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Market Segmentation and Target Markets

Market Segmentation and Target Markets. chapter 7. Harcourt, Inc. Objectives. Understand the concepts: market, segmentation, and target markets Learn the advantages and disadvantages of target marketing Explain the steps in target market selection. Objectives.

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Market Segmentation and Target Markets

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  1. Market Segmentation and Target Markets chapter 7 Harcourt, Inc.

  2. Objectives • Understand the concepts: market, segmentation, and target markets • Learn the advantages and disadvantages of target marketing • Explain the steps in target market selection Dr. Rosenbloom

  3. Objectives • Discuss segmentation criteria, strategies, bases, and information sources • Understand market profiling and positioning strategies • Discuss differences for business and international marketing Dr. Rosenbloom

  4. What is a market? • Individuals or organizations who: • Are willing, able, and capable of purchasing a firm’s product • Segmentation is critical because demand is often heterogeneous Dr. Rosenbloom

  5. What is market segmentation? • Market Segmentation • Process of dividing a large market into smaller target markets, or customer groups with similar needs and/or desires Dr. Rosenbloom

  6. Market Segmentation Mass Market Niche Micro-marketing The Individual Continuum of Market Segmentation Size Personal-ization Micro-marketing Niche Standardized Marketing Mix Dr. Rosenbloom

  7. Target Marketing • Advantages • Easier analysis of potential and actual consumers • Tailoring of products to market • Assessment of demand potential • Identify competing products • Increased sales effectiveness and cost efficiencies • Product positioning and easy identification of opportunities Dr. Rosenbloom

  8. Target Marketing • Disadvantages • Increased marketing costs • Personalization can become burdensome to manage • Faux segmentation may be viewed cynically • Narrow segmentation can impact brand loyalty • Ethics and stereotyping issues Dr. Rosenbloom

  9. Target Market Selection Identify Total Market Determine Need for Segmentation Determine Bases for Segmentation Assess Potential Profitability of Segment and Select Target Segment Profile Each Selected Segment Select Positioning Strategy Develop and Implement Appropriate Marketing Mix Monitor, Evaluate and Control Dr. Rosenbloom

  10. Market Criteria • Segmentable markets are: • Heterogeneous • Measurable • Substantial • Actionable • Companies must be able to respond to preferences with an appropriate marketing mix • Accessible • Market must be efficiently reachable Dr. Rosenbloom

  11. External Factors • Stage in product life cycle • Competition • Product specific issues • Market for the product Dr. Rosenbloom

  12. Segmentation Variables Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

  13. Age Demographic Segmentation Income Level Family Ethnicity Education Dr. Rosenbloom

  14. Demographic Segmentation • Age • Some products are marketed to specific age groups Dr. Rosenbloom

  15. Demographic Segmentation • Age • Some products are marketed to specific age groups Dr. Rosenbloom

  16. Demographic Segmentation • Income Level • Some products are marketed to consumers with different income levels Dr. Rosenbloom

  17. Demographic Segmentation • Income Level • Some products are marketed to consumers with different income levels Dr. Rosenbloom

  18. Demographic Segmentation Bartles and James Hal Riney and Partners Dr. Rosenbloom

  19. Demographic Segmentation • Family • Some products are marketed to consumers with special family consideration • Family Life Cycle • Bachelor, marriage, married with children, retired, etc. Dr. Rosenbloom

  20. Functions Of Advertising KinderCare The Martin Agency Dr. Rosenbloom

  21. Demographic Segmentation • Family • Some products are marketed to consumers with special family consideration • Family Life Cycle • Bachelor, marriage, married with children, retired, etc. Dr. Rosenbloom

  22. Demographic Segmentation • Education • Some products are marketed to consumers with certain educational levels Dr. Rosenbloom

  23. Demographic Segmentation • Ethnicity • Some products are marketed to consumers from specific ethnic backgrounds Dr. Rosenbloom

  24. Demographic Segmentation • Ethnicity • Some products are marketed to consumers from specific ethnic backgrounds Dr. Rosenbloom

  25. Segmentation Variables Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

  26. Geographic Segmentation • When an organization localizes its marketing efforts to accommodate the unique needs of specific geographic regions Dr. Rosenbloom

  27. Geographic Segmentation • When an organization localizes its marketing efforts to accommodate the unique needs of specific geographic regions Dr. Rosenbloom

  28. Geographic Segmentation • Metropolitan Statistical Areas • An urbanized area of 50,000 and a total metropolitan area population of at least 100,000 • Charlottesville, Virginia Dr. Rosenbloom

  29. Geographic Segmentation • Primary Metropolitan Statistical Areas • An urbanized county or cluster of counties with a population of more than 1 million • Gary/Hammond, Indiana Dr. Rosenbloom

  30. Geographic Segmentation • Consolidated Metropolitan Statistical Area • A metropolitan area that includes at least two PMSAs • Baltimore, Maryland and Washington, D.C. Dr. Rosenbloom

  31. Segmenting Consumer Markets Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

  32. Psychographic Segmentation • Grouping customers together based on social class, lifestyles and psychological characteristics (attitudes, interests and opinions) • PRIZM analysis from Claritas Dr. Rosenbloom

  33. Segmenting Consumer Markets Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

  34. Benefits-Sought Segmentation • Markets can be segmented based on the benefits that consumers desire from using a specific product Dr. Rosenbloom

  35. Benefits-Sought Segmentation American Pork Council Bozell, Incorporated Dr. Rosenbloom

  36. Segmenting Consumer Markets Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

  37. Situation Segmentation • Purchase situation or occasion • Physical surroundings • Social surroundings • Temporal perspective • How much time to make a purchase? • Task definition • Pre-purchase attitude Dr. Rosenbloom

  38. Segmenting Consumer Markets Demographic Segmentation Benefits-Sought Segmentation Geographic Segmentation Situation Segmentation Psychographic Segmentation Behavior/Usage Segmentation Dr. Rosenbloom

  39. Behavior/Usage Segmentation • Markets can be segmented by how often or how heavily consumers use a specific product • 80/20 Principle - 80% of revenue generated by 20% of customers Light Users 80% Heavy Users 20% Dr. Rosenbloom

  40. Segmentation Data • Internal sources • In-house customer and marketing databases • Data mine to explore patterns and relationships in collected data • External sources • Lists of catalog/magazine subscribers • U.S. Census information • Mediamark, CACI Marketing Systems, etc. Dr. Rosenbloom

  41. Positioning Strategy • Differentiation through: • Price/quality - emphasize value in terms of quality, price, or both Dr. Rosenbloom

  42. Positioning Strategy • Differentiation through: • Product attributes - characteristics as a positioning base • Product usage - positioning based on a products typical use • Differentiation through: • Symbol - use of a symbol or icon to position a product in the consumer consciousness Dr. Rosenbloom

  43. Positioning Strategy • Differentiation through: • Product user - the typical user of a product Dr. Rosenbloom

  44. Positioning Strategy • Differentiation through: • Product class - positioning against another type of product or product class Dr. Rosenbloom

  45. Positioning Strategy • Differentiation through: • Competition - comparisons to a product’s competition (directly or indirectly) Dr. Rosenbloom

  46. Segmenting Business Markets • Demographics • Industry size, growth potential, etc. • Operating Characteristics • Technology, brand-user status, etc. • Purchasing Approaches • Purchasing policies, size of orders, etc. Dr. Rosenbloom

  47. Segmenting Business Markets • Product Use or Usage Situation • The way the product will be used and customer service levels required • Situational Factors • Urgency, special product uses • Buyer’s Personal Characteristics Dr. Rosenbloom

  48. Segmenting Global Markets • Economic • Stage of development in a host country • Political/Legal • Regulations and laws • Cultural • Language barriers, differences in consumer customs Dr. Rosenbloom

  49. Segmenting Global Markets • Some segments transcend national borders • Rich around the world • Older and comfortable • Indulged kids • Emerging middle class • Women employed outside the house Dr. Rosenbloom

  50. Market Segmentation • Differentiated • Concentrated • Undifferentiated Dr. Rosenbloom

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