Chapter 7 Segmenting and Targeting Markets Slide 2 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 Slide 3 Criteria for Segmentation SubstantialitySubstantialityIdentifiabilityMeasurabilityIdentifiabilityMeasurability AccessibilityAccessibility ResponsivenessResponsiveness 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. Slide 4 Bases for Segmentation Usage Rate Benefits Sought Psychographics Demographics Geography Bases Used to Segment Consumer Markets Slide 5 Geographic Segmentation Region of the country or world Market size Market density Climate Slide 6 Bases for Demographic Segmentation Age Gender Income Ethnic background Family Life Cycle Slide 7 Ethnic Background Largest ethnic markets are: African-American Hispanic-American Asian-American Will comprise 1/3 of U.S. population by 2010 with buying power of a trillion dollars Slide 8 Family Life Cycle Age Marital Status Children Slide 9 Bases for Psychographic Segmentation Psychographic Segmentation Personality Motives Lifestyles Geodemographics Slide 10 Lifestyle Segmentation How time is spent Beliefs Socioeconomic characteristics Slide 11 Geodemographic Segmentation Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation. Slide 12 Quartiles of County Residents of Asian Descent Slide 13 CLARTAS PRIZM 62 American clusters Each cluster is a member of 15 social groups arranged by urbanization density and socio-economic standing. County City High $ Low RURAL TOWN 2nd CITY SUBURB URBAN Slide 14 CLARTAS PRIZM 62 American clusters Each cluster is a member of 15 social groups arranged by urbanization density and socio-economic standing. 01: BLUE BLOOD ESTATES05: KIDS & CUL-DE-SACS 07: MONEY & BRAINS09: AMERICAN DREAMS 12: UPWARD BOUND14: COUNTRY SQUIRES 18: YOUNG INFLUENCIALS28: BIG CITY BLEND 31: LATINO AMERICA40: MILITARY QUARTERS 41: SHOTGUNS & PICKUPS62: HARD SCRABBLE 01: BLUE BLOOD ESTATES05: KIDS & CUL-DE-SACS 07: MONEY & BRAINS09: AMERICAN DREAMS 12: UPWARD BOUND14: COUNTRY SQUIRES 18: YOUNG INFLUENCIALS28: BIG CITY BLEND 31: LATINO AMERICA40: MILITARY QUARTERS 41: SHOTGUNS & PICKUPS62: HARD SCRABBLE For definitions of each cluster, see http://www.qmsoft.com/solutions/prizm.htm for complete descriptions To look up a ZIP code use http://www.velocity.claritas.com/YAWYL/Default.wjsp?System=WL Slide 15 VALS 2 Dimensions Principle-oriented Status-orientedAction-oriented Fulfillers Believers Actualizers Achievers Strivers Strugglers Experi- encers Makers Minimal Resources Abundant Resources Slide 16 Benefit Segmentation The process of grouping customers into market segments according to the benefits they seek from the product. Slide 17 Usage-Rate Segmentation Dividing a market by the amount of product bought or consumed. Slide 18 The 80/20 Principle A principle holding that 20 percent of all customers generate 80 percent of the demand. Slide 19 Steps in Segmenting a Market Select a market for study Choose bases for segmen- tation Select descrip- tors Profile and analyze segments Select target markets Design, imple- ment, maintain mkting mix Slide 20 Strategies for Selecting Target Markets ConcentratedStrategyUndifferentiatedStrategyMultisegmentStrategy Slide 21 Undifferentiated Targeting Strategy Advantages Advantages : Potential savings on production and marketing costs Disadvantages Disadvantages: Unimaginative product offerings Company more susceptible to competition Slide 22 Concentrated Targeting Strategy Advantages Advantages: Concentration of resources Meets narrowly defined segment Small firms can compete Strong positioning Disadvantages Disadvantages: Segments too small, or changing Large competitors may market to niche segment Slide 23 Advantages Advantages: Greater financial success Economies of scale Disadvantages Disadvantages: High costs Cannibalization Multisegment Targeting Strategy Slide 24 Costs of Multisegment Targeting $ Product design costs $ Production costs $ Promotion costs $ Inventory costs $ Marketing research costs $ Management costs $ Cannibalization Slide 25 Cannibalization Situation that occurs when sales of a new product cut into sales of a firms existing products. Slide 26 Positioning Developing a specific marketing mix to influence potential customers overall perception of a brand, product line, or organization in general. Slide 27 Effective Positioning Assess the positions of competing products Determine the dimensions of these positions Choose an effective market position Slide 28 Perceptual Mapping--Levis High Price Low Price ClassicClassic DesignerDesigner Old product New product Vintage Red Line Silver Tab Slates Dockers Premium Dockers Classics 501 Red Tab Basics Red Tab Dry Goods L2 Red Tab Elesco Slide 29 Positioning Bases Attribute Price and Quality Use or Application Product User Product Class Competitor Positioning Bases Slide 30 Repositioning Changing consumers perceptions of a brand in relation to competing brands. Slide 31 Guess Who Owns Theses Brands? What are the segments that each is directed toward? See http://www.gloss.com/interim_flash.html Slide 32 HighHigh PRICE LowLow LowLowHighHigh Richness Product Positioning Slide 33 Why Do Consumers Purchase Technology? Neo- hearthminders Mouse Potatoes Gadget Grabbers Cyber-snobs X-techs Fast Forwards Techno- strivers TraditionalistsHandshakers Media Junkies Country Clubbers Sidelined Citizens Primary Motivation Family Career Entertainment Status Technology pessimists Technology optimists Disposable Income Disposable Income Low High Low High Source: Forrester Research, Inc.