Chapter 8 Segmenting and Targeting Marketswweb.uta.edu/faculty/gossett/3321/lhm 10e ch08_final-ie.pdfList the steps involved in segmenting markets Discuss alternative strategies for

Chapter 8 Segmenting and Targeting Markets

1

Copyright ©2009 by Cengage Learning Inc. All rights reserved 1

Designed by

Eric Brengle

B-books, Ltd.

CHAPTER

8

Segmenting and Targeting Markets

Prepared by

Amit Shah

Frostburg State University

MarketingLamb, Hair, McDaniel

10

Copyright ©2009 by Cengage Learning Inc. All rights reserved

Learning Outcomes

2

Describe the characteristics of markets

and market segments

Explain the importance of market segmentation

Discuss criteria for successful market

segmentation

Describe the bases commonly used to segment

consumer markets

LOI

LO2

LO3

LO4


Learning Outcomes

3

Describe the bases for segmenting business markets

List the steps involved in segmenting markets

Discuss alternative strategies for selecting

target markets

Explain one-to-one marketing

Explain how and why firms implement

positioning strategies and how product

differentiation plays a role

LO5

LO6

LO7

LO9

LO8


Market Segmentation

4

Describe the characteristics

of markets

and market segments

LOI


LOI

(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.

A Market Is...


Market Segmentation

6

LOI

MarketPeople or organizations with

needs or wants and the ability

and willingness to buy.

Market

Segment

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

Market

Segmentation

The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.


2


The Concept of Market

Segmentation

7

LOI


The Importance of Market

Segmentation

8

Explain the importance of market segmentation

LO2


The Importance of Market

Segmentation

9

LO2

Markets have a variety of product

needs and preferences.

Marketers can better define

customer needs.

Decision makers can define objectives

and allocate resources more accurately.


REVIEW LEARNING OUTCOMEThe Importance of Market Segmentation

10

LO2

Marketsegmentation

More precise definition of customers needs and wants

More accurate marketing objectives

Improved resource allocation

Better marketing results


Criteria for Successful

Segmentation

11

Discuss criteria for successful market

segmentation

LO3


Criteria for Segmentation

12

LO3

SubstantialitySegment must be large

enough to warrant a special marketing mix.

Identifiabilityand

Measurability

Segments must be identifiable and their size measurable.

AccessibilityMembers of targeted segments

must be reachable with marketing mix.

ResponsivenessUnless segment responds to a marketing mix differently, no separate treatment is needed.


3


REVIEW LEARNING OUTCOMESuccessful Market Segmentation

13

LO3

Useful

segment?

Substantial

Identifiable and measurable

Accessible

Responsive

Then, yes: Useful segmentation scheme


Bases for Segmenting

Consumer Markets

14

Describe the bases

commonly used to

segment

consumer markets

LO4


Bases for Segmenting

Consumer Markets

15

LO4

Segmentation

BasesCharacteristics of individuals,

groups, or organizations used

to divide a total market into

segments.

(variables)


Bases for Segmentation

16

LO4

Usage Rate

Benefits Sought

Psychographics

Demographics

Geography


Geographic Segmentation

• Region of the country or world

• Market size

• Market density

• Climate

17

LO4


Benefits of Regional

Segmentation

• New ways to generate sales in sluggish

and competitive markets

• Scanner data allow assessment of best

selling brands in region

• Regional brands appeal to local

preferences

• Quicker reaction to competition

18

LO4


4


Demographic Segmentation

19

LO4

Age

Gender

Income

Ethnic background

Family life cycle


Gender Segmentation

• In U.S., women…

– handle 75% of family finances

– Influence 80% of consumer purchases

– Make purchase decisions about variety of goods

and services

• New cars, hardware stores, electronics, etc.

• Other brands that have targeted men are trying to target women– Gillette razors, Rogaine baldness remedy, Nike,

Reebok, etc.

20

LO4


Income Segmentation

• Income – popular demographic variable for

segmenting markets

• According to Nielsen study…

– Affluent households (earning more than $100k/ year)

twice as likely to shop at warehouses

– Lexus catering to wealthy customers

• Price-sensitive consumers

– P & G

• Bounty Basic paper towels

• Charmin Basic bath tissue

21

LO4


Ethnic Segmentation

• Largest ethnic markets are:

– Hispanic Americans

– African Americans

– Asian Americans

• Will comprise 1/3 of U.S. population by 2010

with buying power of $1 trillion annually

22

LO4


Family Life Cycle

23LO4

Age

MaritalStatus Children


Family Life Cycle

24

LO4


5


Psychographic Segmentation

25

LO4

Psychographic

SegmentationMarket segmentation on the

basis of personality,

motives, lifestyles, and

geodemographics.


Bases for Psychographic

Segmentation

26

LO4

Personality

Motives

Lifestyles

Geodemographics


Lifestyle Segmentation

• How time is spent

• Importance of things around them

• Beliefs

• Socioeconomic characteristics

27

LO4


Geodemographic

Segmentation

28

LO4

Geodemographic

SegmentationSegmenting potential customers

into neighborhood lifestyle

categories.

Combines geographic,

demographic, and lifestyle

segmentation.


Benefit Segmentation

29

LO4

Benefit

SegmentationThe process of grouping

customers into market segments

according to the benefits they

seek from the product.


Benefit Segmentation

30

LO4

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.


6


REVIEW LEARNING OUTCOMEBases for Segmenting Consumer Markets

31

LO4

Geography Demographics Psychographics Benefits Usage Rate

• Region

• Market size

• Market

density

• Climate

• Age

• Gender

• Income

• Race/ethnicity

• Family life

cycle

• Personality

• Motives

• Lifestyle

• Geodemo-

graphics

• Benefits

sought

• Former

• Potential

• 1st time

• Light or

irregular

• Medium

• Heavy


Steps in Segmenting a Market

32

List the steps involved

in segmenting markets

LO6


REVIEW LEARNING OUTCOMESteps in Segmenting Markets

33

LO6

Select a market

for study

Choosebases

for segmen-

tation

Selectdescriptors

Profileand

analyzesegments

Selecttarget

markets

Design,implement,

maintainmarketing

mix

1 53 42 6


Strategies for Selecting

Target Markets

34

Discuss alternative strategies

for selecting target markets

LO7



Target Markets

35

Target

Market

LO7

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.



Target Markets

36

LO7

ConcentratedStrategy

UndifferentiatedStrategy

MultisegmentStrategy


7


Undifferentiated Targeting Strategy

37

Undifferentiated

Targeting

Strategy

LO7

A marketing approach that

views the market as one big

market with no individual

segments and thus

requires a single

marketing mix.


Undifferentiated Targeting Strategy

38

LO7

UndifferentiatedStrategy

Advantage:

Potential savings on production and marketing costs

Disadvantages:

Unimaginative product offerings

Company more susceptible to competition


Concentrated Targeting Strategy

39

Concentrated

Targeting Strategy

LO7

A strategy used to select one

segment of a market for

targeting marketing efforts.

Niche

One segment of a

market.


Concentrated Targeting Strategy

40

LO7

ConcentratedStrategy

Advantages: Concentration of resources Meets narrowly defined

segment Small firms can compete Strong positioning

Disadvantages: Segments too small, or

changing Large competitors may

market to niche segment


Multisegment Targeting Strategy

41

Multisegment

Targeting

Strategy

LO7

A strategy that chooses two or

more well-defined market

segments and develops a

distinct marketing

mix for each.


Multisegment Targeting Strategy

42

LO7

MultisegmentStrategy

Advantages: Greater financial success Economies of scale

Disadvantages: High costs Cannibalization


8


Costs of Multisegment Targeting

43

LO7

Product design costs

Production costs

Promotion costs

Inventory costs

Marketing research costs

Management costs

Cannibalization


Cannibalization

44

LO7

CannibalizationSituation that occurs when

sales of a new product cut into

sales of a firm’s existing

products.


REVIEW LEARNING OUTCOMEAlternatives for Selecting Target Markets

45

LO7

Undifferentiated Multisegment Concentrated


One-to-One Marketing

46

Explain one-to-one marketing

LO8



47

LO8

One-to-One

Marketing

An individualized marketing

method that utilizes

customer information to

build long-term,

personalized, and profitable

relationships with each

customer.



1. One-size-fits all marketing no longer effective

2. Direct and personal marketing will grow to meet

needs of busy consumers.

3. Consumers will be loyal to companies that have

earned—and reinforced—their loyalty.

4. Mass-media approaches will decline as technology

allows better customer tracking.

48

LO8

Trends


9


REVIEW LEARNING OUTCOMEOne-to-One Marketing

49

LO8


Positioning

50

Explain how and why firms

implement positioning

strategies and how

product differentiation

plays a role

LO9


Positioning

51

Positioning

LO9

Developing a specific marketing

mix to influence potential

customers’ overall perception of a

brand, product line, or organization

in general.


Positioning of Procter & Gamble

DetergentsBrand Positioning Market

Share

Tide Tough, powerful cleaning 31.1%

Cheer Tough cleaning, color protection 8.2%

Bold Detergent plus fabric softener 2.9%

Gain Sunshine scent and odor-removing formula 2.6%

Era Stain treatment and stain removal 2.2%

Dash Value brand 1.8%

Oxydol Bleach-boosted formula, whitening 1.4%

Solo Detergent and fabric softener in liquid form 1.2%

Dreft Outstanding cleaning for baby clothes, safe 1.0%

Ivory Snow Fabric & skin safety on baby clothes 0.7%

Ariel Tough cleaner, aimed at Hispanic market 0.1%

52

LO9


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

53LO9


Product Differentiation

54

Product

Differentiation

LO9

A positioning strategy that

some firms use to distinguish

their products from those of

competitors.

Distinctions can be real or

perceived.


10


Perceptual Mapping

55

Perceptual

Mapping

LO9

A means of displaying or

graphing, in two or more

dimensions, the location of

products, brands, or groups of

products in customers’ minds.


Perceptual Mapping

LO9


Positioning Bases

57

LO9

Attribute

Price and Quality

Use or Application

Product User

Product Class

Competitor

Emotion


Repositioning

58

Repositioning

LO9

Changing consumers’

perceptions of a brand in relation

to competing brands.


REVIEW LEARNING OUTCOME Positioning and Product Differentiation

59

LO9

Documents

Chapter 8 Segmenting and Targeting Marketswweb.uta.edu/faculty/gossett/3321/lhm 10e ch08_final-ie.pdfList the steps involved in segmenting markets Discuss alternative strategies for