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Target Marketing Strategies
Chapter 8Lecture Slides
Solomon, Stuart,
Carson, & Smith
Your name here
Course title/number
Date
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Copyright 2003 Pearson Education Canada Inc. 8-2
Chapter Learning Objectives
When you have completed your study of this chapter,
you should be able to:
Understand the three steps ofdeveloping a target marketingstrategy.
Understand the need for marketsegmentation in todays businessenvironment.
Know the different dimensionsmarketers use to segment consumermarkets.
Understand the bases forsegmentation in business-to-business markets.
Explain how marketers evaluateand select potential marketsegments.
Explain how marketers
develop a targeting strategy.
Understand how a firm
develops and implements a
positioning strategy.
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Introduction to the Topic
If your product: is completely unique,
has no substitute,
people need it to survive,
you have no competition,
and demand is without
limits,
then market segmentation is
not likely to interest you.
However, if your products are like the other 99.9% in
the market place, then listen up!
This topic forms the basis for the vast majority of marketing
efforts by organizations, hence its importance to our study.
Figure 8.1
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Selecting andEntering a Market
You can have it any colour you want, as long as it is black. Thisfamous quote is attributed to Henry Ford, who was providing his
opinion about the necessity of offering the customer a choice.
Market fragmentation:creation of many consumer groups dueto a diversity of distinct need and wants in modern society.
Having it your wayis a good way to describe theconsumers desire for products that more closely suit
their tastes, rather than putting up with only one
version.
Target marketing strategy:dividing the totalmarket into different segments based on customer
characteristics, selecting one or more segments, and
developing products to meet the needs of those specific
segments.
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Segmentation,Targeting, and Positioning
Develop profiles of
resulting segments
MarketSegmentation
Develop measures of
segment attractiveness
Select the
target segment(s)
Develop positioningfor each segment
Develop marketing mix
for each segment
Identify bases for
segmenting market
Market
targeting
Market
positioning
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The Process of Segmentation
Segmentation:the process of dividing a larger market into smallerpieces, based on one or more meaningful, shared characteristics.
The purpose of segmenting a market
is to design a separate marketing mix
tailored to the specific desires of each
segment.
Segmentation variables:basesfor dividing the total market into
fairly homogeneous groups, each with
different needs and preferences.
Segmentation strategies can be basedon demographic, psychographic, or
behavioural factors.
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Segmentation by Demographics
Demographics:statistics that measure observable aspects of apopulation, including age, gender, ethnic group, income, education,occupation, and family structure.
Demographic factors are
attractive to use as
segmentation variablesbecause they are
(relatively) easy to
identify and measure.
Segmenting by age is
interesting due toCanadas unusual
population distribution,
caused by our recent
history.
1996 Canadian Population by Selected Age Group
0 1E+06 2E+06 3E+06 4E+06 5E+06
Under 15
15 to 24
25 to 44
45 to 64
65 to 74
75 plus
Population
Age groups
Female
Male
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Segmentation by Demographics (continued)
Baby boomers:the largest age group in Canada, it includespeople born between 1947 and 1966. This trend is also repeated inthe United States, only ten times larger.
Due to their numbers, the
needs of the baby
boomers have dominatedthe marketplace and our
culture for the past 50
years, and will continue
to do so for another 30
years. Just be careful about
calling them old!
1996 Canadian Population by Selected Age Group
0 1E+06 2E+06 3E+06 4E+06 5E+06
Under 15
15 to 24
25 to 44
45 to 64
65 to 74
75 plus
Population
Age groups
Female
Male
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Segmentation by Demographics (continued)
Segmenting bygender
will work for many products that are
actually gender-specific, but one must be careful not to make too
many assumptions in todays politically correct marketplace.
Family structure is a useful basefor segmentation as consumption
changes in relatively predictable waysas a family begins and grows.
The only problem is that todays
definition of what a family is has
changed due to a number of social
trends.
Income and social class can beuseful bases, but difficult to define
precisely.
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Segmentation by Demographics (continued)
Segmenting byethnicorigin can be useful, if we
know that consumption
behaviour is different
between groups.
Canada has a diversepopulation by ethnic origin,
and this trend will continue
in the future as the majority
of population growth
continues to be due toimmigration, and not birth
rate.
Ethnic Origin Number PercentTotal Canadian Population 26,994,045 100.0%
Total single origins 19,199,790 71.1%Total multiple origins 7,794,250 28.9%
British alone 5,611,050 20.7%
British alone or with other 12,047,920 44.6%
French alone 6,129,680 22.6%
French alone or with other 8,389,180 31.1%
Single European 4,146,065 15.2%
German 911,560 3.4%
Italian 750,055 2.8%
Ukrainian 406,645 1.5%
Dutch 358,180 1.3%
Polish 272,810 1.0%
Portuguese 246,890 0.9%
Greek 151,150 0.6%
Hungarian 100,725 0.4%
Aboriginal alone 470,615 1.7%
Aboriginal alone or with other 1,002,670 3.7%
Single Asian 1,607,230 5.9%Chinese 586,645 2.2%
East Indian 324,840 1.2%
Filipino 157,250 0.6%
Vietnamese 84,005 0.3%
Black 214,265 0.8%
Jewish 245,840 0.9%
Other single origins 1,446,355 5.4%
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Segmentation by Demographics (continued)
Segmenting by geography means using different marketing mixesto appeal to different regional tastes, such as offering stronger tasting
coffee in Western Canada.
For most companies, segmenting by geography in Canada may be
impractical due to the small size of our regional markets.
Geodemography:asegmentation technique that
combines geography with
demographics.
The basic assumption of
geodemography is that people wholive near one another tend to share
similar characteristics.
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Segmentation by Psychographics
Psychographics:information
about the activities and interests,and opinions of consumers that is
used to construct market
segments.
VALS (Values and
Lifestyles): psychographicsystem that divides people into
eight segments.
The dimensions used are based on
psychological characteristics, such
as willingness to take risks andinnovativeness, and access to
resources.
You can take the survey by
clicking on the link.
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Segmentation by Behaviour
Behavioural segmentation:technique that divides consumersinto segments on the basis of how they act toward, feel about, or use aproduct or service.
Usage occasions:indicator used inone type of market segmentation based
on when consumers use a product most.
80/20 Rule:a marketing rule of thumbthat 20% of purchasers account for 80%
of a products sales. Also known as the
concentration principle.
This explains why beer companies seem
to be preoccupied with under-25 year old
males!
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Segmenting Business Markets
Segmenting business customers can be done by industry using theNAICS classification system (Chapter 7), or by their consumptionbehaviour using various operating variables.
Operating variables:theproduction technology used, the
business customers degree of technical,financial, or operations expertise,and
whether the prospect is a current user or
non-user of the product.
Companies will also differentiate
customers based on how they buy, suchas the competitive bidding systems used
by governments.
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Targeting
Target market:group or groups that a firm selects to turn intocustomers as a result of segmentation and targeting.
The objective of targeting is to choose
the segment(s) that the company can
most profitably serve, given its resources
and capabilities.
Segment profile:a description of thetypical customer in a segment. This is
done to help determine the best way to
reach them.
Market potential:the maximumdemand expected among consumers in a
segment for a product or service.
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Criteria for Evaluating Segments
Measurable:can the buyer characteristics be easilyidentified and segmented into groups at reasonable cost?
Similarity of needs:buyers within the group havesimilar needs and wants.
Distinctness of needs: buyers in each group havedistinct needs and wants.
Profit potential:is there greater potential for profitby segmenting a market than attempting to serve the
mass market?
Accessible:can the buyers in the segment be reachedeffectively with a simple marketing action?
Capability:does the company have the resources andcapability of satisfying the segment?
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Choosing a Targeting Strategy
Differentiated targeting strategy:developing one or moreproducts for each of several distinct customer groups and making
sure these offerings are kept separate in the marketplace.
Example: Black & Decker sell under own brand
name to homeowners and the DeWalt line to
professional contractor users. Undifferentiated targeting strategy:
appealing to a broad spectrum of people.
Example: selling one version of the product to
many different markets, such as baking soda.
Concentrated targeting strategy:focusing a forms efforts on offering one or more
products to a single segment.
Example: Burton snowboards
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Choosing a Targeting Strategy(continued)
Custom marketing strategy:approach that tailors specificproducts and the messages about them to individual customers.
As practiced by most professional service
providers, and some on-line retailers.
Mass customization:approach thatmodifies a basic product or service tomeet the needs of an individual.
Made to measure has traditionally
meant expensive and low volume.
Mass customization uses technology to
take this idea to a larger scale to bring the
costs down to a more affordable level.
You can have a mountain bike built to
your exact measurements!
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Positioning
Positioning:developing a marketing strategy aimed at influencinghow a particular market segment perceives a product or service incomparison to the competition.
Repositioning:redoing a products position to respond tomarketplace changes.
Brand personality:adistinctive image that
captures a product or
services character and
benefits.
Perceptual map:apicture of where products or
brands are located in
consumers minds. Figure 8.4
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FamousLast Words
The three processes of
segmentation, targeting, and
positioning form the
essence of marketing in
todays competitive
environments.
Without them, mass
marketing would be our
only alternative, and we
know how boring that can
be!