The process of grouping customers into market segments according to the benefits they seek from the product. LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 24
Usage-Rate Segmentation Dividing a market by the amount of product bought or consumed. 80/20 Principle A principle holding that 20 percent of all customers generate 80 percent of the demand. LO 4 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 25
Steps in Segmenting a Market List the steps involved in segmenting markets LO 6 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 26
Steps in Segmenting Markets 1 Select a market for study 2 3 Choose bases for segmentation Select descriptors 4 Profile and analyze segments 5 Select target markets 6 Design, implement, and maintain marketing mix Note that steps 5 and 6 are actually marketing activities that follow market segmentation (steps 1 through 4). LO 6 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 27
Strategies for Selecting Target Markets Discuss alternative strategies for selecting target markets LO 7 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 28
Strategies for Selecting Target Markets 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. LO 7 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 29
Strategies for Selecting Target Markets Undifferentiated Strategy 7 LO Chapter 7 Concentrated Strategy Multisegment Strategy Copyright © 2012 by Cengage Learning Inc. All rights reserved 30
Undifferentiated Targeting Strategy Undifferentiated A marketing approach that Targeting views the market as one big Strategy market with no individual segments and thus uses a single marketing mix. LO 7 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 31
Undifferentiated Targeting Strategy Advantage: u Potential savings on production and marketing costs Disadvantages: u Unimaginative product offerings LO 7 Chapter 7 Undifferentiated Strategy u Company more susceptible to competition Copyright © 2012 by Cengage Learning Inc. All rights reserved 32
Concentrated Targeting Strategy A strategy used to select one Concentrated segment of a market for targeting Targeting Strategy marketing efforts. Niche One segment of a market. LO 7 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 33
Concentrated Targeting Strategy Advantage: u u Concentration of resources Meets narrowly defined segment Small firms can compete Strong positioning Disadvantages: Concentrated Strategy u Segments too small, or changing u Large competitors may market to niche segment LO 7 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 34
Multisegment Targeting Strategy A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each. LO 7 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 35
Multisegment Targeting Strategy Advantage: u Greater financial success u Economies of scale Disadvantages: u Higher costs u Cannibalization LO 7 Chapter 7 Multisegment Strategy Copyright © 2012 by Cengage Learning Inc. All rights reserved 36
Costs of Multisegment Targeting Strategy LO 7 Chapter 7 u Product design costs u Production costs u Promotion costs u Inventory costs u Marketing research costs u Management costs u Cannibalization Multisegment Strategy Copyright © 2012 by Cengage Learning Inc. All rights reserved 37
One-to-One Marketing Explain one-to-one marketing LO 8 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 38
One-to-One Marketing is. . . Has a Goal of… Individualized Cost Reduction Information-Intensive Customer Retention Long-Term Increased Revenue Personalized Customer Loyalty LO 8 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 39
One-to-One Marketing Trends • One-size-fits all marketing no longer relevant • Direct and personal marketing efforts will grow to meet needs of busy consumers. • Consumers will be loyal to companies that have earned—and reinforced—their loyalty. • Mass-media approaches will decline as technology allows better customer tracking. LO 8 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 40
Positioning Explain how and why firms implement positioning strategies and how product differentiation plays a role LO 9 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 41
Positioning is… developing a specific marketing mix to influence potential customers’ overall perception or a brand, product line, or organization in general. LO 9 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 42
Beyond the Book LO 9 Chapter 7 Positioning of Procter & Gamble Detergents Brand Positioning Tide Tough, powerful cleaning Cheer Bold Gain Era Dash Solo Dreft Ivory Tough cleaning, color protection Ariel Tough cleaner, aimed at Hispanic market Detergent plus fabric softener Sunshine scent and odor-removing formula Stan treatment and stain removal Value brand Detergent and fabric softener in liquid form Outstanding cleaning for baby clothes, safe Fabric and skin safety on baby clothes Copyright © 2012 by Cengage Learning Inc. All rights reserved 43
Effective Positioning 1. Assess the positions occupied by competing products 2. Determine the dimensions underlying these positions 3. Choose a market position where marketing efforts will have the greatest impact LO 9 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 44
Product Differentiation is… © Super. Jam a positioning strategy that some firms use to distinguish their products from those of competitors. LO 9 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 45
Perceptual Mapping is… a means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds. LO 9 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 46
Exhibit 8. 3 Perceptual Map and Positioning Strategy for Saks’ Department Stores LO 9 Chapter 7 SOURCE: Vanessa O’Connell, “Park Avenue Classic or Soho Trendy? ” Wall Street Journal, April 20, 2007, B 1. Copyright © 2012 by Cengage Learning Inc. All rights reserved 47
Positioning Bases Attribute Price and Quality Use or Application Product User Product Class Competitor Emotion LO 9 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 48
Repositioning is… changing consumers’ perceptions of a brand in relation to competing brands. LO 9 Chapter 7 Copyright © 2012 by Cengage Learning Inc. All rights reserved 49
Beyond the Book Chapter 8 Videos Chapter 7 Ready. Made – Segmenting and Targeting Markets How does Ready. Made communicate the demographics of its reader base to advertisers who want to see specific statistics that do not easily represent Ready. Made’s target market? http: //www. cengage. com/marketing/boo k_content/1439039429_lamb/company_c lips/ch 08. html Copyright © 2012 by Cengage Learning Inc. All rights reserved 50
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