Chapter 9

1. Chapter 9 • Market Segmentation, Targeting, and Positioning

2. Chapter Objectives • Identify the essential components of a market. • Outline the role of market segmentation in developing a marketing strategy. • Describe the criteria necessary for effective segmentation. • Explain each of the four bases for segmenting consumer markets. • Identify the steps in the market segmentation process. • Discuss four basic strategies for reaching target markets. • Summarize the types of positioning strategies. • Explain the reasons for positioning and repositioning products.

3. Selecting a Target Market • Before a marketing mix strategy can be implemented, the marketer must identify, evaluate, and select a target market. • Market:people or institutions with sufficient purchasing power, authority, and willingness to buy • Target market: specific segment of consumers most likely to purchase a particular product

4. Types of Markets • Consumer products:goods or services purchased by an ultimate consumer for personal use • Business products:goods or services purchased for use either directly or indirectly in the production of other goods and services for resale • The key to classification is to identify the purchaser and the reasons for buying the goods.

5. The Role of Market Segmentation • Market SegmentationDivision of the total market into smaller, relatively homogeneous groups • No single marketing mix can satisfy everyone. Therefore, separate marketing mixes should be used for different market segments.

6. No Market Segmentation

7. Segmented by Sex

8. Segmented by Age

9. Criteria for Effective Segmentation • Market segmentation cannot be used in all cases. To be effective, segmentation must meet the following basic requirements. • The market segments must be measurable in terms of both purchasing power and size. • Marketers must be able to effectively promote to and serve a market segment. • Market segments must be sufficiently large to be potentially profitable. • The number of segments must match the firm’s capabilities.

10. Segmenting Consumer Markets • Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locations • Does not ensure that all consumers in a location will make the same buying decision. • Help in identifying some general patterns.

11. Urban Data Classified • Core Based Statistical Area (CBSA) • Metropolitan Statistical Area (MSA) • Micropolitan Statistical Area • Consolidated Metropolitan Statistical Area (CMSA) • Primary Metropolitan Statistical Area (PMSA)

12. Using Geographic Segmentation • Demand for some goods and services can vary according to the geographic region • Most major brands get 40-80 percent of their sales from what are called core regions • Climate is another important segmentation factor • Northern consumers, for example, eat more soup than Southerners • Southerners use more chlorine for their swimming pools than Northern residents

13. Geographic Information Service (GIS):computer technology that records several layers of data on a single map • Simplifies the job of analyzing marketing information by placing data in a spatial format . . . The result of which is a geographic map overlaid with digital data about consumers in a particular area.

14. Segmenting Consumer Markets • Demographic Segmentation:dividing consumer groups according to characteristics such as sex, age, income, occupation, education, household size, and stage in the family life cycle • A primary source for demographic data in the United States is the Census Bureau

15. Segmenting by Gender • Marketers must ensure that traditional assumptions are not false • Recently, the lines have increasingly blurred • Some companies market successfully to both genders

16. Segmenting by Age • Identify market segments on the basis of age • Products designed to meet the specific needs of certain age groups

17. Tweens and Teens • Rapidly growing market • Significant purchasing power • Cohert Effect • Tendency among members of a generation to be influenced and drawn together by significant events occurring during their key formative years, roughly 17 to 22 years of age

18. Baby Boomers • Born from 1946 until 1965 • Nearly 42 percent of U.S. adults • Values influenced both by the Vietnam War and the career-driven era • Huge disposable income • Seniors • By 2025, 1 in 5 over age 65 • Median age is now 35.2 years • Life expectancy 74 for men and 79 for women • Heads of households aged 55-plus control about three-quarters of the country’s total financial assets.

19. Segmenting by Ethnic Group • By 2050, nearly half of the population of the US will belong to nonwhite minority groups. • Hispanic • African Americans • Asian Americans • Native Americans • People of Mixed Race

20. Family Life Cycle Stages Segmentation • The process of family formation and dissolution • Life stage, not age per se, is the primary determinant of many consumer purchases • Segmenting by Household Type • Today’s U.S. households are very diverse • Married couples and their children • Blended by divorce or loss of spouse • Headed by single parent, same-sex parents, grandparents

21. Segmenting by Income and Expenditure Patterns • Engel’s Laws,as family income increases: • A smaller percentage of expenditures go for food • The percentage spent on housing and household operations and clothing remains constant • The percentage spent on other items (such as recreation and education) increases

22. Demographic Segmentation Abroad • Obtaining the data necessary for global demographic segmentation is often difficult • Many countries do not operate regularly scheduled census programs • For example, the most recent census of Holland is now over 20 years old, and Germany skipped its census from 1970 to 1987 • Daily life cycle data is difficult to apply in global demographic segmentation efforts

23. Psychographic Segmentation • Divides a population into groups that have similar psychological characteristics, values, and lifestyles • Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities • The most common method for developing psychographic profiles of a population is to conduct a large-scale survey • AIO statements • VALS and VALS 2 “Values and Lifestyles”

25. Psychographic Segmentation of Global Markets like those done by Roper Starch can paint useful pictures of the residents of various countries • Roper found six psychographic consumer segments that are common to 35 nations • Strivers • Devouts • Altruists • Intimates • Fun seekers • Creatives

26. Using Psychographic Segmentation • Psychographic profiles produce rich descriptions of potential target markets • Greater detail aids in matching a company’s image and its offerings with the types of consumers who are likely purchasers

27. Product-Related SegmentationDividing a consumer population into homogeneous groups based on characteristics of their relationships to the product • Can take the form of segmenting based on: • Benefits that people seek when they buy • Usage rates for a product • Consumers’ brand loyalty toward a product

28. Benefits • Focuses on the attributes that people seek in a good or service and the benefits that they expect to receive from that good or service • Groups consumers into segments based on what they want a product to do for them • Usage Rates • Segmenting by grouping people according to the amounts of a product that they buy and use • Markets often divided into heavy-user, moderate-user, and light-user segments • The 80/20 principle (“Praedo’s Law”)

29. Brand Loyalty • Segmenting consumers grouped according to the strength of brand loyalty felt toward a product • Frequent flyer programs of airlines and many hotels

30. Using Multiple Segmentation Bases • Increase accuracy in reaching the right markets • Combine multiple bases • Geographic and Demographic • Product-related with income and expenditure patterns • Others

31. The Market Segmentation Process • Develop a Relevant Profile for each Segment • Forecast Market Potential • Forecast Probable Market Share • Select Specific Market Segments

32. Strategies for ReachingTarget Markets • Undifferentiated Marketing: when a firm produces only one product or product line and promotes it to all customers with a single marketing mix • Differentiated Marketing: when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments

33. Concentrated Marketing (niche marketing): when a firm commits all of its marketing resources to serve a single market segment • Micromarketing: involves targeting potential customers at a very basic level, such as by ZIP code, specific occupation, lifestyle, or individual household

34. Selecting and Executing a Strategy • No single, best choice strategy suits all firms • Determinants of a market-specific strategy: • Company resources • Product homogeneity • Stage in the product life-cycle • Competitors’ strategy

35. Positioning: a marketing strategy that emphasizes serving a specific market segment by achieving a certain position in buyers’ minds • Attributes • Price/quality • Competitors • Application • Product user • Product class

36. Positioning mapGraphic illustration that shows differences in consumers’ perceptions of competing products • RepositionMarketing strategy to change the position of its product in consumers’ minds relative to the positions of competing products

37. Hypothetical Competitive Positioning Map for Selected Retailers