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1. 10 MarketingLamb, Hair, McDaniel Designed by Eric Brengle B-books, Ltd. Prepared by Amit Shah Frostburg State University Segmenting and Targeting Markets CHAPTER 8

2. A Market Is... (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. LOI

3. Market Market Segment Market Segmentation People or organizations with needs or wants and the ability and willingness to buy. A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The process of dividing a market into meaningful, relatively similar, identifiable segments or groups. Market Segmentation LOI

4. The Concept of Market Segmentation LOI

5. LO2 The Importance of Market Segmentation • 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.

6. Substantiality Segment must be large enough to warrant a special marketing mix. Identifiabilityand Measurability Segments must be identifiable and their size measurable. Accessibility Members of targeted segments must be reachable with marketing mix. Responsiveness Unless segment responds to a marketing mix differently, no separate treatment is needed. LO3 Criteria for Segmentation

7. SegmentationBases Bases for Segmenting Consumer Markets LO4 Characteristics of individuals, groups, or organizations used to divide a total market into segments. (variables)

8. LO4 Geography Demographics Psychographics Benefits Sought Usage Rate Bases for Segmentation

9. Geographic Segmentation LO4 • Region of the country or world • Market size • Market density • Climate

10. 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

11. Demographic Segmentation Age Gender Income Ethnic background Family life cycle LO4

12. LO4 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.

13. 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

14. 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

15. PsychographicSegmentation Psychographic Segmentation LO4 Market segmentation on the basis of personality, motives, lifestyles, and geodemographics.

16. Personality Motives Lifestyles Geodemographics Bases for Psychographic Segmentation LO4

17. Lifestyle Segmentation LO4 • How time is spent • Importance of things around them • Beliefs • Socioeconomic characteristics

18. Geodemographic Segmentation Geodemographic Segmentation LO4 Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation.

19. Benefit Segmentation Benefit Segmentation LO4 The process of grouping customers into market segments according to the benefits they seek from the product.

20. Usage-RateSegmentation Dividing a market by the amount of product bought or consumed. 80/20Principle A principle holding that 20 percent of all customers generate 80 percent of the demand. Benefit Segmentation LO4

21. LO4 REVIEW LEARNING OUTCOMEBases for Segmenting Consumer Markets Geography Demographics Psychographics Benefits Usage Rate • Region • Market size • Marketdensity • Climate • Age • Gender • Income • Race/ethnicity • Family life cycle • Personality • Motives • Lifestyle • Geodemo-graphics • Benefitssought • Former • Potential • 1st time • Light orirregular • Medium • Heavy

22. Producers Resellers Government Institutions Bases for Segmenting Business Markets LO5 Company Characteristics Buying Processes

23. LO5 • Company Characteristics Bases for Segmenting Business Markets • Geographic location • Type of company • Company size • Volume of purchase • Product use

24. Satisficers Business customers who place an order with the first familiarsupplier to satisfy product anddelivery requirements. Optimizers Business customers who consider numerous suppliers, both familiar and unfamiliar, solicit bids, and study allproposals carefully beforeselecting one. Buyer Characteristics LO5

25. Demographic characteristics Decision style Tolerance for risk Confidence level Job responsibilities Buyer Characteristics LO5

26. TargetMarket Strategies for Selecting Target Markets 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.

27. Undifferentiated Strategy Concentrated Strategy Multisegment Strategy LO7 Strategies for Selecting Target Markets

28. UndifferentiatedTargetingStrategy 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.

29. Undifferentiated Strategy LO7 Undifferentiated Targeting Strategy Advantage: • Potential savings on production and marketing costs Disadvantages: • Unimaginative product offerings • Company more susceptible to competition

30. Concentrated Targeting Strategy LO7 ConcentratedTargeting Strategy A strategy used to select one segment of a market for targeting marketing efforts. NicheOne segment of a market.

31. Concentrated Strategy LO7 Concentrated Targeting Strategy 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

32. MultisegmentTargetingStrategy Multisegment Targeting Strategy LO7 A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.

33. Multisegment Strategy LO7 Multisegment Targeting Strategy Advantages: • Greater financial success • Economies of scale Disadvantages: • High costs • Cannibalization

34. Cannibalization Situation that occurs when sales of a new product cut into sales of a firm’s existing products. Cannibalization LO7

35. One-to-One Marketing An individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer. One-to-One Marketing LO8

36. One-to-One Marketing One-to-One Marketing is... Has a Goal of… Cost Reduction Individualized Customer Retention Information-Intensive Increased Revenue Long-Term Personalized Customer Loyalty LO8

37. LO8 One-to-One Marketing Trends • One-size-fits all marketing no longer effective • Direct and personal marketing will grow to meet needs of busy consumers. • Consumers will be loyal to companies that have earned—and reinforced—their loyalty. • Mass-media approaches will decline as technology allows better customer tracking.

38. Positioning Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. Positioning LO9

39. Effective Positioning • Assess the positions occupied by competing products • Determine the dimensions underlying these positions • Choose a market position where marketing efforts will have the greatest impact LO9

40. ProductDifferentiation A positioning strategy that some firms use to distinguish their products from those of competitors. Distinctions can be real or perceived. Product Differentiation LO9

41. 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. Perceptual Mapping LO9

42. Repositioning Changing consumers’ perceptions of a brand in relation to competing brands. Repositioning LO9