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Transcript of Chapter 7Copyright ©2009 Cengage Learning Inc. All rights reserved 1 MKTG Designed by Amy McGuire,...
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 1
MKTG
Designed byAmy McGuire, B-books, Ltd.
Prepared byDeborah Baker, Texas Christian University
Lamb, Hair, McDaniel 2008-2009
7CHAPTERSegmenting and Targeting Markets
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 2
Learning Outcomes
Describe the characteristics of markets and market segments
Explain the importance of market segmentation
Discuss criteria for successful market segmentation
Describe the bases commonly used to segment consumer markets
Describe the bases for segmenting business markets
LO1
LO2
LO3
LO4
LO5
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 3
Learning Outcomes
List the steps involved in segmenting markets
Discuss alternative strategies for selecting target markets
Explain one-to-one marketing
Explain how and why firms implement positioning strategies and how product differentiation plays a role
LO6
LO7
LO8
LO9
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 4
Describe the characteristics of markets and
market segments
Market SegmentationMarket SegmentationLO1
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 5
LO1
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.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 6
Market Segmentation
LO1
MarketMarket
MarketSegment
MarketSegment
MarketSegmentation
MarketSegmentation
People or organizations with needs or wants and the ability and willingness to buy.
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.
A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.
The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.
The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 7
The Concept of Market Segmentation
LO1
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 8
Explain the importance
of market segmentation
The Importance of Market SegmentationThe Importance of Market SegmentationLO2
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 9
The Importance of Market Segmentation
LO2
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
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 10
REVIEW LEARNING OUTCOMELO2
The Importance of Market Segmentation
Marketsegmentation
More precise definition of customers needs and wants
More accurate marketing objectives
Improved resource allocation
Better marketing results
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 11
Discuss criteria for successful market
segmentation
Criteria for Successful SegmentationCriteria for Successful SegmentationLO3
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 12
Criteria for Segmentation
LO3
Substantiality
Identifiabilityand Measurability
Accessibility
Responsiveness
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.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 13
REVIEW LEARNING OUTCOMELO3
Usefulsegment?
Substantial Identifiable and measurable Accessible Responsive
Then, yes: Useful segmentation scheme
Successful Market Segmentation
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 14
Describe the bases commonly used
to segment consumer markets
Bases for Segmenting Bases for Segmenting Consumer MarketsConsumer Markets
LO4
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 15
LO4
Bases for Segmenting Consumer Markets
SegmentationBases
SegmentationBases
Characteristics of individuals,
groups, or organizations used
to divide a total market into
segments. (variables)
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 16
Bases for SegmentationLO4
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
DemographicsDemographics
GeographyGeography
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 17
Geographic Segmentation
LO4
Region of the country or world
Market size
Market density
Climate
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 18
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
LO4
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 19
Demographic Segmentation
LO4
AgeAge
GenderGender
IncomeIncome
Ethnic backgroundEthnic background
Family life cycleFamily life cycle
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 20
Ethnic Segmentation
LO4
Largest ethnic markets are: Hispanic Americans African Americans Asian Americans
Will comprise 1/3 of U.S. population by 2010 with buying power of $1 trillion annually
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 21
Family Life Cycle
LO4
Age
MaritalStatus Children
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 22
Family Life Cycle
LO4
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 23
Psychographic Segmentation
LO4
PsychographicSegmentation
PsychographicSegmentation
Market segmentation on the basis
of personality, motives, lifestyles,
and geodemographics.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 24
Bases for Psychographic Segmentation
LO4
PersonalityPersonality
MotivesMotives
LifestylesLifestyles
GeodemographicsGeodemographics
Online
http://www.marthastewart.com http://www.goodhousekeeping.com
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 25
Lifestyle Segmentation
LO4
How time is spent Importance of things around them Beliefs Socioeconomic
characteristics
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 26
Biz Flix
LO4The Breakfast Club
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 27
Geodemographic Segmentation
LO4
Segmenting potential customers into neighborhood lifestyle categories.
Combines geographic, demographic, and lifestyle segmentation.
Segmenting potential customers into neighborhood lifestyle categories.
Combines geographic, demographic, and lifestyle segmentation.
GeodemographicSegmentation
GeodemographicSegmentation
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 28
Benefit Segmentation
LO4
The process of grouping
customers into market segments
according to the benefits they
seek from the product.
Benefit Segmentation
Benefit Segmentation
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 29
Benefit Segmentation
LO4
Usage-RateSegmentation
Usage-RateSegmentation
Dividing a market by the amount
of product bought or consumed.
Dividing a market by the amount
of product bought or consumed.
80/20Principle
80/20Principle
A principle holding that 20
percent of all customers generate
80 percent of the demand.
A principle holding that 20
percent of all customers generate
80 percent of the demand.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 30
LO4B
eyond
the
Book
Example of Usage-Rate
Verizon, Sprint Nextel and others allow consumers with standard contracts to access the Internet via cellular high-speed services.
Some customers’ service is being cancelled because they are using excessive network capacity.
Sprint and Cingular Wireless charge based on usage: the amount of data bits they wirelessly transfer each month.
SOURCE: Amol Sharma and Dionne Searcey, “Cell Carriers to Web Customers: Use Us, but Not too Much,” Wall Street Journal, May 11, 2006, B1.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 31
REVIEW LEARNING OUTCOMELO4
Bases for Segmenting Consumer Markets
Geography Demographics Psychographics Benefits Usage Rate
• Region• Market size• Market
density• Climate
• Age• Gender• Income• Race/ethnicity• Family life
cycle
• Personality• Motives• Lifestyle• Geodemo-
graphics
• Benefitssought
• Former• Potential• 1st time• Light or
irregular• Medium• Heavy
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 32
Describe the bases for segmenting
business markets
Bases for Segmenting Bases for Segmenting Business MarketsBusiness Markets
LO5
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 33
Bases for Segmenting Business Markets
LO5
CompanyCharacteristics
CompanyCharacteristics
BuyingProcesses
BuyingProcesses
ProducersProducers
ResellersResellers
GovernmentGovernment
InstitutionsInstitutions
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 34
Bases for Segmenting Business Markets
LO5
Company Characteristics
Geographic location
Type of company
Company size
Volume of purchase
Product use
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 35
Buyer CharacteristicsLO5
SatisficersSatisficersBusiness customers who place an order
with the first familiar supplier to satisfy
product and delivery requirements.
Business customers who place an order
with the first familiar supplier to satisfy
product and delivery requirements.
OptimizersOptimizersBusiness customers who consider
numerous suppliers, both familiar and
unfamiliar, solicit bids, and study all
proposals carefully before selecting one.
Business customers who consider
numerous suppliers, both familiar and
unfamiliar, solicit bids, and study all
proposals carefully before selecting one.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 36
Buyer CharacteristicsLO5
Demographic characteristicsDemographic characteristics
Decision styleDecision style
Tolerance for riskTolerance for risk
Confidence levelConfidence level
Job responsibilitiesJob responsibilities
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 37
REVIEW LEARNING OUTCOMELO5
Segmenting Business Markets
Producers Resellers
InstitutionsGovernments
Buying Process
Company Characteristics
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 38
List the steps involved in segmenting
markets
Steps in Segmenting Steps in Segmenting a Marketa Market
LO6
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 39
REVIEW LEARNING OUTCOMELO6
Steps in Segmenting Markets
Select a market
for study
Choosebases
for segmen-
tation
Selectdescriptors
Profileand
analyzesegments
Selecttarget
markets
Design,implement,
maintainmarketing
mix
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 40
Discuss alternative strategies for
selecting target markets
Strategies for Selecting Strategies for Selecting Target MarketsTarget Markets
LO7
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 41
Strategies for Selecting Target Markets
LO7
TargetMarketTargetMarket
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.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 42
Strategies for Selecting Target Markets
LO7
ConcentratedStrategy
UndifferentiatedStrategy
MultisegmentStrategy
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 43
Undifferentiated Targeting Strategy
LO7
UndifferentiatedTargetingStrategy
UndifferentiatedTargetingStrategy
A marketing approach that
views the market as one big
market with no individual
segments and thus
requires a single
marketing mix.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 44
LO7
UndifferentiatedStrategy
Advantage:
Potential savings on production and marketing costs
Disadvantages:
Unimaginative product offerings
Company more susceptible to competition
Undifferentiated Targeting Strategy
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 45
Concentrated Targeting Strategy
LO7
ConcentratedTargeting Strategy
A strategy used to select one
segment of a market for
targeting marketing efforts.
NicheOne segment of
a market.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 46
LO7
ConcentratedStrategy
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
Concentrated Targeting Strategy
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 47
MultisegmentTargeting Strategy
LO7
MultisegmentTargetingStrategy
A strategy that chooses
two or more well-defined
market segments and
develops a distinct
marketing
mix for each.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 48
Multisegment TargetingB
eyond
the
Book
designer print or no print, cushioned or non-cushioned, scented or unscented, economy priced or luxury priced, and single, double, or triple roll. Fort Howard Corporation, the market share leader in industrial toilet paper, does not even sell to the consumer market.
{Standard Tissue} You might think a firm producing a standard product like toilet tissue would adopt an undifferentiated strategy. However, this market has industrial segments and consumer segments. Industrial buyers want an economical, single-ply product sold in boxes of a hundred rolls. The consumer market demands a more versatile product in smaller quantities. Within the consumer market, the product is differentiated with
LO7
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 49
LO7
MultisegmentStrategy
Advantage:
Greater financial success
Economies of scale
Disadvantages:
High costs
Cannibalization
MultisegmentTargeting Strategy
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 50
Costs of Multisegment Targeting
LO7
Product design costs
Production costs
Promotion costs
Inventory costs
Marketing research costs
Management costs
Cannibalization MultisegmentStrategy
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 51
Cannibalization
LO7
Situation that occurs when
sales of a new product cut into
sales of a firm’s existing
products.
CannibalizationCannibalization
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 52
REVIEW LEARNING OUTCOMELO7
Alternatives for Selecting Target Markets
Undifferentiated Multisegment Concentrated
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 53
Explain one-to-one marketing
One-to-One MarketingOne-to-One MarketingLO8
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 54
One-to-One Marketing
LO8
An individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer.
One-to-OneMarketing
One-to-OneMarketing
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 55
One-to-One Marketing
LO8
Information-IntensiveInformation-Intensive
Long-TermLong-Term
One-to-OneMarketing is...One-to-One
Marketing is...
IndividualizedIndividualized Cost ReductionCost Reduction
Has a Goal of…Has a Goal of…
Customer LoyaltyCustomer Loyalty
Increased RevenueIncreased Revenue
PersonalizedPersonalized
Customer RetentionCustomer Retention
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 56
One-to-One Marketing
LO8
One-size-fits all marketing no longer effective
Direct and personal marketing will grow to meet needs of busy consumers.
Consumers will be loyal to companies that have earned—and reinforced—their loyalty.
Mass-media approaches will decline as technology allows better customer tracking.
TrendsTrends
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 57
REVIEW LEARNING OUTCOMELO8
One-to-One Marketing
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 58
Explain how and why firms implement
positioning strategies and how product
differentiation plays a role
PositioningPositioningLO9
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 59
LO9
Positioning
Developing a specific
marketing mix to
influence potential
customers’ overall
perception of a brand,
product line, or
organization in
general.
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 60
LO9 0.7%Fabric & skin safety on baby clothesIvory Snow
0.1%Tough cleaner, aimed at Hispanic marketAriel
1.0%Outstanding cleaning for baby clothes, safeDreft
1.2%Detergent and fabric softener in liquid formSolo
1.4%Bleach-boosted formula, whiteningOxydol
1.8%Value brandDash
2.2%Stain treatment and stain removalEra
2.6%Sunshine scent and odor-removing formulaGain
2.9%Detergent plus fabric softenerBold
8.2%Tough cleaning, color protectionCheer
31.1%Tough, powerful cleaningTide
MarketShare
PositioningBrand
Positioning of Procter & Gamble
DetergentsLO9
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 61
Effective Positioning
LO9
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
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 62
LO9
Product Differentiation
A positioning strategy that some firms use to distinguish their products from those of competitors.
Distinctions can be real or perceived.
Eat Fresh!
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 63
A means of displaying or
graphing, in two or more
dimensions, the location of
products, brands, or groups
of products in customers’
minds.
LO9
Perceptual Mapping
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 64
AttributeAttribute
Price and QualityPrice and Quality
Use or ApplicationUse or Application
Product UserProduct User
Product ClassProduct Class
CompetitorCompetitor
EmotionEmotionLO9
Positioning Bases
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 65
Changing consumers’
perceptions of a brand in
relation to competing brands.
LO9
Repositioning
Chapter 7 Copyright ©2009 Cengage Learning Inc. All rights reserved 66
REVIEW LEARNING OUTCOMELO9
Positioning and Product Differentiation