Segmenting & Targeting Markets

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Segmenting & Targeting Markets. Strategic Marketing Chapter 7 210 - 234. Characteristics of Markets & Market Segments. A Market is Comprised of people or organizations (Consumer or Business) Have needs, abilities, and willingness to buy Markets have market segments - PowerPoint PPT Presentation

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Segmenting & Targeting Markets

Segmenting & Targeting MarketsStrategic MarketingChapter 7210 - 234Characteristics of Markets & Market SegmentsA Market isComprised of people or organizations (Consumer or Business)Have needs, abilities, and willingness to buy

Markets have market segments

A Market Segment consists of a subgroup of people who share one or more common characteristic that causes them to have similar product needsTheoretically anything can be grouped togetherMarket segmentation is only valuable if the group is meaningful to the marketerThe marketing mix is tailored to the market segment defined

3LOI

The Concept of Market SegmentationCopyright 2009, Cengage Learning. All rights reserved Chapter 73Chapter 7 Segmenting and Targeting MarketsNotes:Exhibit 7.1 illustrates the concept of market segmentation, using age and gender as the bases.

Discussion/Team Activity:Discuss other ways of segmenting the market in addition to age and gender.

Market SegmentationMarket Segmentation helps marketers define customer needs and wants more precisely

Segments differ in size & potential so companies look at particular segments and determine more accurate marketing objectives

Accurate marketing objectives lead to:Improved allocation of resourcesBetter marketing resultsMarket Segmentation ReviewMarket Segmentation accomplishes the following:

Identify specific groups that you can analyze characteristics & buying behavior of

Design marketing mixes specific to segmented groups

Allows you to meet customer needs & wants while meeting company objectivesMarket SegmentationTo be useful, a segmentation scheme must produce segments that meet four basic criteria:

SustainabilityNeeds to be large enough to matter. Not enough potential; it wont last.

Identifiability & MeasurabilityNeed to be able to identify the group being targeted & its sizeEasy to determine amount of people in certain subgroups; not easy to determine willingness or interestAccessibilityImportant to devise marketing mixes that allow your segments to access your productSeniors citizens, Disabled, Language deficient, etcdont access information or products as easily as everyone else

ResponsivenessIf the majority of customers respond positively to a marketing mix; then creating a separate marketing mix strategy for unresponsive group may not be necessary

Market Segmentation Bases Segmentation Bases (Variables)Characteristics of individuals, groups, or organizations used to divide a total market into segments

Marketers choose bases that are SubstantialIdentifiable MeasurableAccessible Responsive

Market SegmentationOne Base or Variable is not as precise but is simple and easy

Multiple variables allows for precision butIs Harder to useUsable secondary resources are less likelyThe size of group gets smaller

Current trend is to use more variables then less variables

Market Segmentation Examples One VariableSegment a population based on gender

Multiple VariableGenderAgeRaceEducationMarital status GeographicsInterestsMarket SegmentationMost Common Variables used to segment marketsGeographyDemographicsPsychographicsBenefits SoughtUsage Rate(s)GeographicsSegment by:RegionCountryWorldMarket sizeMarket density# of people within a unit of land

ClimateImportant because purchasing needs vary based on weather conditionsWhy Segment with Geographics?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 competitionExamples of Geogrpahic MarketingRestaurants offering menu items that reflect local taste interest

Cracker Barrel & McDonalds alters menu to reflect local tastesMenu in south is different than menu in Northeast

Miller Lite developed a True to Texas Marketing Campaign

Magazines like Midwest or Southwest Living

Pepsi packaging products based on NFL Cities

Examples of Geogrpahics: Local Retailers

Demographic SegmentationDemographic SegmentationEasy to obtain demographic information

Correlates to consumer buyingAgeGenderIncomeEthnic BackgroundFamily Life CycleAge Demographics

Gender SegmentationFacts About Female Consumers75% of Family Finances51% of new electronics sold75% over-the-counter drugs65% of new cars

Companies are realizing that women buy more than packaged goods

Ace Hardware: 42% of customers are female who spend 30% - 40% more than men per visitWider, well-lit aisles, clear signage, instructions on product use.

Gender Segmentation

Income SegmentationIncome segmentation tells marketers what consumers can afford

Segment by wants & buying power

Examples:HousingClothingAutomobilesFood

Income

Ethnic SegmentationIn the past marketers would present ads as anglo-centricWhite all-American familyMass marketing approach

In large part this occurred because the majority of the population fit this mold

1970s a shift in culture startedEthnic Foods started to be introduced into storesRoles in music, movies, & politics became more prominent

As population of minorities increases so does marketing efforts towards themA lot of marketers are choosing to target urban areas versus specific ethnic groups

LaRaza:Hispanic Rights Organization

Ethnic Segmentation AdsGeely Automobile Holdings Ltd

Pantene Pro-V

Family Life-Cycle SegmentationFamily Life Cycle is a series of stages determined by a combination of age, marital status, & presence or absence of children

46% of households are maintained by unmarried men or women

102 unmarried Americans over the age of 18240.144 million people living in the United States over the age of 18

A families needs, income, resources, & expenditures differ at each stage of the life cycle

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LO4Family Life CycleCopyright 2009, Cengage Learning. All rights reserved Chapter 725Chapter 7 Segmenting and Targeting MarketsNotes: Exhibit 7.2 demonstrates both traditional and contemporary FLC patterns and shows how families needs, incomes, etc. differ at each stage.

Married couples make up just 50.7% of the U.S. population. Unmarried Americans make up 42% of the workforce and 40% of home buyers.

Discussion/Team Activity:Find examples of advertisements that target different stages of the family life cycle.

Life Cycle Buying Habits

Targeting Age, Marital Status & Children Factor

Psychographic Factors

Psychographic SegmentationPsychographics is segmenting based on PersonalityMotivesEmotional: Caring for othersRational: Appeals to economy, Reliability, & DependabilityStatus-Related: Customers want to look a certain wayLifestyle:Way consumers spend their timeImportance of things around themBeliefsSocioeconomic Factors: Income & EducationExplorers, Achievers, Builders, & MastersGeodemographics: Combines geographic, demographic, & lifestyle segments Claritas PRIZM Lifestyle Softwarehttp://www.claritas.com/MyBestSegments/Default.jsp?ID=30&pageName=Segment%2BExplorer

28277: Market Segmentation

85365: Market Segmentation

Psychographic Ads

Benefit SegmentationBenefit Segmentation:Process of grouping customers into market segments according to the benefits they seek from a product

Segmentation typically connects variables to needsIf you are this age, living in this city, & you like to do.then this is the product you want

Benefit segmentation is different because it is based on their needs and wantsAdvertises the benefit of a product

Start with a product and break it down into the benefits it offersHealthy product, Better tasting, Low price, etc.

Low Carb v. High Protein v. Energy

Usage-Rate SegmentationUsage-Rate Segmentation:Dividing a market by the amount of product bought or consumed.Examples of markets:Former usersPotential usersFirst-time usersLight or irregular usersMedium usersHeavy users

Heavy users are the group most commonly marketed towards

Useage Rate Segmentation80/20 PrincipleA principle holding that 20 percent of all customers generate 80 percent of the demand.

Time Warner Cable ExampleFewer than 10% of its subscribers consume 75% of its bandwidth

The goal is to turn customers into heavy usersFrequency & customer loyalty programs are designed around this conceptUseage Rate Ads

Cell Phone Use Useage Rate Ads

Bases for Segmenting Business MarketsBusiness MarketsBusiness Market consists of four broad segments:ProducersProfit-oriented individuals & organizations that use purchased goods to produce other productsExamples: Construction, Manufacturing, Transportation, Finance, Real Estate, & Food ServicesResellersWholesalers & RetailersBuy & resell productsGovernmentSelling to Federal, Municipal, & Local officials. Most lucrative industry. Usually requires bidsInstitutionsSchools, churches, civic clubs, hospitals, unions, colleges, nonbusiness organizations, etc..

Business Market SegmentationThe four types of business segments that are marketed towards are broken down by Company Characteristics & Buying Process

Company CharacteristicsGeographic locationVendors close by may have advantage because it is usually cheaperType of companyTarget companies specifically based on a company's particular needCompany sizeLarger companies may get different opportunities because they buy moreVolume of purchaseHeavy, Moderate, or light users of a productProduct useTargeting a company based on what they are producing, purchasing &