Lamb, Hair, McDaniel

2012-2013

CHAPTER 8 Segmenting and Targeting Markets

Chapter 1

Copyright 2012 by Cengage Learning Inc. All rights reserved

iStockphoto.com/Rubberball

A Market Is...
1) people or organizations with 2) needs or wants, and with 3) the ability and

4) the willingness to buy.

A group of people that lacks any one of these characteristics is NOT a market.
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Market Segmentation
Market
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.

Market Segment

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

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The Concept of Market Segmentation

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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

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Criteria for Segmentation

Substantiality
Identifiability and Measurability

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.
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Accessibility

Responsiveness

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Bases for Segmentation

Geography
Demographics Psychographics

Benefits Sought
Usage Rate
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Geographic Segmentation
Region of the country or world
Market size Market density Climate
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Benefits of Regional Segmentation

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 competition
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Demographic Segmentation
Age
Gender Income

Ethnic
Family life cycle
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Age Segmentation
Marketers can segment markets using cohorts: Tweens Teens Generation Y Generation X Baby Boomers The War Generation (ages 61-66) The Great Depression Generation (ages 67-76) The G.I. Generation (ages 77+)

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Gender Segmentation
Women make 70 percent of consumers goods purchases annually Many marketers of male-dominated arenas are targeting women Increasing numbers of marketers in female dominated categories are targeting men.

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Income Segmentation
Determines consumer wants Determines buying power Retailers can appeal to:
low-income (Walmart) High-income (Saks Fifth Avenue) Both (Costco, Target)

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Ethnic Segmentation
Largest ethnic markets are:
Hispanic Americans African Americans Asian Americans Companies must make products geared toward specific ethnic groups as they continue to expand.
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Foodpix/Jupiterimages/Getty Images

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Family Life Cycle

Age

Marital Status

Children

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Exhibit 8.1
Family Life Cycle

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Psychographic Segmentation

Psychographic Segmentation
Market segmentation on the basis of personality, motives, lifestyles, and geodemographics.

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Bases for Psychographic Segmentation

Personality

Motives
Lifestyles Geodemographics

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Personality and Motive Segmentation

Personality
Reflects a persons traits, attitudes, and habits.

Motives
Marketers might appeal to emotional, rational, or status motives, among others.

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Lifestyle Segmentation
How time is spent Importance of things around them Beliefs Socioeconomic characteristics

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Geodemographic Segmentation
Geodemographic Segmentation
Segmenting potential customers into neighborhood lifestyle categories.
Combines geographic, demographic, and lifestyle segmentation.

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Benefit Segmentation
Benefit Segmentation
The process of grouping customers into market segments according to the benefits they seek from the product.

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Usage-Rate Segmentation
Usage-Rate Segmentation Dividing a market by the amount of product bought or consumed.

80/20 Principle

A principle holding that 20 percent of all customers generate 80 percent of the demand.

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Bases for Segmenting Business Markets

Producers Company Characteristics

Resellers

Government Buying Processes Institutions

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Company Characteristics
Important segmentation variables:
Geographic location

Type of company
Company size Product use

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Buyer Characteristics
Business customers who place an order with the first familiar supplier to satisfy product and delivery requirements. Business customers who consider numerous suppliers, both familiar and unfamiliar, solicit bids, and study all proposals carefully before selecting one.

Satisficers

Optimizers

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Buyer Characteristics
Demographic characteristics Decision style Tolerance for risk Confidence level

Job responsibilities
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Steps in Segmenting Markets

1 Select a 2
Choose bases for segmentation

market for study

3 Select

descriptors

4 Profile and
analyze segments

5 Select

target markets

6 Design,

implement, and maintain marketing mix

Note that steps 5 and 6 are actually marketing activities that follow market segmentation (steps 1 through 4).

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Strategies for Selecting Target Markets

Target Market
A group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.
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Strategies for Selecting Target Markets

Undifferentiated Strategy
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Concentrated Strategy

Multisegment Strategy
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Undifferentiated Targeting Strategy

A marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix.

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Undifferentiated Targeting Strategy

Advantage:
Potential savings on production and marketing costs

Disadvantages:
Unimaginative product offerings Company more susceptible to competition
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Undifferentiated Strategy
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Concentrated Targeting Strategy

A strategy used to select one Concentrated segment of a market for targeting Targeting Strategy marketing efforts.

Niche
One segment of a market.

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Concentrated Targeting Strategy

Advantage:
Concentration of resources Meets narrowly defined segment Small firms can compete Strong positioning

Disadvantages:
Segments too small, or changing Large competitors may market to niche segment 7

Concentrated Strategy
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Multisegment Targeting Strategy

Multisegment Targeting Strategy
A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.

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Multisegment Targeting Strategy

Advantage:
Greater financial success Economies of scale

Disadvantages:
Higher costs
Multisegment Strategy

Cannibalization

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Costs of Multisegment Targeting Strategy

Product design costs

Production costs
Promotion costs Inventory costs

Marketing research costs

Management costs Cannibalization

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One-to-One Marketing
One-to-One Marketing is... Has a Goal of

Individualized Information-Intensive Long-Term Personalized

Cost Reduction Customer Retention Increased Revenue Customer Loyalty

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One-to-One Marketing Trends

One-size-fits all marketing no longer relevant Direct and personal marketing efforts will grow to meet needs of busy consumers. Consumers will be loyal to companies that have earnedand reinforcedtheir loyalty. Mass-media approaches will decline as technology allows better customer tracking.

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Positioning
Positioning is
developing a specific marketing mix to influence potential customers overall perception or a brand, product line, or organization in general.

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Positioning of Procter & Gamble Detergents

Brand Tide Cheer Bold Gain Era Dash Solo Dreft Ivory Ariel
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Positioning
Tough, powerful cleaning Tough cleaning, color protection Detergent plus fabric softener Sunshine scent and odor-removing formula Stan treatment and stain removal Value brand

Detergent and fabric softener in liquid form

Outstanding cleaning for baby clothes, safe Fabric and skin safety on baby clothes Tough cleaner, aimed at Hispanic market

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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
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Product Differentiation
Product Differentiation is
a positioning strategy that some firms use to distinguish their products from those of competitors.

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Perceptual Mapping
Perceptual Mapping is
a means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers minds.

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Exhibit 8.3
Perceptual Map and Positioning Strategy for Saks Department Stores

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SOURCE: Vanessa OConnell, Park Avenue Classic or Soho Trendy ?Wall Street Journal, April 20, 2007, B1.

Positioning Bases
Attribute Price and Quality

Use or Application
Product User Product Class Competitor

Emotion
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Repositioning
Repositioning is
changing consumers perceptions of a brand in relation to competing brands.

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