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Transcript of Segmenting
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1Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Chapter 7: Segmenting and Targeting MarketsObjectives:
• 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.
• List the steps involved in segmenting markets.
• Discuss alternative strategies for selecting target markets.
• Explain how and why firms implement positioning strategies and how product differentiation plays a role.
• Discuss global market segmentation and targeting issues.
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2Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Market Segmentation
MarketMarket
MarketSegmentMarket
Segment
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.
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3Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
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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4Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
The Concept of Market Segmentation
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5Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
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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6Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Criteria 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.
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7Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Segmentation Bases
Characteristics of
individuals, groups,
or organizations used
to divide a total market
into segments.
(variables)
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8Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Bases for Segmentation
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
DemographicsDemographics
GeographyGeography
http://www.toofaced.comhttp://www.toofaced.com
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9Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Geographic Segmentation
Segmenting markets by
region of the country or
world, market size, market
density, or climate.
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10Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Geographic Segmentation
● Region of the country or world
●Market size
●Market density
● Climate
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11Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
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
● React more quickly to competition
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12Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Demographic Segmentation
Segmenting markets
by age, gender, income,
ethnic background,
and family life cycle
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13Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Bases for Demographic Segmentation
● Age
● Gender
● Income
● Ethnic background
● Family Life Cycle
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14Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Ethnic Background
● Largest ethnic markets are:African-AmericanHispanic-AmericanAsian-American
●Will comprise 1/3 of U.S. population by 2010 with buying power of a trillion dollars
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15Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Family Life Cycle
AgeAge
MaritalMaritalStatusStatus
ChildrenChildren
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16Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Family Life Cycle44
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17Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Psychographic Segmentation
Market segmentation on
the bases of personality,
motives, lifestyles, and
geodemographics.
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18Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Bases for Psychographic Segmentation
PsychographicPsychographicSegmentationSegmentation
PsychographicPsychographicSegmentationSegmentation
PersonalityPersonality
MotivesMotives
LifestylesLifestyles
GeodemographicsGeodemographics
http://www.marthastewart.comhttp://www.goodhousekeeping.com
http://www.marthastewart.comhttp://www.goodhousekeeping.com
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19Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Categories of Porsche Buyers
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20Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Lifestyle Segmentation
● How time is spent
● Importance of things around them
● Beliefs
● Socioeconomic characteristics
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21Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Geodemographic Segmentation
Segmenting potential
customers into
neighborhood lifestyle
categories.
Combines geographic,
demographic, and lifestyle
segmentation.
http://www.redenvelope.comhttp://www.redenvelope.com
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22Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Benefit Segmentation
The process of grouping
customers into market
segments according to
the benefits they seek
from the product.
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23Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Benefit Segmentation of the Snack-Food Market
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24Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Usage-Rate Segmentation
Dividing a market by the
amount of product
bought or consumed.
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25Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
The 80/20 Principle
A principle holding that
20 percent of all customers
generate 80 percent
of the demand.
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26Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Business Marketing Segmentation
CompanyCharacteristics
CompanyCharacteristics
BuyingProcesses
BuyingProcesses
CustomerRelationshipCustomer
Relationship
Segmentation Bases
Segmentation Bases
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http://www.homedepot.comhttp://www.homedepot.com
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27Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Steps in Segmenting a Market
Select a
market for
study
Choosebases
for segmen-
tation
Selectdescrip-
tors
Profileand
analyzesegments
Selecttarget
markets
Design,imple-ment,
maintainmkting
mix
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28Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
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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29Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Strategies for Selecting Target Markets
ConcentratedStrategy
UndifferentiatedStrategy
MultisegmentStrategy
http://www.charlestongardens.comhttp://www.charlestongardens.com
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30Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Undifferentiated Targeting Strategy
Marketing approach that
views the market as one big
market with no individual
segments and thus requires
a single marketing mix.
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31Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Undifferentiated Targeting Strategy
AdvantagesAdvantages: Potential savings on
production and marketing costs
DisadvantagesDisadvantages: Unimaginative product
offerings Company more
susceptible to competition
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32Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Concentrated Targeting Strategy
A strategy used to select
one segment of a market for
targeting marketing efforts.
77
Niche
77
One segment of
a market.
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33Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Concentrated Targeting Strategy
AdvantagesAdvantages: 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
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34Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
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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35Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
AdvantagesAdvantages: Greater financial success Economies of scale
DisadvantagesDisadvantages: High costs Cannibalization
Multisegment Targeting Strategy
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36Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Costs of Multisegment Targeting
$ Product design costs
$ Production costs
$ Promotion costs
$ Inventory costs
$ Marketing research costs
$ Management costs
$ Cannibalization
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37Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Cannibalization
Situation that occurs when
sales of a new product
cut into sales of a
firm’s existing products.
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38Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
PositioningDeveloping a specific
marketing mix to
influence potential
customers’ overall
perception of a brand,
product line, or
organization in
general.
88PositionThe place a product,
brand, or group of
products occupies in
consumers’ minds
relative to competing
offerings.
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39Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Positioning of Procter & Gamble Detergents
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40Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Effective Positioning
1. Assess the positions of competing products
2. Determine the dimensions of these positions
3. Choose an effective market position
http://www.pg.comhttp://www.pg.com
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41Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Product Differentiation
A positioning strategy that
some firms use to
distinguish their products
from those of competitors.
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42Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Perceptual Mapping
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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43Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Perceptual Map and Positioning Strategy for Levi Strauss Products
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44Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Positioning 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
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45Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Repositioning
Changing consumers’
perceptions of a brand
in relation to
competing brands.
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46Chapter 7 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning
Global Issues
Global Market Standardization
Target smaller, defined markets
TrendsTrends
99