Part 2 Reaching Your Market Reaching Your Market

Part 2 Reaching Your Market

Reaching Your Market § How does a company identify its market? § Why do customers buy certain products? § How can competitors influence a company’s decisions? § How does marketing research influence marketing decisions? § How are for-profit and not-for profit companies similar and different? Friends or Food? § Burger King – Whopper Sacrifice Campaign

Part 2 Reaching Your Market Chapter 5 Targeting a Market

Learning Goals § define business opportunity § explain the components of a marketing strategy § describe the four qualities of a target market § identify the four strategies in the marketing mix § define mass marketing and target marketing and state the advantages and disadvantages of each (Continued)

Learning Goals § explain how segmentation helps to determine which market to target § explain each of the four segmentation categories and list the variables for each § describe how marketers create and use a market segment profile

Marketing Terms § business opportunity § mass marketing § target marketing § market segmentation § segmentation variable § geographic segmentation § census § demographic information § demographic segmentation § generation (Continued)

Marketing Terms § disposable income § discretionary income § psychographic segmentation § behavioural segmentation § 80/20 rule § market segment or consumer profile

Business Opportunity Business opportunity § a chance for success based on a product idea and a market that will buy it To turn a business opportunity into a successful business, develop a business plan and a marketing plan. The marketing plan includes the marketing strategy.

Target Market Target market § segment of a larger market whose wants and needs you will try to meet with a specific marketing mix Marketers focus on the target market while making marketing mix decisions. (Continued)

Target Market Qualities of a good target market § clearly defined needs and wants that your company can meet § money to buy your product § willingness and authority to buy your product § enough customers in the market to be profitable

Marketing Mix Marketing mix decisions are marketing mix strategies. Both are made with the target market in mind.

Product Strategies Product strategies § decisions about goods, services, or ideas § made with the target market in mind Types of decisions § quality, quantity, size, colour, features, technical support, packaging, warranties, brand name, and brand image

Price Strategies Price strategies § decisions about price § made with the target market and profit in mind Types of decisions § list price and discounts

Place Strategies Place strategies § decisions about where the product will be sold § made with the target market in mind Types of decisions § what types of stores will carry the product, whether to sell online, and how to transport the product

Promotion Strategies Promotion strategies § decisions about how to tell the customer about the product and the company § made with the target market in mind Types of decisions § advertising, personal selling, customer service, publicity, promotional events, and design and layout of stores

Mass Marketing Mass marketing §only one marketing mix §assumes that everyone’s wants and needs for a product are exactly the same It is difficult to be successful with a mass marketing strategy. (Continued)

Mass Marketing Two problems with mass marketing § diversity of consumer markets § profitability problems (Continued)

Mass Marketing Consumer markets are diverse. § contain many subgroups with very different needs and wants § needs within a mass market differ § example: one type of shoe will not meet the needs of everyone who wears shoes (Continued)

Mass Marketing Profitability §if a product doesn’t meet enough consumers’ needs, there might not be enough sales to make a profit §advertising to a mass market is expensive Target marketing is the answer to problems with mass marketing.

Target Marketing When target marketing § choose a subgroup of the mass market that has the same needs and wants for your product § this subgroup is your target market § create a unique marketing mix for your target market

Choosing Your Target Market Four ways to choose a target market § target market first § product idea first § product and target market together § old product, new target market (Continued)

Choosing Your Target Market Target market first § choose a target market § create a product that this market wants and needs Approach works well when there is a large and distinct target market that has money to spend. § Teens are a popular target market. (Continued)

Choosing Your Target Market Product idea first § develop a product idea § find a target market that would buy the product Potential problem: You might never find a market. Potential benefit: You might create a huge market. (Continued)

Choosing Your Target Market Product and target market together § usually occurs when you observe a need in a particular group Example § MAC cosmetics line developed specifically for make-up artists (Continued)

Choosing Your Target Market Old product, new target market § usually occurs when a long-existing product is losing sales § company promotes the old product to a new market or for a new use Example: baking soda § was promoted as a baking ingredient § now promoted as a cleaning product

Advantages of Targeting a Market Target marketing § allows a business to focus on meeting the needs of one small group § often more profitable than trying to meet the needs of everyone in a large group (Continued)

Advantages of Targeting a Market Target marketing § enables smaller businesses to compete with larger companies § smaller businesses can target a group whose needs are not being met by the larger companies § market niche: smaller segment of a larger market whose needs are not being met by the main providers (Continued)

Advantages of Targeting a Market Example of niche market § Kaepa athletic shoes developed specifically for cheerleaders § niche market in the larger athletic shoe market

Disadvantages of Targeting a Market If you target a market that is too small, there will not be enough sales to make a profit. You will… §need to broaden your market If you choose the wrong target market, it won’t buy your product. You will… §need to find a new target market (Continued)

Disadvantages of Targeting a Market When sales come from one small market, if that market has a setback then the business will suffer too. Despite the potential disadvantages, most companies use target marketing.

Segmenting a Market segmentation § process of dividing a large market into smaller parts § each of these smaller parts is called a segment Market Segments (Continued)

Segmenting a Market The purpose of market segmentation is to find a target market with § similar wants and needs for your product § money to buy your product § the will and authority to buy your product § enough size to be profitable (Continued)

Segmenting a Market Segmentation variable § customer characteristic used to segment a market Age Income (Continued)

Segmenting a Market Segmentation variables are organized into four categories. § geographic § demographic § psychographic § behavioural

Geographic Variables Geographic segmentation § dividing a market based on where customers live Geographic variables include § location § climate § community size

Location §customs of place (not the same as climate) Example: car manufacturer §Canadian market: metric system indicators §U. S. market: imperial system indicators

Climate Different climates require different types of products, such as § clothing § automobile tires § housing § heating and air conditioning

Demographic Variables Demographic information § statistics (numbers) that describe the characteristics of a population § collected in a census Census § count of the people in a country made by the government on a regular basis § Statistics Canada: conducts census every 5 years (Continued)

Demographic Variables Demographic information is organized into demographic variables, including § age § gender § ethnicity § income § family size and make-up (Continued)

Age People of different ages have different needs and wants. Generation § group of people who were born or grew up during a particular period of history § people in the same generation generally have similar attitudes, wants, and needs. § the Canadian consumer market is often segmented by generations.

Ethnicity Needs for many products vary with culture and ethnicity. Examples § ingredients for culture-specific dishes § items for religious practices In Canada, people enjoy products produced for a wide range of cultures.

Income Marketers are interested in two categories of income. § disposable income § money left after taxes are taken out § discretionary income § money left after taxes are taken out and after necessities are paid for A market is often segmented based on income levels.

Family Make-up Families of different sizes have different needs.

Psychographic Variables Psychographic segmentation § based on psychological characteristics of customers Psychographic variables include § hobbies § social activities § lifestyle § interests § attitudes

Hobbies and Activities People who participate in the same hobbies and activities often buy similar things. Examples of hobbies and activities § photography § crafts § stamp collecting § sports § cultural events

Lifestyle To discover lifestyle and values, marketers may use the VALS™ Survey. §eight VALS™ segments §organized by level of resources and personal motivation §information used to meet the unique needs of the target market Take the VALS™ survey

Behavioural Variables Behavioural segmentation § dividing a market based on the way customers use a product Behavioural variables include § features desired § usage rate § brand loyalty

Usage Rate 80/20 rule § most of the profits (80%) come from a few customers (20%) who show the greatest brand loyalty Marketers often segment the market based on customer usage rates. § heavy, moderate, light, nonuse

Combining Variables Marketers often target a market based on two or more segmentation variables. Geographic location and income is a common combination.

Market Segment Profile Market segment profile § a detailed description of the typical customer in a market segment § includes information on § geographic variables § demographics § psychographics § behaviour relevant to the product

Review § What is a business opportunity? § What are the two parts of a marketing strategy? § List the four qualities that a target market should have. § Why are mass marketing strategies usually unsuccessful? § Describe the four approaches to choosing a target market. (Continued)

Review § What is market segmentation? § What is the purpose of market segmentation? § List the four categories of variables often used to segment markets. § Give an example of a segmentation variable and how you would use it to segment a market.

Glossary Back § 80/20 rule. Majority of a business’s profits come from a small number of customers; based on research that shows that 80 percent of the sales come from 20 percent of the customers in many businesses. § behavioural segmentation. Segmenting a market based on the way customers use a product or behave toward a product. (Continued)

Glossary Back § business opportunity. Chance for success provided by the combination of a product idea and a market that is willing and able to buy the product. § census. Count of the people in a country made by the government on a regular basis. § demographic information. Statistics (numbers) that describe the characteristics of a population, such as age or income. (Continued)

Glossary Back § demographic segmentation. Segmenting a market based on demographic variables, that is, characteristics of a population. § discretionary income. Income left after taxes and after the necessities of life have been paid for. § disposable income. Income a person has available to spend (dispose of) after taxes have been taken out. (Continued)

Glossary Back § generation. Group of people born during a particular period of history. § geographic segmentation. Segmenting a market based on where customers live. § market segmentation. Process of dividing a large market into smaller parts. (Continued)

Glossary Back § market segment or consumer profile. Detailed description of the typical consumer in a market segment. § mass marketing. Development of only one marketing mix for a specific product. (Continued)

Glossary Back § psychographic segmentation. Segmenting a market based on psychological characteristics of customers. § segmentation variable. Customer characteristic that is used to segment a market. § target marketing. Development of a unique marketing mix for a market segment (target market).