Market Segmentation and Target Markets chapter 7 Harcourt

Market Segmentation and Target Markets chapter 7 Harcourt, Inc.

Objectives n Understand the concepts: market, segmentation, and target markets n Learn the advantages and disadvantages of target marketing n Explain the steps in target market selection

Objectives n Discuss segmentation criteria, strategies, bases, and information sources n Understand market profiling and positioning strategies n Discuss differences for business and international marketing

What is a market? n Individuals or organizations who: Are willing, able, and capable of purchasing a firm’s product n Segmentation is critical because demand is often heterogeneous n

What is market segmentation? n Market Segmentation n Process of dividing a large market into smaller target markets, or customer groups with similar needs and/or desires

Market Segmentation Mass Market Niche Micromarketing The Individual e z i S n o i t a t n e m g e S t e k r Ma f o m u u n i t Con Personal. Standardized Marketing Mix Niche Micromarketing ization

Target Marketing n Advantages n Easier analysis of potential and actual consumers n Tailoring of products to market n Assessment of demand potential n Identify competing products n Increased sales effectiveness and cost efficiencies n Product positioning and easy identification of opportunities

Target Marketing n Disadvantages Increased marketing costs n Personalization can become burdensome to manage n Faux segmentation may be viewed cynically n Narrow segmentation can impact brand loyalty n Ethics and stereotyping issues n

Target Market Selection Identify Total Market Determine Need for Segmentation Determine Bases for Segmentation Assess Potential Profitability of Segment and Select Target Segment Profile Each Selected Segment Select Positioning Strategy Develop and Implement Appropriate Marketing Mix Dr. Rosenbloom Monitor, Evaluate and Control

Market Criteria n Segmentable markets are: Heterogeneous n Measurable n Substantial n Actionable n • Companies must be able to respond to preferences with an appropriate marketing mix n Accessible • Market must be efficiently reachable Dr. Rosenbloom

External Factors n Stage in product life cycle n Competition n Product specific issues n Market for the product Dr. Rosenbloom

Segmentation Variables Demographic Segmentation Geographic Segmentation Situation Segmentation Psychographic Behavior/Usage Segmentation Benefits-Sought Segmentation

Demographic Segmentation Income Level Age Family Education Ethnicity

Demographic Segmentation n Age n Some products are marketed to specific age groups

Demographic Segmentation n Age n Some products are marketed to specific age groups

Demographic Segmentation n Income Level n Some products are marketed to consumers with different income levels

Demographic Segmentation n Income Level n Some products are marketed to consumers with different income levels

Demographic Segmentation Bartles and James Hal Riney and Partners

Demographic Segmentation n Family n Some products are marketed to consumers with special family consideration • Family Life Cycle • Bachelor, marriage, married with children, retired, etc.

Functions Of Advertising Kinder. Care The Martin Agency

Demographic Segmentation n Family n Some products are marketed to consumers with special family consideration • Family Life Cycle • Bachelor, marriage, married with children, retired, etc.

Demographic Segmentation n Education n Some products are marketed to consumers with certain educational levels

Demographic Segmentation n Ethnicity n Some products are marketed to consumers from specific ethnic backgrounds

Demographic Segmentation n Ethnicity n Some products are marketed to consumers from specific ethnic backgrounds

Segmentation Variables Demographic Segmentation Geographic Segmentation Situation Segmentation Psychographic Behavior/Usage Segmentation Benefits-Sought Segmentation

Geographic Segmentation n When an organization localizes its marketing efforts to accommodate the unique needs of specific geographic regions

Geographic Segmentation n When an organization localizes its marketing efforts to accommodate the unique needs of specific geographic regions

Geographic Segmentation n Metropolitan Statistical Areas n An urbanized area of 50, 000 and a total metropolitan area population of at least 100, 000 • Charlottesville, Virginia

Geographic Segmentation n Primary Metropolitan Statistical Areas n An urbanized county or cluster of counties with a population of more than 1 million • Gary/Hammond, Indiana

Geographic Segmentation n Consolidated Metropolitan Statistical Area n A metropolitan area that includes at least two PMSAs • Baltimore, Maryland Washington, D. C.

Segmenting Consumer Markets Demographic Segmentation Geographic Segmentation Situation Segmentation Psychographic Behavior/Usage Segmentation Benefits-Sought Segmentation

Psychographic Segmentation Grouping customers together based on social class, lifestyles and psychological characteristics (attitudes, interests and opinions) n PRIZM analysis from Claritas n

Segmenting Consumer Markets Demographic Segmentation Geographic Segmentation Situation Segmentation Psychographic Behavior/Usage Segmentation Benefits-Sought Segmentation

Benefits-Sought Segmentation n Markets can be segmented based on the benefits that consumers desire from using a specific product

Benefits-Sought Segmentation American Pork Council Bozell, Incorporated

Segmenting Consumer Markets Demographic Segmentation Geographic Segmentation Situation Segmentation Psychographic Behavior/Usage Segmentation Benefits-Sought Segmentation

Situation Segmentation n Purchase situation or occasion Physical surroundings n Social surroundings n Temporal perspective n • How much time to make a purchase? Task definition n Pre-purchase attitude n Dr. Rosenbloom

Segmenting Consumer Markets Demographic Segmentation Geographic Segmentation Situation Segmentation Psychographic Behavior/Usage Segmentation Benefits-Sought Segmentation

Behavior/Usage Segmentation n Markets can be segmented by how often or how heavily consumers use a specific product n 80/20 Principle - 80% of revenue generated by 20% of customers Light Users 80% Heavy Users 20%

Segmentation Data n Internal sources In-house customer and marketing databases n Data mine to explore patterns and relationships in collected data n n External sources Lists of catalog/magazine subscribers n U. S. Census information n Mediamark, CACI Marketing Systems, etc. n Dr. Rosenbloom

Positioning Strategy n Differentiation through: n Price/quality emphasize value in terms of quality, price, or both Dr. Rosenbloom

Positioning Strategy n Differentiation through: Product attributes characteristics as a positioning base n Product usage positioning based on a products typical use n Dr. Rosenbloom n Symbol - use of a symbol or icon to position a product in the consumer consciousness

Positioning Strategy n Differentiation through: n Product user - the typical user of a product Dr. Rosenbloom

Positioning Strategy n Differentiation through: n Product class positioning against another type of product or product class Dr. Rosenbloom

Positioning Strategy n Differentiation through: n Competition comparisons to a product’s competition (directly or indirectly) Dr. Rosenbloom

Segmenting Business Markets n Demographics n Industry size, growth potential, etc. n Operating Characteristics n Technology, brand-user status, etc. n Purchasing Approaches n Purchasing policies, size of orders, etc.

Segmenting Business Markets n Product Use or Usage Situation n The way the product will be used and customer service levels required n Situational Factors n Urgency, special product uses n Buyer’s Personal Characteristics

Segmenting Global Markets n Economic n Stage of development in a host country n Political/Legal n Regulations and laws n Cultural n Language barriers, differences in consumer customs

Segmenting Global Markets n Some segments transcend national borders Rich around the world n Older and comfortable n Indulged kids n Emerging middle class n Women employed outside the house n

Market Segmentation n Differentiated n Concentrated n Undifferentiated

Differentiated Marketing n An organization targets multiple market segments and develops segment specific mixes

Concentrated Marketing n When an organization concentrates its marketing efforts on a smaller segment of a larger market

Undifferentiated Marketing n An organization develops one strategy appropriate for all members of the total market