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Chapter Twelve

Chapter Twelve. Differentiation, Segmentation, and Target Marketing. Differentiation. Separating your product in the mind of the consumer so that they will choose you over the competition Basis of differentiation: Difficult to duplicate Focuses on specific need or want

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Chapter Twelve

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  1. Chapter Twelve Differentiation, Segmentation, and Target Marketing

  2. Differentiation • Separating your product in the mind of the consumer so that they will choose you over the competition • Basis of differentiation: • Difficult to duplicate • Focuses on specific need or want • Creates a perception that the change is greater than the specific difference

  3. Differentiation (cont.) • Differentiation of intangibles • “Tangibilize the intangible” • Differentiation as a marketing tool • Can be real or perceived and create awareness for the firm • Differentiation–of anything • The customer’s perceived difference in a product

  4. Market Segmentation • Complementary strategy to differentiation • Divides market by customers’ different needs and wants • Which comes first?

  5. Market Segmentation (cont.) • The process of market segmentation: • Step 1: Needs and wants of the marketplace • Step 2: Projecting needs and wants into potential markets • Step 3: Matching the market and capabilities • Step 4: Segmenting the market • Step 5: Selecting target markets from identified segments

  6. Tailoring the Product to the Wants and Needs of the Target Market • Advantages: • Better able to identify and evaluate opportunities • Better mesh our product with consumer needs • Better able to allocate resources • Use intelligence to change strategy • Able to differentiate • Determine strategies to enlarge core market

  7. Segmentation Variables • Geographic segmentation • Most widely used in hospitality • MSA and DMA • Demographic segmentation • Easily measured and classified • Psychographic segmentation • Based on self-concepts, lifestyle behaviors, and personality traits

  8. Segmentation Variables (cont.) • Usage segmentation: • Purpose • Frequency • Monetary value • Recency • REM • Timing • Nature of purchase • Where they go • Purchase occasion • Heavy, medium, and light users

  9. Segmentation Variables (cont.) • Benefit segmentation • Price segmentation • Between product class • Within product class • International segmentation • Fine-tuning segments • Become more specific and concentrated

  10. Price Segments in the U.S. Lodging Industry Luxury - top 15% average room rates Upscale - next 15% average room rates Mid-Price - middle 30% average room rates Economy - next 20% average room rates Budget - lowest 20% average room rates In rural or non-metro STR markets, the luxury and upscale segments collapse into the upscale and form four price segment categories: Upscale - top 30% average room rates Mid-Price - next 30% average room rates Economy - next 20% average room rates Budget - lowest 20% average room rates

  11. Globalization of Markets Theodore Levitt’s argument in the “era of multinational marketing” Segmentation Strategies Behavior of segments is the test of validity Avoid too much segmentation Seek the ideal segment mix

  12. Target Marketing • Drawn from segments • Are more refined toward more specific portions of the market • Three strategies: • Undifferentiated • Concentrated • Differentiated multi-target

  13. Mass Customization • Customers as a “segment of one” • Put forth by technology and databases

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