© 2012 south-western, a part of cengage learning 6-1 chapter 6: target markets: segmentation,...

© 2012 South-Western, a part of Cengage Learning 6-1

Chapter 6: Target Markets: Chapter 6: Target Markets: Segmentation, Evaluation, and Segmentation, Evaluation, and PositioningPositioning

Dr. Jun YangDr. Jun Yang

University of Houston VictoriaUniversity of Houston Victoria


Learning Objectives• To learn what a market is

• To understand the differences among general targeting strategies

• To become familiar with the major segmentation variables

• To know what segment profiles are and how they are used

• To understand how to evaluate market segments

• To identify the factors that influence the selection of specific market segments for use as target markets

• To understand positioning

• To become familiar with sales forecasting methods


Types of Markets

Consumer Markets

Purchasers are household members who intend to consume or benefit from purchased products and do not buy products to make profits

Business Markets

Individuals or groups that purchase a specific kind of product for resale, direct use in producing other products, or use in general daily operations


Discussion Questions

Can you think of an example of a product produced for the business market?

Are there any instances of overlap between products aimed at consumer markets and those aimed at business markets?• What would be an example of a product that

could be targeted at both?


The Target Market Selection Process


Target-Market Selection Process

Target Market: A group of people or organizations which a business creates and maintains a marketing mix specifically designed to satisfy the needs of group members

Market Segment: Individuals, groups, or organizations with one or more similar characteristics that cause them to have similar product needs

Market Segmentation: The process of dividing a total market into groups with relatively similar product needs to design a marketing mix that matches those needs


Market Segmentation

Reason for Segmentation

Firms are better able to develop a marketing mix that satisfies a small portion of a heterogeneous market

Segmentation Variables

Characteristics of individuals, groups, or organizations used to divide a market into segments


Discussion Question

If a baseball team wants to purchase 12 cases of baseballs for use in games, is this an example of a purchase for the consumer market or the business market?


Step 1: Identify the Appropriate Targeting Strategy

Undifferentiated Targeting Strategy Should be a homogeneous market (Customers have

similar needs for a product)

A single marketing mix directed at the entire market


Step 1: Identify the Appropriate Targeting Strategy continued

Concentrated Targeting Strategy Heterogeneous market (Individuals or organizations with

diverse needs for products in the same class) Targeting a single market segment using one marketing

mix


Step 1: Identify the Appropriate Targeting Strategy continued

Differentiated Targeting Strategy Heterogeneous market

Targeting two or more segments with a marketing mix for each


Think About It

Mont Blanc pens are known for high quality and high prices

What targeting strategy does Mont Blanc use? • Undifferentiated

• Concentrated

• Differentiated


Think About It

Review this article about Apple

What market is Apple targeting in this example?

Do you think that Apple uses an undifferentiated, a concentrated, or a differentiated targeting strategy for its iPad?

http://www.businessweek.com/magazine/content/10_15/b4173018408771.htm


Step 2: Determine Which Segmentation Variables to Use

Segmentation Variables: Characteristics of individuals, groups, or organizations used to divide a market into segments


Spending Levels for Three Age Groups for Selected Product Categories

(Demographic Variables)


Think About It

Click here to watch an Old Spice commercial

What segmentation variables are being used here?

Who is the target market?

http://www.youtube.com/watch?v=owGykVbfgUE


Family Structures are More Diverse than Ever

Family structures are changing, leading to different product needs and demands from consumers


Geographic Variables

Market Density The number of potential customers within a unit of land area

Geodemographic SegmentationMarket segmentation that clusters people in units (zip codes, neighborhoods) based on lifestyle and demographic information

Micromarketing An approach to market segmentation in which organizations focus precise marketing efforts on very small geographic markets


Examples of Geographic Variables


Discussion Question

O’Neill produces sportswear and accessories for a variety of outdoor sports

What other segmentation variables is O’Neill using here?

Who is the target market?


Psychographic Variables

Personality characteristics

Motives

Lifestyles

Can be combined with other segmentation variables


Psychographic Variables

Lifestyles Motives

PersonalityCharacteristics

PsychographicVariables


Values, Attitudes & Lifestyles (VALS)

Developed by SRI Consulting Business Intelligence

Classifies consumers based on psychological characteristics that are correlated with purchase behavior and key demographics

The VALS Survey

http://www.strategicbusinessinsights.com/vals/presurvey.shtml


VALS Types and Sports Preferences


Behavioristic Variables

BenefitsSought

Usage or Application Type

UsageRates

BehavioristicVariables


Benefit Segmentation

The division of a market according to benefits that consumers want from the product• Different than other segmentation methods

because the benefits customers seek are their product needs

Three conditions must be met

1. Benefits must be identifiable

2. Customers must be divisible into segments

3. At least one segment must be accessible to marketing efforts


Variables for Segmenting Business Markets

Business Segmentation

Variables

Geographic Location

ProductUse

Type ofOrganization

CustomerSize


Think About It

Click here to view an Audi commercial

Which segmentation basis do you think the marketers intended to use?

http://www.youtube.com/watch?v=_6rj5jisB7g


Step 3: Develop Market Segment Profiles

A market segment profile describes the similarities among potential customers within a segment

Explains the differences among people and organizations in different segments

Benefits Include: Determining most attractive segment or segments

Potentially useful information for subsequent marketing decisions


Evaluate Relevant Market Segments

Cost Estimates

Sales Estimates

Competitive Assessment


Step 4: Evaluate Relevant Market Segments

Sales estimates can be measured along several dimensionsMarket Potential: The total amount of product customers will purchase in a specified period

Company Sales Potential: The maximum percentage of market share a firm can expect for a product

Breakdown Approach: Measuring company sales potential based on a general economic forecast

Buildup Approach: Measuring company sales potential by estimating how much of a product a buyer will purchase


Step 4: Evaluate Relevant Market Segments continued

Competitive Assessment

Firms must assess competition already in the segments being considered

Market segments that seem attractive based on sales estimates may be less so after competitive assessment

Cost Estimates

Maintaining the right marketing mix can be expensive

Firms must consider the cost of taking a potential product to market


Step 5: Select Specific Target Markets

Marketers must determine whether homogeneous or segmentation approach is best

Does the firm have the resources to compete in the selected market segment?

Identifying the right target market is the key to implementing a successful marketing strategy

Failure to target the right market can lead to low sales and financial losses


Product Positioning

Creating and maintaining a certain concept of a product in customers’ minds

Marketers seek to position a product so that it appears to have the characteristics the target market most desires


Toothpaste Product Positions


Discussion Question

How is Excedrin trying to shift its product positioning in this advertisement?


Perceptual Mapping

A product’s position is the result of customers’ perceptions of the product’s attributes relative to those of competitive brands

A perceptual map is created by questioning a sample of consumers about their perceptions of products, brand and organizations with respect to two or more dimensions

Ideal Clusters: Consumer consensus about desired product features

Ideal Points: An indicated preference for specific product features


Hypothetical Perceptual Map for Pain Relievers


Bases for Positioning


Repositioning

Positioning decisions are for all products, existing and new• Existing brands must be reevaluated and

sometimes repositioned

Can be accomplished by: Changing price

Changing distribution

Changing image through promotion

Changing packaging

Changing benefits


Developing Sales Forecasts

Sales Forecast: The amount of a product a company expects to sell during a specific period at a specified level of marketing activities

• Forecasting methods can be scientific or arbitrary and vary in complexity and expense

• Depends on costs, product, market characteristics, time span, purpose of forecast, historical sales data and many other variables

Forecasts are used in planning, organizing, implementing and controlling a firm’s activities


Tools in Sales Forecasting

Forecasting

Tools

ExecutiveJudgment

SurveysMultiple

Forecasting Methods

Market TestsTime Series

Analysis

Regression Analysis


Executive Judgment

A sales forecasting method based on the intuition of one or more executives Unscientific

Quick and inexpensive

Works well in situations where demand is relatively stable

Can be skewed by recent experiences

Use of the past to project the future


Surveys

Customer Forecasting: Surveying customers regarding types and quantities of products they intend to buy during a specified periodDownside is that customers may not be equipped to make accurate estimates of future product requirements

Sales Force Forecasting: Surveying a firm’s sales force regarding anticipated salesDownsides are:

Salespeople are not objective

They will underestimate sales potential in their territories if sales goals will be determined by their forecasts


Surveys continued

Expert Forecasting Survey: Prepared by economists, management consultants, advertising executives and others outside the firmMay be less motivated than internal personnel to do an effective job

Delphi Technique: Creating initial forecasts, submitting them to the company for averaging, then refiningA more complex form of the expert forecasting survey

May be repeated many times until experts reach a consensus on the forecast


Time-Series Analysis

Using historical sales data to discover patterns in the firm’s sales, such as:Trend Analysis: Using aggregate sales data from many years to determine general trends

Cycle Analysis: Analyzing sales for three to five years to assess consistent fluctuations

Seasonal Analysis: Analyzing daily, weekly, or monthly sales to assess seasonal influences

Random Factor Analysis: Attempting to attribute erratic variations to random events


Regression Analysis

Predicting sales based on finding a relationship between past sales and one or more independent variablesAlso requires the use of historical sales data

Is useful when a precise association between variables can be established and when historical data is extensive

Cannot use this method for new products


Market Test

Making a product available to buyers in one or more test areas and measuring purchases and consumer responsesInformation about customers’ actual rather than intended purchase behavior

Effective at estimating sales of new products

Time-consuming and expensive


Using Multiple Forecasting Methods

Most firms use a variety of forecasting methods and techniques to accommodate different products and/or different time frames and to confirm and refine the forecasts

Short-range and long-range forecasts will usually require different methods


Important Terms

Consumer market Breakdown approach

Business market Buildup approach

Undifferentiated targeting strategy

Product positioning

Homogeneous market Sales forecast

Heterogeneous market Executive judgment

Market segmentation Customer forecasting survey

Market segment Sales force forecasting survey

Concentrated targeting strategy

Expert forecasting survey


Important Terms continued

Differentiated targeting strategy

Delphi technique

Segmentation variables Time series analysis

Market density Trend analysis

Geodemographic segmentation

Cycle analysis

Micromarketing Seasonal analysis

Benefit segmentation Random factor analysis

Market potential Regression analysis

Company sales potential Market test

© 2012 south-western, a part of cengage learning 6-1 chapter 6: target markets: segmentation,...

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