MKTG

1. MKTG Lamb, Hair, McDaniel 2007-2008 7 CHAPTER Segmenting and Targeting Markets

2. Learning Outcomes Describe the characteristics of markets and market segments Explain the importance of market segmentation Discuss criteria for successful market segmentation Describe the bases commonly used to segment consumer markets Describe the bases for segmenting business markets LO1 LO2 LO3 LO4 LO5

3. Learning Outcomes List the steps involved in segmenting markets Discuss alternative strategies for selecting target markets Explain one-to-one marketing Explain how and why firms implement positioning strategies and how product differentiation plays a role LO6 LO7 LO8 LO9

4. Market Segmentation LO1 Describe the characteristics of markets and market segments

5. A Market Is... people or organizations with needs or wants, and with the ability and the willingness to buy. A group of people that lacks any one of these characteristics is not a market. LO1

6. Market People or organizations with needs or wants and the ability and willingness to buy. 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, identifiable segments or groups. Market Segmentation LO1

7. The Concept of Market Segmentation LO1

8. The Importance of Market Segmentation LO2 Explain the importance of market segmentation

9. 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 LO2

10. Market segmentation More precise definition of customers needs and wants More accurate marketing objectives Improved resource allocation Better marketing results REVIEW LEARNING OUTCOME LO2 The Importance of Market Segmentation

11. Criteria for Successful Segmentation LO3 Discuss criteria for successful market segmentation

12. 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. Criteria for Segmentation LO3

13. REVIEW LEARNING OUTCOME LO3 Successful Market Segmentation Usefulsegment? • Substantial • Identifiable and measurable • Accessible • Responsive Then, yes: Useful segmentation scheme

14. Bases for Segmenting Consumer Markets LO4 Describe the bases commonly used to segment consumer markets

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

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

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

18. 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 LO4

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

20. 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 Ethnic Segmentation LO4

21. Family Life Cycle Age MaritalStatus Children LO4

22. Family Life Cycle LO4

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

24. Personality Motives Lifestyles Geodemographics http://www.marthastewart.comhttp://www.goodhousekeeping.com Online Bases for Psychographic Segmentation LO4

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

26. Biz Flix The Breakfast Club LO4

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

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

29. 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

30. Verizon, Sprint Nextel and others allow consumers with standard contracts to access the Internet via cellular high-speed services. Some customers’ service is being cancelled because they are using excessive network capacity. Sprint and Cingular Wireless charge based on usage: the amount of data bits they wirelessly transfer each month. Example of Usage-Rate LO4 Beyond the Book SOURCE: Amol Sharma and Dionne Searcey, “Cell Carriers to Web Customers: Use Us, but Not too Much,” Wall Street Journal, May 11, 2006, B1.

31. 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 REVIEW LEARNING OUTCOME LO4 Bases for Segmenting Consumer Markets

32. Bases for Segmenting Business Markets LO5 Describe the bases for segmenting business markets

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

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

35. Satisficers Business customers who place an order with the first familiar supplier to satisfy product and delivery requirements. Optimizers Business customers who consider numerous suppliers, both familiar and unfamiliar, solicit bids, and study all proposals carefully before selecting one. Buyer Characteristics LO5

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

37. Company Characteristics Producers Resellers Governments Institutions Buying Process REVIEW LEARNING OUTCOME LO5 Segmenting Business Markets

38. Steps in Segmenting a Market LO6 List the steps involved in segmenting markets

39. Select a market for study Choosebasesfor segmen-tation Selectdescriptors Profileandanalyzesegments Selecttargetmarkets Design,implement,maintainmarketingmix REVIEW LEARNING OUTCOME LO6 Steps in Segmenting Markets

40. Strategies for Selecting Target Markets LO7 Discuss alternative strategies for selecting target markets

41. Strategies for Selecting Target Markets LO7 TargetMarket 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.

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

43. UndifferentiatedTargetingStrategy A marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix. Undifferentiated Targeting Strategy LO7

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

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

46. Concentrated Strategy Concentrated Targeting Strategy Advantage: • 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 LO7

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

48. Multisegment Strategy MultisegmentTargeting Strategy Advantage: • Greater financial success • Economies of scale Disadvantages: • High costs • Cannibalization LO7

49. Multisegment Strategy Costs of Multisegment Targeting • Product design costs • Production costs • Promotion costs • Inventory costs • Marketing research costs • Management costs • Cannibalization LO7

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