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Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Part 3: Target Market SelectionPart 3: Target Market Selection
8. Marketing Research, Decision-
Support Systems, and SalesForecasting
9. Market Segmentation, Targeting,
and Positioning
10.Relationship Marketing,
Customer Relationship
Management (CRM), and One-to-
One Marketing
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Chapter 9Chapter 9
MarketMarketSegmentation,Segmentation,
Targeting, andTargeting, and
PositioningPositioning
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Chapter ObjectivesChapter Objectives
1. Identify the essential components of a market.2. Outline the role of market segmentation in developing a
marketing strategy.
3. Describe the criteria necessary for effectivesegmentation.
4. Explain each of the four bases for segmenting consumermarkets.
5. Identify the steps in the market segmentation process.
6. Discuss four basic strategies for reaching target
markets.7. Summarize the types of positioning strategies.
8. Explain the reasons for positioning and repositioningproducts.
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Selecting a Target MarketSelecting a Target Market
Before a marketing mix strategy can beimplemented, the marketer must identify,
evaluate, and select a target market.
Market:Market: people or institutions with
sufficient purchasing power, authority,
and willingness to buy
Target market:Target market: specific segment of
consumers most likely to purchase aparticular product
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Types of MarketsTypes of Markets
Consumer products:Consumer products: goods or servicespurchased by an ultimate consumer for
personal use
Business products:Business products: goods or services
purchased for use either directly orindirectly in the production of other goods
and services for resale
The key to classification is to identify the
purchaser and the reasons for buying the
goods.
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The Role of Market SegmentationThe Role of Market Segmentation
Market SegmentationMarket SegmentationDivision of the total market into smaller,relatively homogeneous groups
No single marketing mix can satisfyeveryone. Therefore, separate marketingmixes should be used for different marketsegments.
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No Market SegmentationNo Market Segmentation
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Segmented by SexSegmented by Sex
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Segmented by AgeSegmented by Age
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Criteria for Effective SegmentationCriteria for Effective Segmentation
Market segmentation cannot be used in allcases. To be effective, segmentation must
meet the following basic requirements.
The market segments must be measurablein terms of both purchasing power andsize.
Marketers must be able to effectivelypromote to and serve a market segment.
Market segments must be sufficiently large
to be potentially profitable.The number of segments must match the
firms capabilities.
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Segmenting Consumer MarketsSegmenting Consumer Markets
Geographic Segmentation:
Geographic Segmentation: Dividing anoverall market into homogeneous groups on
the basis of their locations
Does not ensure that all consumers in alocation will make the same buyingdecision.
Help in identifying some general patterns.
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Urban Data ClassifiedUrban Data Classified
Core Based Statistical Area (CBSA)
Metropolitan Statistical Area (MSA)
Micropolitan Statistical Area
Consolidated Metropolitan Statistical Area(CMSA)
Primary Metropolitan Statistical Area
(PMSA)
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Using Geographic SegmentationUsing Geographic Segmentation
Demand for some goods and services canvary according to the geographic region
Most major brands get 40-80 percent oftheir sales from what are called coreregions
Climate is another important segmentationfactor
Northern consumers, for example, eatmore soup than Southerners
Southerners use more chlorine for theirswimming pools than Northern residents
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Geographic Information Service (GIS):Geographic Information Service (GIS):computer technology that records several
layers of data on a single map
Simplifies the job of analyzing
marketing information by placing datain a spatial format . . .
The result of which is a geographic
map overlaid with digital data about
consumers in a particular area.
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Segmenting Consumer MarketsSegmenting Consumer Markets
Demographic Segmentation:Demographic Segmentation: dividingconsumer groups according tocharacteristics such as sex, age, income,occupation, education, household size,
and stage in the family life cycle
A primary source for demographic data inthe United States is the Census Bureau
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Segmenting by GenderSegmenting by Gender
Marketers must ensure thattraditional assumptions are not false
Recently, the lines have increasingly
blurred
Some companies marketsuccessfully to both genders
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Segmenting by AgeSegmenting by Age
Identify market segments on thebasis of age
Products designed to meet thespecific needs of certain age groups
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Tweens and TeensTweens and Teens
Rapidly growing market
Significant purchasing power
Cohert Effect
Tendency among members of ageneration to be influenced and drawntogether by significant events occurringduring their key formative years, roughly17 to 22 years of age
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Baby BoomersBaby Boomers
Born from 1946 until 1965
Nearly 42 percent of U.S. adultsValues influenced both by the Vietnam War and
the career-driven era
Huge disposable income
SeniorsSeniors
By 2025, 1 in 5 over age 65
Median age is now 35.2 years
Life expectancy 74 for men and 79 for womenHeads of households aged 55-plus control about
three-quarters of the countrys total financial
assets.
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Segmenting by Ethnic
GroupSegmenting by Ethnic
Group
By 2050, nearly half of the population ofthe US will belong to nonwhite minoritygroups.
HispanicAfrican Americans
Asian Americans
Native Americans
People ofMixed Race
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Family Life Cycle Stages SegmentationFamily Life Cycle Stages Segmentation
The process of family formation and
dissolutionLife stage, not age per se, is the primary
determinant of many consumer purchases
Segmenting by Household TypeSegmenting by Household Type
Todays U.S. households are very diverse
Married couples and their children
Blended by divorce or loss of spouseHeaded by single parent, same-sex
parents, grandparents
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Segmenting by Income and ExpenditureSegmenting by Income and Expenditure
PatternsPatternsEngels Laws,Engels Laws, as family income increases:
A smaller percentage of expenditures go
for food
The percentage spent on housing and
household operations and clothing
remains constant
The percentage spent on other items(such as recreation and education)
increases
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Demographic Segmentation AbroadDemographic Segmentation Abroad
Obtaining the data necessary for globaldemographic segmentation is oftendifficult
Many countries do not operate regularlyscheduled census programs
For example, the most recent censusof Holland is now over 20 years old,and Germany skipped its censusfrom 1970 to 1987
Daily life cycle data is difficult to apply inglobal demographic segmentationefforts
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Psychographic SegmentationPsychographic Segmentation
Divides a population into groups that havesimilar psychological characteristics,values, and lifestyles
Lifestyle: peoples decisions about how tolive their daily lives, including family, job,
social, and consumer activitiesThe most common method for developing
psychographic profiles of a population is toconduct a large-scale survey
AIO statementsVALS and VALS 2
Values and Lifestyles
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Psychographic Segmentation ofGlobalPsychographic Segmentation ofGlobalMarketsMarkets like those done by Roper Starch
can paint useful pictures of the residents ofvarious countries
Roper found six psychographic consumersegments that are common to 35 nations
Strivers
Devouts
Altruists
IntimatesFun seekers
Creatives
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UsingUsingPsychographicPsychographicSegmentationSegmentation
Psychographicprofiles producerich descriptions ofpotential target
marketsGreater detail aids
in matching acompanys image
and its offeringswith the types ofconsumers whoare likelypurchasers
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ProductProduct--Related SegmentationRelated Segmentation
Dividing a consumer population intohomogeneous groups based oncharacteristics of their relationships to theproduct
Can take the form of segmenting based on:Benefits that people seek when they buy
Usage rates for a product
Consumers brand loyalty toward a
product
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BenefitsBenefits
Focuses on the attributes that people seek in
a good or service and the benefits that theyexpect to receive from that good or service
Groups consumers into segments based onwhat they want a product to do for them
Usage RatesUsage Rates
Segmenting by grouping people according to
the amounts of a product that they buy and
use
Markets often divided into heavy-user,
moderate-user, and light-user segments
The 80/20 principle (Praedos Law)
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Brand LoyaltyBrand Loyalty
Segmenting consumers grouped accordingto the strength of brand loyalty felt toward a
product
Frequent flyer programs of airlines and
many hotels
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Using Multiple Segmentation
Bases
Using Multiple Segmentation
Bases
Increase accuracy in reaching the right
markets
Combine multiple bases
Geographic and Demographic
Product-related with income and
expenditure patterns
Others
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The Market Segmentation ProcessThe Market Segmentation Process
Develop a Relevant Profile for eachSegment
Forecast
Market Potential
Forecast Probable Market Share
Select Specific Market Segments
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Strategies for ReachingStrategies for Reaching
Target MarketsTarget Markets
Undifferentiated Marketing:Undifferentiated Marketing: when a firm
produces only one product or product line
and promotes it to all customers with a single
marketing mix
Differentiated Marketing:Differentiated Marketing: when a firm
produces numerous products and promotesthem with a different marketing mix designed
to satisfy smaller segments
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Concentrated Marketing (nicheConcentrated Marketing (nichemarketing):marketing): when a firm commits all of its
marketing resources to serve a single market
segment
Micromarketing:Micromarketing: involves targeting potentialcustomers at a very basic level, such as byZIP code, specific occupation, lifestyle, or
individual household
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Selecting and Executing a StrategySelecting and Executing a Strategy
No single, best choice strategy suits allfirms
Determinants of a market-specific strategy:
Company resourcesProduct homogeneity
Stage in the product life-cycle
Competitors strategy
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Positioning:Positioning: a marketing strategy that
emphasizes serving a specific marketsegment by achieving a certain position
in buyers minds
Attributes
Price/qualityCompetitors
Application
Product userProduct class
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Positioning mapPositioning mapGraphic illustration that shows differences
in consumers perceptions of competing
products
RepositionReposition
Marketing strategy to change the position
of its product in consumers minds relative
to the positions of competing products
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Hypothetical
CompetitivePositioning
Map for
Selected
Retailers