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chapter 7
Market Segmentation and Target MarketsMarket Segmentation and Target Markets
Harcourt, Inc.
Dr. Rosenbloom
ObjectivesObjectives
Understand the concepts: market, Understand the concepts: market, segmentation, and target marketssegmentation, and target markets
Learn the advantages and Learn the advantages and disadvantages of target marketingdisadvantages of target marketing
Explain the steps in target market Explain the steps in target market selectionselection
Dr. Rosenbloom
Discuss segmentation criteria, Discuss segmentation criteria, strategies, bases, and information strategies, bases, and information sourcessources
Understand market profiling and Understand market profiling and positioning strategiespositioning strategies
Discuss differences for business Discuss differences for business and international marketingand international marketing
ObjectivesObjectives
Dr. Rosenbloom
What is a market?What is a market?
Individuals or organizations Individuals or organizations who:who: Are willing, able, and capable of Are willing, able, and capable of
purchasing a firm’s productpurchasing a firm’s product Segmentation is critical because Segmentation is critical because
demand is often heterogeneousdemand is often heterogeneous
Dr. Rosenbloom
What is market segmentation?What is market segmentation?
Market SegmentationMarket Segmentation Process of dividing a large Process of dividing a large
market into smaller target market into smaller target markets, or customer groups markets, or customer groups with similar needs and/or with similar needs and/or desiresdesires
Dr. Rosenbloom
Market SegmentationMarket Segmentation
Mass Market
Niche Micro-marketing The
Individual
Personal-izationMicro-
marketingNicheStandardized Marketing
Mix
Continuum of Market Segmentation Size
Continuum of Market Segmentation Size
Dr. Rosenbloom
Target MarketingTarget Marketing
AdvantagesAdvantages Easier analysis of potential and actual Easier analysis of potential and actual
consumersconsumers Tailoring of products to marketTailoring of products to market Assessment of demand potentialAssessment of demand potential Identify competing productsIdentify competing products Increased sales effectiveness and cost Increased sales effectiveness and cost
efficienciesefficiencies Product positioning and easy identification Product positioning and easy identification
of opportunitiesof opportunities
Dr. Rosenbloom
Target MarketingTarget Marketing
DisadvantagesDisadvantages Increased marketing costsIncreased marketing costs Personalization can become Personalization can become
burdensome to manageburdensome to manage Faux segmentation may be viewed Faux segmentation may be viewed
cynicallycynically Narrow segmentation can impact Narrow segmentation can impact
brand loyaltybrand loyalty Ethics and stereotyping issuesEthics and stereotyping issues
Dr. Rosenbloom
Target Market SelectionTarget Market Selection
Identify Total MarketIdentify Total Market
Determine Need for Determine Need for SegmentationSegmentation
Determine Bases for Determine Bases for SegmentationSegmentation
Profile Each Selected Profile Each Selected SegmentSegment
Assess Potential Assess Potential Profitability of Segment Profitability of Segment
and Select Target Segmentand Select Target Segment
Select Positioning Select Positioning StrategyStrategy
Develop and Implement Develop and Implement Appropriate Marketing MixAppropriate Marketing Mix
Monitor, Evaluate and Monitor, Evaluate and ControlControl
Dr. Rosenbloom
Market CriteriaMarket Criteria
Segmentable markets are:Segmentable markets are: HeterogeneousHeterogeneous MeasurableMeasurable SubstantialSubstantial ActionableActionable
• Companies must be able to respond to preferences with an appropriate marketing mix
AccessibleAccessible• Market must be efficiently reachable
Dr. Rosenbloom
External FactorsExternal Factors
Stage in product life cycleStage in product life cycle CompetitionCompetition Product specific issuesProduct specific issues Market for the productMarket for the product
Dr. Rosenbloom
Segmentation VariablesSegmentation Variables
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
Dr. Rosenbloom
FamilyFamilyFamilyFamily
Income LevelIncome LevelIncome LevelIncome Level
EthnicityEthnicityEthnicityEthnicityEducationEducationEducationEducation
AgeAgeAgeAge
Demographic SegmentationDemographic Segmentation
Dr. Rosenbloom
Demographic SegmentationDemographic Segmentation
AgeAge Some products Some products
are marketed to are marketed to specific age specific age groupsgroups
Dr. Rosenbloom
Demographic SegmentationDemographic Segmentation
AgeAge Some products Some products
are marketed to are marketed to specific age specific age groupsgroups
Dr. Rosenbloom
Demographic SegmentationDemographic Segmentation
Income LevelIncome Level Some products Some products
are marketed to are marketed to consumers with consumers with different income different income levelslevels
Dr. Rosenbloom
Demographic SegmentationDemographic Segmentation
Income LevelIncome Level Some products Some products
are marketed to are marketed to consumers with consumers with different income different income levelslevels
Dr. Rosenbloom
Demographic SegmentationDemographic Segmentation
Hal Riney and Hal Riney and PartnersPartners
Bartles and JamesBartles and James
Dr. Rosenbloom
Demographic SegmentationDemographic Segmentation
FamilyFamily Some products are Some products are
marketed to marketed to consumers with consumers with special family special family considerationconsideration
• Family Life Cycle
• Bachelor, marriage, married with children, retired, etc.
Dr. Rosenbloom
Functions Of AdvertisingFunctions Of Advertising
The Martin AgencyThe Martin Agency
KinderCareKinderCare
Dr. Rosenbloom
Demographic SegmentationDemographic Segmentation
FamilyFamily Some products are Some products are
marketed to marketed to consumers with consumers with special family special family considerationconsideration
• Family Life Cycle
• Bachelor, marriage, married with children, retired, etc.
Dr. Rosenbloom
Demographic SegmentationDemographic Segmentation
EducationEducation Some products are Some products are
marketed to marketed to consumers with consumers with certain educational certain educational levelslevels
Dr. Rosenbloom
Demographic SegmentationDemographic Segmentation
EthnicityEthnicity Some products are Some products are
marketed to marketed to consumers from consumers from specific ethnic specific ethnic backgroundsbackgrounds
Dr. Rosenbloom
Demographic SegmentationDemographic Segmentation
EthnicityEthnicity Some products are Some products are
marketed to marketed to consumers from consumers from specific ethnic specific ethnic backgroundsbackgrounds
Dr. Rosenbloom
Segmentation VariablesSegmentation Variables
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
Dr. Rosenbloom
Geographic SegmentationGeographic Segmentation
When an organization localizes its When an organization localizes its marketing efforts to accommodate the marketing efforts to accommodate the unique needs of specific geographic unique needs of specific geographic regionsregions
Dr. Rosenbloom
Geographic SegmentationGeographic Segmentation
When an organization localizes its When an organization localizes its marketing efforts to accommodate the marketing efforts to accommodate the unique needs of specific geographic unique needs of specific geographic regionsregions
Dr. Rosenbloom
Geographic SegmentationGeographic Segmentation
Metropolitan Statistical AreasMetropolitan Statistical Areas An urbanized area of 50,000 and a total An urbanized area of 50,000 and a total
metropolitan area population of at least metropolitan area population of at least 100,000100,000• Charlottesville, Virginia
Dr. Rosenbloom
Geographic SegmentationGeographic Segmentation
Primary Metropolitan Statistical Primary Metropolitan Statistical AreasAreas An urbanized county or cluster of An urbanized county or cluster of
counties with a population of more counties with a population of more than 1 millionthan 1 million• Gary/Hammond, Indiana
Dr. Rosenbloom
Geographic SegmentationGeographic Segmentation
Consolidated Metropolitan Consolidated Metropolitan Statistical AreaStatistical Area A metropolitan area that includes at A metropolitan area that includes at
least two PMSAsleast two PMSAs• Baltimore, Maryland and Washington,
D.C.
Dr. Rosenbloom
Segmenting Consumer MarketsSegmenting Consumer Markets
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
Dr. Rosenbloom
Psychographic SegmentationPsychographic Segmentation
Grouping customers together Grouping customers together based on social class, based on social class, lifestyles and psychological lifestyles and psychological characteristics (attitudes, characteristics (attitudes, interests and opinions)interests and opinions)
PRIZM analysis from ClaritasPRIZM analysis from Claritas
Dr. Rosenbloom
Segmenting Consumer MarketsSegmenting Consumer Markets
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
Dr. Rosenbloom
Benefits-Sought SegmentationBenefits-Sought Segmentation
Markets can be Markets can be segmented based segmented based on the benefits that on the benefits that consumers desire consumers desire from using a from using a specific productspecific product
Dr. Rosenbloom
Benefits-Sought SegmentationBenefits-Sought Segmentation
Bozell, IncorporatedBozell, Incorporated
American Pork American Pork CouncilCouncil
Dr. Rosenbloom
Segmenting Consumer MarketsSegmenting Consumer Markets
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
Dr. Rosenbloom
Situation SegmentationSituation Segmentation
Purchase situation or occasionPurchase situation or occasion Physical surroundingsPhysical surroundings Social surroundingsSocial surroundings Temporal perspectiveTemporal perspective
• How much time to make a purchase? Task definitionTask definition Pre-purchase attitudePre-purchase attitude
Dr. Rosenbloom
Segmenting Consumer MarketsSegmenting Consumer Markets
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
Dr. Rosenbloom
Light Users
80%
Light Users
80%Heavy Users
20%
Heavy Users
20%
Behavior/Usage SegmentationBehavior/Usage Segmentation
Markets can be segmented by how often or how Markets can be segmented by how often or how heavily consumers use a specific productheavily consumers use a specific product 80/20 Principle - 80% of revenue generated by 20% 80/20 Principle - 80% of revenue generated by 20%
of customersof customers
Dr. Rosenbloom
Segmentation DataSegmentation Data
Internal sourcesInternal sources In-house customer and marketing databasesIn-house customer and marketing databases Data mine to explore patterns and Data mine to explore patterns and
relationships in collected datarelationships in collected data External sourcesExternal sources
Lists of catalog/magazine subscribersLists of catalog/magazine subscribers U.S. Census informationU.S. Census information Mediamark, CACI Marketing Systems, etc.Mediamark, CACI Marketing Systems, etc.
Dr. Rosenbloom
Positioning StrategyPositioning Strategy
Differentiation Differentiation through:through: Price/quality - Price/quality -
emphasize value emphasize value in terms of in terms of quality, price, or quality, price, or bothboth
Dr. Rosenbloom
Positioning StrategyPositioning Strategy
Differentiation Differentiation through:through: Product attributes - Product attributes -
characteristics as a characteristics as a positioning basepositioning base
Product usage - Product usage - positioning based positioning based on a products on a products typical usetypical use
Differentiation Differentiation through:through: Symbol - use of a Symbol - use of a
symbol or icon to symbol or icon to position a product position a product in the consumer in the consumer consciousnessconsciousness
Dr. Rosenbloom
Positioning StrategyPositioning Strategy
Differentiation Differentiation through:through: Product user - the Product user - the
typical user of a typical user of a productproduct
Dr. Rosenbloom
Positioning StrategyPositioning Strategy
Differentiation Differentiation through:through: Product class - Product class -
positioning against positioning against another type of another type of product or product product or product classclass
Dr. Rosenbloom
Positioning StrategyPositioning Strategy
Differentiation Differentiation through:through: Competition - Competition -
comparisons to a comparisons to a product’s product’s competition competition (directly or (directly or indirectly)indirectly)
Dr. Rosenbloom
Segmenting Business MarketsSegmenting Business Markets
DemographicsDemographics Industry size, growth potential, etc.Industry size, growth potential, etc.
Operating CharacteristicsOperating Characteristics Technology, brand-user status, etc.Technology, brand-user status, etc.
Purchasing ApproachesPurchasing Approaches Purchasing policies, size of orders, Purchasing policies, size of orders,
etc.etc.
Dr. Rosenbloom
Segmenting Business MarketsSegmenting Business Markets
Product Use or Usage SituationProduct Use or Usage Situation The way the product will be used The way the product will be used
and customer service levels and customer service levels requiredrequired
Situational FactorsSituational Factors Urgency, special product usesUrgency, special product uses
Buyer’s Personal CharacteristicsBuyer’s Personal Characteristics
Dr. Rosenbloom
Segmenting Global MarketsSegmenting Global Markets
EconomicEconomic Stage of development in a host Stage of development in a host
countrycountry Political/LegalPolitical/Legal
Regulations and lawsRegulations and laws CulturalCultural
Language barriers, differences in Language barriers, differences in consumer customsconsumer customs
Dr. Rosenbloom
Segmenting Global MarketsSegmenting Global Markets
Some segments transcend Some segments transcend national bordersnational borders Rich around the worldRich around the world Older and comfortableOlder and comfortable Indulged kidsIndulged kids Emerging middle classEmerging middle class Women employed outside the Women employed outside the
househouse
Dr. Rosenbloom
Market SegmentationMarket Segmentation
DifferentiatedDifferentiated ConcentratedConcentrated UndifferentiatedUndifferentiated
Dr. Rosenbloom
Differentiated MarketingDifferentiated Marketing
Differentiated Differentiated MarketingMarketing An organization An organization
targets multiple targets multiple market market segments and segments and develops develops segment segment specific mixesspecific mixes
Dr. Rosenbloom
Concentrated MarketingConcentrated Marketing
Concentrated Concentrated MarketingMarketing When an When an
organization organization concentrates its concentrates its marketing marketing efforts on a efforts on a smaller smaller segment of a segment of a larger marketlarger market
Dr. Rosenbloom
Undifferentiated MarketingUndifferentiated Marketing
Undifferentiated Undifferentiated MarketingMarketing An organization An organization
develops one develops one strategy strategy appropriate for appropriate for all members of all members of the total marketthe total market