8Segmentation & Target

Marketing

Dr. Close

Finding Markets• Markets = people with needs/wants and

the ability and willingness to buy

• Types of markets:– Generic

• People with broadly similar needs (social)• Diverse ways of satisfying (restaurants, movies)

– Products• Very similar needs (thirsty for soft drinks)• Very close substitutes (Coke vs. Pepsi, and what

else?)

Close substitutes or no?

Pepsi vs Coke

What’s the Difference?

MarketMarket

MarketSegment

MarketSegment

MarketSegmentation

MarketSegmentation

People or organizations with needs or wants and the ability and willingness to buy.

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.

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.

The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.

Market Segmentation

• Dividing market into meaningful, similar groups

(or aggregating those with similar needs)• Why is segmentation important?....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

Criteria for Segmentation

Substantiality

Identifiabilityand Measurability

Accessibility

Responsiveness

Segment must be large enough to warrant a special marketing mix.

Segments must be identifiable and their size measurable.

Members of targeted segments must be reachable with marketing mix.

Unless segment responds to a marketing mix differently, no separate

treatment is needed.

So, A Good Segment is…

• Homogenous within: members are similar

• Heterogeneous between: outsiders differ (choose the best)

• Substantial: large enough for profit (Ned Flanders)

• Operational: workable (identify then access China)

Bases for Segmenting MarketsGeography Demographics Psychographics Benefits Usage Rate

• Region• Market size• Market

density• Climate

• Age• Gender• Income• Ethnicity• Family life

cycle

• Personality• Motives• Lifestyle• Geodemo-

graphics

• Benefitssought

• Former• Potential• 1st time• Light or

irregular• Medium• Heavy

Demographic Segmentation:Family Life Cycle

Psychographic Segmentation

• Personality (cars)

• Motives (emotions)

• Lifestyles (outdoor)

• Geodemographics (PRIZM)

Benefit Segmentation

• Group consumers via needs/wants (NOT by gender, age, lifestyle etc.)

• What do you want from your cell phone?

Usage Rate Segmentation

• Group by amount/rate of consumption

• Former apple users

• Potential apple users

• Light apple users

• Heavy apple users

• 80/20 principle of demand

6 Steps to Segment a Market

Select a market

for study

Choosebases

for segmen-

tation

Selectdescriptors

Profileand

analyzesegments

Selecttarget

markets

Design,implement,

maintainmarketing

mix

Strategies for Selecting Target Markets

Options…– Undifferentiated Targeting

• One market, one mix (plain toilet paper)• Any other examples?

– Concentrated Targeting• Multiple markets & mix for each• Examples include Ford, Lincoln, Mercury, and what else?

– Multi-segment Targeting• Multiple markets share mix (bad idea)• Advantages = Greater financial success; Economies of scale

Disadvantages= High costs; Cannibalization

Strategies for Selecting Target Markets

• Options– Undifferentiated Targeting

• One market, one mix (plain toilet paper)• Any other examples?

– Concentrated Targeting• Multiple markets & mix for each• Examples include Ford, Lincoln, Mercury, and what else?

– Multi-segment Targeting• Multiple markets share mix (bad idea)• Example: network television and any more?

One-to-One Marketing

Information-IntensiveInformation-Intensive

Long-TermLong-Term

One-to-OneMarketing is...One-to-One

Marketing is...

IndividualizedIndividualized Cost ReductionCost Reduction

Has a Goal of…Has a Goal of…

Customer LoyaltyCustomer Loyalty

Increased RevenueIncreased Revenue

PersonalizedPersonalized

Customer RetentionCustomer Retention

One-to-One Marketing

•One-size-fits all marketing is lame.•Direct/personal marketing will grow to meet needs of busy consumers.•We will be loyal to companies that have earned—and reinforced—our loyalty. •Mass-media approaches will decline as technology allows better customer tracking.

TrendsTrends

Marketing Strategy

• Matching opportunity with resources and business objectives

• Goals:1. SCA

• Enduring superiority of a business• BEST: from many parts (Wal-Mart)

2. Breakthrough opportunity• Conditions right for SCA

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?

AttributeAttribute

Price and QualityPrice and Quality

Use or ApplicationUse or Application

Product UserProduct User

Product ClassProduct Class

CompetitorCompetitor

EmotionEmotion

Positioning Bases

LO9 0.7%Fabric & skin safety on baby clothesIvory Snow0.1%Tough cleaner, aimed at Hispanic marketAriel

1.0%Cleaning for baby clothes, safeDreft1.2%Detergent and fabric softener in liquid formSolo1.4%Bleach-boosted formula, whiteningOxydol1.8%Value brandDash2.2%Stain treatment and stain removalEra2.6%Sunshine scent, odor-removing Gain2.9%Detergent plus fabric softenerBold8.2%Tough cleaning, color protectionCheer

31.1%Tough, powerful cleaningTide

MarketShare

PositioningBrand

Positioning of Procter & Gamble

Detergents

Effective Positioning

1. Assess the positions occupied by competing products

2. Determine the dimensions underlying these positions

3. Choose a market position where marketing efforts will have the greatest impact

Product Differentiation

A positioning strategy that some firms use to distinguish their products from those of competitors.

Are distinctions real or Are distinctions real or perceived?perceived?

Perceptual Mapping

Daimler Chrysler:Do they need a reposition?

(Changing consumers’ perceptions of a brand in relation to competing brands)

Summary

• Generic vs product markets

• Segmentation: Criteria

• Bases for segmenting

• Strategies of segmentation

• (effective)Positioning/repositioning, bases

• Any questions?