Chapter 8 Notes PDF

Preview

Summary

Lecture notes from powerpoints...

Description

Chapter 8 Segmenting and Targeting Markets

P a g e |1

8-1 Markets and Market Segments 

 

Market – people or organizations with needs or wants and the ability and willingness to buy o any one of these four characteristics is lacking, it is not a market. 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, and identifiable segments or groups

8-2 The Importance of Market Segmentation Market segmentation:  Plays a key role in the marketing strategy of almost all successful organizations  Helps marketers define customer needs and wants more precisely  Leads to a deeper understanding of customer lifestyles, values, jobs to be done, need states, and buying occasions  Helps decision makers more accurately define marketing objectives and better allocate resources

8-3 Criteria for Successful Segmentation Marketers segment markets for three important reasons: 1. Enables marketers to identify groups of customers with similar needs and to analyze the characteristics and buying behavior of these groups 2. Provides marketers with information to help them design marketing mixes specifically matched with the characteristics and desires of one or more segments 3. Aligns with the marketing concept of satisfying customer wants and needs while meeting the organization’s objectives To be useful, a segmentation scheme must produce segments that meet four basic criteria: 1. Substantiality: A segment must be large enough to warrant developing and maintaining a special marketing mix. 2. Identifiability and measurability: Data about the population within geographic boundaries, the number of people in various age categories, and other social and demographic characteristics are often easy to get, and they provide fairly concrete measures of segment size. 3. Accessibility: The firm must be able to reach members of targeted segments with customized marketing mixes. 4. Responsiveness: Markets can be segmented using any criteria that seem logical. Unless one market segment responds to a marketing mix differently than other segments, that segment need not be treated separately.

8-4 Bases for Segmenting Consumer Markets

Chapter 8 Segmenting and Targeting Markets





P a g e |2

Marketers use one or more segmentation bases, or variables, to divide a total market into segments. o Segmentation bases (variables) – characteristics of individuals, groups, or organizations The choice of segmentation bases is crucial, because an inappropriate segmentation strategy may lead to lost sales and missed profit opportunities.



The key is to identify bases that will produce substantial, measurable, and accessible segments that exhibit different response patterns to marketing mixes.



The current trend is toward using more rather than fewer variables to segment most markets, because multiple-variable segmentation is clearly more precise than single-variable segmentation. The disadvantages of multiple-variable segmentation are:



o often harder to use than single-variable segmentation. o Usable secondary data are less likely to be available. o the number of segmentation bases increases, the size of individual segments decreases. Geographic Segmentation 

Geographic segmentation – segmenting markets by region of a country or the world, market size, market density, or climate o Market density refers to the number of people within a unit of land, such as a census tract. o Climate is commonly used for geographic segmentation because of its dramatic impact on residents’ needs and purchasing behavior.

 geographic approach to segmentation allows firms to find ways to grow. Demographic Segmentation 

Demographic segmentation – segmenting markets by age, gender, income, ethnic background, and family life cycle AGE SEGMENTATION Marketers use a variety of terms to refer to different age groups:  Parents of babies and young children Generation Z o Born from 1995 to 2015 o Want to work for their success o Believe that brands need to be real o Have their own rules and etiquette for social media Millennials     

million people born between 1980 and 1994 Idealistic and pragmatic The most technology-proficient generation ever, so social media and online shopping are important Value trustworthiness, creativity, intelligence, authenticity, and confidence Want “experiences”

Generation Xers

Chapter 8 Segmenting and Targeting Markets

P a g e |3



Born between 1965 and 1979

 

Often stuck between supporting their aging parents and young children Best-educated generation



Tend to be disloyal to brands and skeptical of big business

Look for products that give them value for the money and good performance Baby Boomers 

 

Born between 1946 and 1964 Outspend the average consumer in nearly every product category



Living longer, healthier, and more active and connected lives

Spend time and money doing whatever is necessary to maintain vitality as they age Silent Generation 

 

Born before 1946 Tend to be cautious, hardworking, and disciplined



Place significant value on economic resources



May require some modifications in the products they purchase

GENDER SEGMENTATION  

the United States, women drive 70 to 80 percent of purchases of consumer goods each year. Companies that have traditionally targeted women are now targeting men, and vice versa.

INCOME SEGMENTATION  Income level influences consumers’ wants and determines their buying power. ETHNIC SEGMENTATION 

meet the needs and wants of expanding ethnic populations, some companies make products geared toward specific ethnic groups.

FAMILY LIFE-CYCLE SEGMENTATION 

Consumption patterns among people of the same age and gender may differ because they are in different stages of the family life cycle. o Family life cycle (FLC) – a series of stages determined by a combination of age, marital status, and the presence or absence of children

PSYCHOGRAPHIC SEGMENTATION 

Age, gender, income, ethnicity, FLC stage, and other demographic variables do not always paint the entire picture.



Variables can be used individually to segment markets or can be combined with other variables to provide more detailed descriptions of market segments.



Psychographic segmentation – segmenting markets on the basis of personality, motives, lifestyles, and geodemographics

Chapter 8 Segmenting and Targeting Markets



P a g e |4

Psychographic variables: o Personality – a person’s traits, attitudes, and habits o Motives – emotions and desires that can drive purchasing decisions o Lifestyles – the way people spend their time, the importance of the things around them, their beliefs, and socioeconomic characteristics o Geodemographics – categories based on a combination of neighborhood, lifestyle, and other demographic variables

BENEFIT SEGMENTATION Benefit segmentation – the process of grouping customers into market segments according to the benefits they seek from the product USAGE-RATE SEGMENTATION 



Usage-rate segmentation – dividing a market by the amount of product bought or consumed o This enables marketers to focus their efforts on heavy users. o principle – a principle holding that 20 percent of all customers generate 80 percent of the demand

8-5 Bases for Segmenting Business Markets Market segmentation offers just as many benefits to business marketers as it does to consumer product marketers. Company Characteristics   

Examples include geographic location, type of company, company size, and product use. Segmenting by company type allows business marketers to tailor marketing mixes to the customers’ unique needs. Volume of purchase (heavy, moderate, light) is a commonly used basis for business segmentation.

Buying Processes  



Companies can segment some business markets by ranking key purchasing criteria, such as price, quality, technical support, and service. Business marketers may segment based on two purchasing profiles: o Satisficers – business customers who place an order with the first familiar supplier to satisfy product and delivery requirements o Optimizers – business customers who consider numerous suppliers (both familiar and unfamiliar), solicit bids, and study all proposals carefully before selecting one Marketers may also segment based on buyers’ personal characteristics.

8-6 Steps in Segmenting a Market

Chapter 8 Segmenting and Targeting Markets

  

 

 

P a g e |5

The purpose of market segmentation is to identify and adapt to dynamic marketing opportunities. Select a market or product category for study. Define the overall market or product category to be studied, whether related or totally new. Choose a basis or bases for segmenting the market. A successful segmentation scheme must produce segments that meet the four basic criteria: people or organizations with needs or wants and the ability and willingness to buy. Select segmentation descriptors. Descriptors identify the specific segmentation variables to use. Profile and analyze segments. The profile should include the segments’ size, expected growth, purchase frequency, current brand usage, brand loyalty, and long-term sales and profit potential. o This information can then be used to rank potential market segments by profit opportunity, risk, consistency with organizational mission and objectives, and other factors important to the firm. Select markets. This is a major decision that influences and often directly determines the firm’s marketing mix. Design, implement, and maintain appropriate marketing mixes.

8-7 Strategies for Selecting Target Markets  



The market seg mentation process is only the first step in deciding whom to approach about buying a product. The next task is to choose one or more target markets. o 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 a marketer wishes to appeal to more than one segment of the market, it must develop different marketing mixes.

Undifferentiated Targeting    



Undifferentiated targeting strategy – a marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix firm that adopts an undifferentiated targeting strategy assumes that individual customers have similar needs that can be met with a common marketing mix. The first firm in an industry sometimes uses an undifferentiated strategy. Advantages of Undifferentiated Targeting: o Potential for saving on production and marketing because only one item is produced o Marketing costs may be lower Disadvantages of Undifferentiated Targeting: o Potentially sterile, unimaginative product offerings that have little appeal to anyone o Makes the company more susceptible to competition

Chapter 8 Segmenting and Targeting Markets

P a g e |6

Concentrated Targeting 





Concentrated targeting strategy – a strategy used to select one segment of a market for targeting marketing efforts o Niche – one segment of a market Advantages of Concentrated Targeting: o Allows a firm to concentrate on understanding the needs, motives, and satisfaction of that segment’s members o Can be more profitable than spreading resources over several different segments o Allows some small firms to better compete with larger firms Disadvantages of Concentrated Targeting: o chosen segment is too small or if it shrinks or changes, the firm may suffer negative consequences. o Large competitors may more effectively market to a niche segment.

Multisegment Targeting   



Multisegment targeting strategy – a strategy that chooses two or more welldefined market segments and develops a distinct marketing mix for each Before deciding to use this strategy, firms should compare the benefits and costs of multisegment targeting to those of undifferentiated and concentrated targeting. Advantages of Multisegment Targeting: o May lead to greater sales volume, higher profits, larger market share, and economies of scale in manufacturing and marketing Disadvantages of Multisegment Targeting: o May involve higher costs for product design, production, promotion, inventory, marketing research, and management o Potential for cannibalization, which occurs when sales of a new product cut into sales of a firm’s existing products

Advantages and Disadvantages of Target Marketing Strategies Targeting Strategy Undifferentiated

Concentrated

Multisegment

Advantages Potential savings on production/marketing costs

Concentration of resources Can better meet the needs of a narrowly defined segment Allows some small firms to better compete with larger firms Strong positioning Greater financial success Economies of scale in production/marketing

Disadvantages Unimaginative product offerings Company more susceptible to competition Segments too small or changing Large competitors may more effectively market to niche segment

High costs Cannibalization

Chapter 8 Segmenting and Targeting Markets

P a g e |7

8-8 CRM as a Targeting Tool   

Companies that successfully implement CRM tend to customize the goods and services offered to their customers based on data generated through interactions between carefully defined groups of customers and the company. CRM can allow marketers to target customers with extremely relevant offerings. CRM is a huge commitment and often requires a 180-degree turnaround for marketers who are accustomed to implementing mass-marketing efforts.

There are at least four trends that will lead to the continued growth of CRM: 1. Personalization: Consumers want to be treated as the individuals they are, with their own unique sets of needs and wants. 2. Time savings: Consumers want to spend less time making purchase decisions and more time doing the things that are important to them. 3. Loyalty: CRM techniques focus on finding a firm’s best customers, rewarding them for their loyalty, and thanking them for their business. 4. Technology: New technology offers marketers a more cost-effective way to reach customers and enables businesses to personalize their messages.

8-9 Positioning 



Positioning – developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general o Position – the place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings Positioning: o Assumes that consumers compare products on the basis of important features o Requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions, and choosing a position that will have the greatest impact

Positioning strategies 



Product differentiation – a positioning strategy that some firms use to distinguish their products from those of competitors o Distinctions between products can be either real or perceived Highlighting the similarities to competing products

Perceptual Mapping 

Perceptual mapping – a means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds

Chapter 8 Segmenting and Targeting Markets

P a g e |8

Positioning Bases 

Firms use a variety of bases for positioning, including the following: o Attribute: A product is associated with an attribute, product feature, or customer benefit. o Price and quality: This positioning base may stress high price as a signal of quality or emphasize low price as an indication of value. o Use or application: Stressing uses or applications for the product can be an effective means of positioning it with buyers. o Product user: This positioning base focuses on a personality or type of user. o Product class: This associates the product with a particular category of products. o Competitor: Positioning against competitors is part of any positioning strategy. o Emotion: Positioning using emotion focuses on how the product makes customers feel.

Repositioning 

Repositioning – changing consumers’ perceptions of a brand in relation to competing brands o Products or companies are repositioned in order to sustain growth in slow markets or to correct positioning mistakes....