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CHAPTER SIX
SEGMENTING AND TARGETING MARKETS
Prepared byJack Gifford
Miami University (Ohio)
© 2001 South-Western College Publishing
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WHAT IS A MARKET?
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.
INDIVIDUALS
ORGANIZATIONS
NEEDS
WANTS
PRODUCTS
SERVICES
QUALIFIERS
ABILITY
WILLINGNESS
AUTHORITY
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TYPES OF MARKETS?
CONSUMER: Intend to consume or benefit, but not to make a profit
ORGANIZATIONAL: Resale Direct use in production Use in daily operations
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THE IMPORTANCE OF MARKET SEGMENTATION
Market segmentation plays a key role in the marketing strategy of almost all successful organizations.
Because market segments differ in size and potential, segmentation helps decision makers more accurately define marketing objectives and better allocate resources.
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MARKET SEGMENTATION
There are very few products which can be sold to all people or organizations. Therefore, marketers must segment potential customers into subsets, or target markets that can be effectively and efficiently reached.
A viable target market must be…
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VIABLE TARGET MARKETS
IDENTIFIABLE MEASURABLE ACCESSIBLE SUBSTANTIAL RESPONSIVE
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MARKET SEGMENTATION
Almost any variable may be used as a segmentation variable as long as the marketer remembers…Not all buyers are alikeMeaningful sub groups must have similar
purchasing motives Every time a marketer adds another segmentation
dimension, the market gets smaller
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MAYBE I WON’T SEGMENT MY MARKET AT ALL
MASS MARKETING+ Economies of scale+ Appropriate if all consumers have the same needs
and wants+ Simplicity -------------------------------------
Ideal method IF all consumers have identical purchasing motives. Reality = RARELY HAPPENS
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DEVELOPING A TARGET MARKET STRATEGY
Analyze consumer demand Segment the market into like
clusters Select one or more segments
to target with a specific marketing mix
Position the product or service so that it is perceived by each target market segment as satisfying their needs better than the opposition.
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COMMON CONSUMER MARKET SEGMENTATON BASES
Geographic segmentation Demographic segmentation Family Life-Style segmentation Psychographic segmentation Behavioral segmentation
Occasions Benefits sought User rates Loyalty
Personal characteristics Multi-dimensional cross-classification
segmentation matrices
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GEOGRAPHIC AND DEMOGRAPHIC SEGMENTATION
GEOGRAPHIC USA / JAPAN /
AUSTRALIA SMALL TOWNS TOURIST
DESTINATIONS RURAL LIVING CLIMATE POPULATION DENSITY
DEMOGRAPHICS MARITAL STATUS INCOME EDUCATION OCCUPATION ETHNIC GENDER AGE RELIGION
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FAMILY LIFE STYLE SEGMENTATION
FAMILY LIFE STYLE SINGLE YOUNG MARRIED W/O
CHILDREN YOUNG MARRIED WITH
CHILDREN MIDDLE AGED MARRIED
WITH CHILDREN MIDDLE AGED MARRIED
W/O DEPENDENT CHILDREN
OLDER MARRIED OLDER UNMARRIED
DIVORCED WITH CHILDREN
DIVORCED WITHOUT CHILDREN
YOUNG MIDDLE AGED OLD
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PSYCHOGRAPHIC SEGMENTATION PERSONALITY MOTIVES LIFESTYLES VALUES ATTITUDES BELIEFS PERCEPTIONS OF RISK REFERENCE GROUPS NEEDS
VALS2•RESOURCES
•SELF-ORIENTATION
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BEHAVIORAL SEGMENTATION
BENEFIT SEGMENTATION
USAGE SEGMENTATION
LOYALTY SEGMENTATION
•Nutrition, taste, calories, value to price, alcohol content, longevity, etc.
•Light, medium or heavy user; purchase pattern, how product is used, family or economy size vs singles, etc.
•Level of brand, company, family of brands, store loyalty; situation specific brand loyalty
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THE 80/20 PRINCIPLE
20% OF YOUR CUSTOMERS ACCOUNT FOR 80% OF YOUR PROFITABLE SALES.
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MUST ALSO AVOID THE MAJORITY FALLICY
Some marketers blindly pursue the largest and most visible target markets and miss very attractive niche markets
JUNIORSPETITES
MISSES
XLT
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BASIS FOR SEGMENTING BUSINESS MARKETS
PRODUCERS RESELLERS INSTITUTIONS GOVERNMENT
Marketers further divide one or more of these segments into microsegmentation or macrosegmentation variables
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MACROSEGMENTATION VARIABLES
Geographic location Customer type Customer size Product use
For example, Home Depot (retailer) targets two principal segments:
Professionals DIY Consumers
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MICROSEGMENTATION
Key purchasing criteria
Purchasing strategies
Importance of purchase
Personal characteristics
EXAMPLES
•Technical support
•Product quality
•Satisficers
•Optimizers
•Routine & small
•Major expenditure
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MICROSEGMENTATION
Personal characteristics
Demographics Decision style Tolerance for risk Confidence level Job responsibilities
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STEPS IN SEGMENTING A MARKET
1 Select a market or product category for study2 Choose a basis or bases for segmenting the market3 Select the specific segmentation variables for use
(descriptors)4 Profile and evaluate segment(s)
A SizeB Expected growthC Purchase frequencyD Current brand usageE Brand loyaltyF Long-term sales and profit potential
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STEPS IN SEGMENTING A MARKET
5 Select the target market(s)6 Design, implement and maintain appropriate
marketing mixes (product, price, promotion, distribution)
Steps five and six are actually marketing activities that follow market segmentation, but are natural outcomes of the segmentation process.
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ALTERNATIVE STRATEGIES
UNDIFFERENTIATED
CONCENTRATED
MULTISEGMENT
Sale of barley, oats or wheat by College Corner Cooperative (undifferentiated product to any buyers)
Marketing of Skool 17” electric chainsaws to Sears for home use by consumers (differentiated product to fill specific need
Dell Optiplex Gxi with custom configuration to student market
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POSITIONING AND PERCEPTUAL MAPPING( IN CONSUMER’S MIND RELATIVE TO ALTERNATIVES)
•Price
•Cleanliness
•Recreational facilities
•Room amenities
•In-house food service
•Location
•Parking facilities
•Safety
•Other ???
HOTELSWhat two dimensions are the most important to a female business executive when selecting a hotel?
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PERCEPTUAL MAP: HOTELS
1 Days Inn/AmeriHost
2 Embassy Suites
3 Holiday Inn
4 Holiday Express
5 Howard Johnson
6 Hyatt
Using your two dimensions, where would you place on this perceptual map each of these hotels?
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REPOSITIONING
Sometimes a firm finds itself in a quadrant of the perceptual map that has become saturated with competing customers. In this case the company may choose to REPOSITION itself in a less competitive quadrant to draw customers who value other product or service attributes