Ch. 8 MArket Segmentation, Targeting, and Positioning PDF

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Learning Objectives: 1. Explain what market segmentation is and when to use it. a. Why segments market? So that is can respond more effectively to the wants of groups of potential buyers and thus increase its sales and profits. OR (Nonprofits) to segments the clients they serve to satisfy clients needs more effectively while achieving the organization’s goals. b. Market Segmentation - involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action. i. Market segments - the relatively homogenous groups of prospective buyers that result from the market segmentation process. ii. Means to an end: it leads to tangible marketing actions that can increase sales and profitability. c. Product differentiation - a marketing strategy that involves a firm using different marketing mix actions to help consumers perceive products as being different and better than competing products.

d. Zappos.com Segmentation Strategy i. Target customer segment consisted of people who wanted to: 1. Have a wide selection of shoes 2. Shop online in the convenience of their own homes 3. Receive quick delivery and free returns e. Market-product grid - a framework to relate the market segments of potential buyers to products offered or potential marketing actions. f. 3 segmentation strategies: i. One product and multiple market segments 1. Avoid costs of developing and producing additional versions of that product ii. Multiple products and multiple market segments iii. Segments of one, or mass customization 1. Tailoring products/services to the tastes of individual consumers on a high volume scale 2. build-to-order(BTO) - m  anufacturing a product only when there is an order from a customer. g. Synergies vs. Cannibalization

i.

Organizational Synergy - the increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently. ii. Cannibalization - when new products and chains steal customers from older ones (e.g. Ann Taylor and LOFT) 2. Identify the five steps involved in segmentation and targeting markets. a. Group potential buyers into segments i. Simplicity and cost-effectiveness of assigning potential buyers to segments. (ID the characteristics of potential buyers in a market and then cost effectively assigning them to a segment) ii. Potential for increased profits (maximize the opportunity for future profit and return of investment (ROI)) iii. Similarity of needs of potential buyers w/i a segment iv. Difference of needs of buyers among segments v. Potential of a marketing action to reacha segment. b. Group products to be sold into categories i. Wendy’s Meal of Hamburger and Fries instead in individuals hamburger OR fries c. Develop a market product grid and estimate size of markets i. Identify and Label Markets (horizontal row) ii. Product grouping (vertical row) iii. Helpful in determining which target market segments to select and which product groupings to offer d. Select target markets i. Divide the market into segments ii. Actually pick the target segments 1. Market size - determines if it’s worth going after 2. Expected growth - is going to grow or remain the same? 3. Competitive position - is there a lot of competition in the segment now or is there likely to be in the future? 4. Cost of reaching the segment - don’t waste money trying to advertise to a small segment. 5. Compatibility with the organization’s objectives and resources dont ad for a breakfast segment without having breakfast serving equipment e. Take marketing actions to reach target markets i. Someone must develop and execute an action plan in the form of a marketing program 3. Recognize the bases used to segment consumers and organizational (business) markets. a. Ways to segment consumer markets i. Geographic segmentation - based on where consumers live or work (region, city size)

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Demographic segmentation - based on objective physical (gender, race), measurable (age, income), or other classification attribute (birth era, occupation) of prospective consumers iii. Psychographic segmentation - based on subjective mental or emotional attributes (personality), aspirations (lifestyle), or needs of prospective consumers) iv. Behavioral segmentation - based on observable action sor attitudes by prospective consumers - such as where they buy, what benefits they seek, how frequently they buy, and why they buy. 1. Usage rate - the quantity consumed or patronage (store visits) during a specific period. Frequency marketing 2. 80/20 Rule (usage rate) a concept that suggests 80 percent of a firm’s sales are obtained from 20 percent of its customers. 4. Develop a market product grid to identify a target market and recommend resulting marketing actions. a. Market Synergies - running horizontally across the grid, each rom reps. An opportunity for efficiency in term of a market segment. Single customer segment b. Product Synergies - running vertically down the market-product grid, each column represents an opportunity for efficiency in research and development (R&D) and production. Focus on a single product 5. Explain how marketing managers position products in the marketplace. a. Product positioning - the place the product occupies in consumers minds based on important attributes relative to competing products. i. Head-to-head positioning - competing directly with competitors on similar product attributes in the same target market ii. Differentiation positioning - seeking a less-competitive, smaller market niche in which to locate a brand. b. Product repositioning - changing the place a product occupies in a consumer’s mind relative to competing products. c. 4 steps to positioning a product or brand: i. Identify the important attributes for a product of brand class ii. Discover how target customers rate competing products or brands with respect to these attributes iii. Discover where the company’s products or brands in on these attributes in the minds of potential customers iv. Reposition the company’s product or brand in the minds of potential customers. d. Perceptual Map - a means of displaying in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how they perceive competing products or brands. As well as firm’s own product or brand....