Segmentation & Target Marketing

1. Dr. Close Segmentation & TargetMarketing

2. Market Segmentation • Dividing market into meaningful, similar groups (or aggregating those with similar needs) • Why is segmentation important?.... • Markets have a variety of product preferences • Marketers can better define customer needs • Decision makers can define objectives and allocate resources more accurately • Target market – Group or market segment that a company selects to focus on

3. Market Segmentation A Model of the Market Segmentation Process

4. Understanding Market Segmentation • Delineate the firm’s current situation • Intended to be a reminder of tasks to be performed prior to marketing planning • Determine consumer needs and wants • Successful marketing strategies depend on meeting consumer needs and wants • Industry within which firm operates specifies boundaries of firm’s need satisfaction activities • At a strategic level, need and wants usually are translated into more operational concepts

5. Dimensions for Market Division • Three important questions to be considered are • Should the segmentation be a priori or a post hoc? • How does one determine the relevant dimensions or bases to use for segmentation? • What are some bases for segmenting consumer and organizational buyer markets?

6. A Priori versus Post HocSegmentation • A priori segmentation – An approach where the marketing manager has decided on the appropriate basis for segmentation in advance of doing any research on a market • Post hoc segmentation – An approach in which people are grouped into segments on the basis of research findings

7. Relevance of Segmentation Dimensions • At least some initial dimensions can be determined from • Previous research • Purchase trends • Managerial judgment • Consideration and research of sought benefits are a strongly recommended approach

8. Geography Demographics Psychographics Benefits Usage Rate • Region • Market size • Marketdensity • Climate • Age • Gender • Income • Ethnicity • Family life cycle • Personality • Motives • Lifestyle • Geodemo-graphics • Benefitssought • Former • Potential • 1st time • Light orirregular • Medium • Heavy Bases for Segmenting Markets

9. Bases for Segmentation • Benefit segmentation – Focuses on benefits sought by consumers • Is a market-oriented approach • Psychographic segmentation – Focuses on consumer lifestyles • Lifestyles are measured on the bases of activities, interests and opinions (AIO) of consumers • Best-known type of segmentation is VALSTM (“values and lifestyles”) • Product of SRI Consulting Business Intelligence

10. Bases for Segmentation • Geodemographic Segmentation – Identifies households in a market by focusing on local geography • PRIZM NE – Potential Ranking Index by ZIP Markets – New Evolution • Assumes that consumers in particular neighborhoods are similar in many respects and that the best prospects are those who actually use a product • Classifies every U.S. neighborhood into a total of 66 distinct segments • You are where you live: PRIZM data exercise. • Is your zipcode accurate for market segmentation purposes?

11. Bases for Segmentation Useful Segmentation Bases for Consumer Markets

12. Bases for Segmentation Useful Segmentation Bases for Consumer Markets

13. Positioning Developing a marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. How is Wal-Mart Positioned?

14. Attribute Price and Quality Use or Application Product User Product Class Competitor Emotion Positioning Bases

15. Develop Product Positioning • Positioning can be achieved through any one of these strategies • Superiority to competitive products on one or more product attributes • Positioned by use or application • Positioned in terms of particular types of users • Positioned relative to a product class • Positioned directly against particular competitors • Position mapping – Visual depiction of customer perceptions of competitive products, brands, or models

16. Positioning Map for Automobiles

17. Market Segmentation Strategies • Firm may decide to do the following • Not to enter the market • To segment but to be a mass marketer • Market is so small that it is not profitable to market to one portion of it • Heavy users comprise such a large proportion of sales that they are the only relevant target • Product is a dominant brand, and targeting to a few segments is not beneficial • To market to one segment • To market to more than one segment and design a separate marketing mix for each

18. Market Segmentation Strategies • Criteria to base a firm’s segmentation strategy decisions are • Measurable – Firm must be capable of measuring its size and characteristics • Meaningful – Large enough to deliver sufficient sales and growth potential • Marketable – Can be reached and served in an efficient manner

19. Market Segmentation Strategies Selecting Target Markets: Some Questions Marketing Managers Should Answer

20. Market Segmentation Strategies Selecting Target Markets: Some Questions Marketing Managers Should Answer

21. Design Marketing Mix Strategy • Selection of target market and designing the market should go hand in hand • Marketing mix decisions should have already been carefully considered • Product positioning has many implications for promotion and channel distribution

22. Product Differentiation A positioning strategy that some firms use to distinguish their products from those of competitors. Are distinctions real or perceived?