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Chapter 7 Segmenting and Chapter 7 Segmenting and Targeting MarketsTargeting Markets
The Importance of The Importance of Market SegmentationMarket 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
Criteria for SegmentationCriteria for Segmentation
SubstantialitySubstantialitySubstantialitySubstantiality
IdentifiabilityIdentifiabilityMeasurabilityMeasurabilityIdentifiabilityIdentifiabilityMeasurabilityMeasurability
AccessibilityAccessibilityAccessibilityAccessibility
ResponsivenessResponsivenessResponsivenessResponsiveness
Segment must be large enough to warrant a special
marketing mix.
Segment must be large enough to warrant a special
marketing mix.
Segments must be identifiable and their size measurable.
Segments must be identifiable and their size measurable.
Members of targeted segments must be reachable with
marketing mix.
Members of targeted segments must be reachable with
marketing mix.Unless segment responds to a marketing mix differently, no separate treatment is needed.
Unless segment responds to a marketing mix differently, no separate treatment is needed.
Bases for SegmentationBases for Segmentation
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
DemographicsDemographics
GeographyGeography
Bases Bases Used toUsed toSegmentSegment
ConsumerConsumerMarketsMarkets
Bases Bases Used toUsed toSegmentSegment
ConsumerConsumerMarketsMarkets
Geographic SegmentationGeographic Segmentation
• Region of the country or world
• Market size
• Market density
• Climate
Bases for Bases for Demographic SegmentationDemographic Segmentation
• Age
• Gender
• Income
• Ethnic background
• Family Life Cycle
Ethnic BackgroundEthnic 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
Family Life CycleFamily Life Cycle
AgeAge
MaritalMaritalStatusStatus
ChildrenChildren
Bases for Bases for Psychographic SegmentationPsychographic Segmentation
PsychographicPsychographicSegmentationSegmentation
PsychographicPsychographicSegmentationSegmentation
PersonalityPersonality
MotivesMotives
LifestylesLifestyles
GeodemographicsGeodemographics
Lifestyle SegmentationLifestyle Segmentation
• How time is spent
• Beliefs
• Socioeconomic characteristics
Geodemographic SegmentationGeodemographic Segmentation
Segmenting potential customers
into neighborhood lifestyle
categories.
Combines geographic,
demographic, and lifestyle
segmentation.
Quartiles of County Residents of Asian Descent
CLARTAS’ PRIZM 62 American clusters
Each cluster is a member of 15 social groups arranged by Each cluster is a member of 15 social groups arranged by urbanization density and socio-economic standing.urbanization density and socio-economic standing.
County City
High
$ $
Low
RURAL TOWN 2nd CITY SUBURB URBAN
CLARTAS’ PRIZM 62 American clusters
Each cluster is a member of 15 social groups arranged by Each cluster is a member of 15 social groups arranged by urbanization density and socio-economic standing.urbanization density and socio-economic standing.
01: BLUE BLOOD ESTATES 05: KIDS & CUL-DE-SACS
07: MONEY & BRAINS 09: AMERICAN DREAMS
12: UPWARD BOUND 14: COUNTRY SQUIRES
18: YOUNG INFLUENCIALS 28: BIG CITY BLEND
31: LATINO AMERICA 40: MILITARY QUARTERS
41: SHOTGUNS & PICKUPS 62: HARD SCRABBLE
01: BLUE BLOOD ESTATES 05: KIDS & CUL-DE-SACS
07: MONEY & BRAINS 09: AMERICAN DREAMS
12: UPWARD BOUND 14: COUNTRY SQUIRES
18: YOUNG INFLUENCIALS 28: BIG CITY BLEND
31: LATINO AMERICA 40: MILITARY QUARTERS
41: SHOTGUNS & PICKUPS 62: 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
VALS 2 DimensionsVALS 2 Dimensions
Principle-Principle-orientedoriented
Status-Status-orientedoriented
Action-Action-orientedoriented
Fulfillers
Believers
Actualizers
Achievers
Strivers
Strugglers
Experi-encers
Makers
Minimal Resources
Abundant Resources
Benefit SegmentationBenefit Segmentation
The process of grouping
customers into market segments
according to
the benefits they seek
from the product .
Usage-Rate SegmentationUsage-Rate Segmentation
Dividing a market by the amount
of product
bought or consumed.
The 80/20 PrincipleThe 80/20 Principle
A principle holding that
20 percent of all customers
generate 80 percent
of the demand.
Steps in Segmenting a MarketSteps in Segmenting a Market
Select a
market for
study
Choosebases
for segmen-
tation
Selectdescrip-
tors
Profileand
analyzesegments
Selecttarget
markets
Design,imple-ment,
maintainmkting
mix
Strategies for SelectingStrategies for SelectingTarget MarketsTarget Markets
ConcentratedConcentratedStrategyStrategy
UndifferentiatedUndifferentiatedStrategyStrategy
MultisegmentMultisegmentStrategyStrategy
Undifferentiated Undifferentiated Targeting StrategyTargeting Strategy
AdvantagesAdvantages: Potential savings on
production and marketing costs
DisadvantagesDisadvantages: Unimaginative product
offerings Company more
susceptible to competition
Concentrated Concentrated Targeting StrategyTargeting StrategyAdvantagesAdvantages:
Concentration of resources Meets narrowly defined
segment Small firms can compete Strong positioning
DisadvantagesDisadvantages: Segments too small, or
changing Large competitors may market
to niche segment
AdvantagesAdvantages: Greater financial success Economies of scale
DisadvantagesDisadvantages: High costs Cannibalization
Multisegment Multisegment Targeting StrategyTargeting Strategy
Costs of Multisegment TargetingCosts of Multisegment Targeting
$ Product design costs
$ Production costs
$ Promotion costs
$ Inventory costs
$ Marketing research costs
$ Management costs
$ Cannibalization
CannibalizationCannibalization
Situation that occurs when sales
of a new product
cut into sales of a
firm’s existing products.
PositioningPositioning
Developing a specific marketing
mix to influence potential
customers’ overall perception of
a brand, product line, or
organization in general.
Effective PositioningEffective Positioning
• Assess the positions of competing products
• Determine the dimensions of these positions
• Choose an effective market position
Perceptual Mapping--Levi’sPerceptual Mapping--Levi’s
High PriceHigh PriceHigh PriceHigh Price
Low PriceLow PriceLow PriceLow Price
Cla
ssic
Cla
ssic
Cla
ssic
Cla
ssic
Desig
ner
Desig
ner
Desig
ner
Desig
ner
Old product
New product
Vintage
Red Line
Silver Tab
Slates
DockersPremium
DockersClassics
501
Red TabBasics
Red TabDry Goods
L2
Red TabElesco
Positioning BasesPositioning Bases
AttributeAttribute
Price and QualityPrice and Quality
Use or ApplicationUse or Application
Product UserProduct User
Product ClassProduct Class
CompetitorCompetitor
Positioning Positioning BasesBases
Positioning Positioning BasesBases
RepositioningRepositioning
Changing consumers’ perceptions
of a brand
in relation to
competing brands.
Guess Who Owns Theses Brands?Guess Who Owns Theses Brands?What are the segments that each is What are the segments that each is
directed toward?directed toward?
See http://www.gloss.com/interim_flash.html
HighHighHighHighP
RIC
EP
RIC
E
LowLowLowLow
LowLowLowLow HighHighHighHighRichnessRichness
Product Positioning Product Positioning
Why Do Consumers Purchase Technology?Why Do Consumers Purchase Technology?
Neo-hearthminders
MousePotatoes
GadgetGrabbers
Cyber-snobs
X-techs
FastForwards
Techno-strivers
Traditionalists HandshakersMedia
JunkiesCountryClubbers
Sidelined Citizens
Primary MotivationPrimary Motivation
Family Career Entertainment Status
Te
chn
olo
gy
Te
chn
olo
gy p
essi
mis
tsp
essi
mis
ts
Te
chn
olo
gy
T
ech
nol
ogy
opt
imis
tso
ptim
ists
D
isp
osa
ble
Inco
me
Dis
posa
ble
Inco
me
Dis
po
sab
le In
com
e
D
ispo
sab
le In
com
e
L
ow
H
igh
L
ow
H
igh
Source: Forrester Research, Inc.