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A MarketA group of people who need and want a particular product, and have the buying
power, willingness, and authority to purchase the product.
What’s a Market?
Need Ability Willingness Authority
Two Basic Types of Markets
HOMOGENOUS
consumers have similar
product needs
“Mass Market Approach”
Two Basic Types of Markets
• HETEROGENEOUS
consumers have
dissimilar product needs
“Target Market Approach”
A fairly homogenous (similar) group of consumers to whom a company wishes to appeal
What is a Target Market?
A Target Marketing Approach:
implies that a firm’s marketing mix (product, place, price, promotion)
is focused on a single market segment
Market SegmentA group of individuals that share one or more characteristic in common that cause them to have relatively similar
product needs.
Target Market Selection Process
2. Determine Which Segmentation Variables to Use2. Determine Which Segmentation Variables to Use
1. Identify the Appropriate Targeting Strategy1. Identify the Appropriate Targeting Strategy
3. Develop Market Segment Profiles3. Develop Market Segment Profiles
4. Evaluate Relevant Market Segments4. Evaluate Relevant Market Segments
5. Select Specific Target Markets5. Select Specific Target Markets
Undifferentiated Strategy
Single Single Marketing Marketing
MixMix
Target MarketTarget MarketOrganizationOrganization
Concentrated Strategy
Single Single Marketing Marketing
MixMix
Target MarketTarget MarketOrganizationOrganization
Differentiated Strategy
OrganizationOrganization
Marketing Mix 1Marketing Mix 1
Target MarketTarget Market
Marketing Mix 2Marketing Mix 2
Target Marketers have Specific Aims
In a product-market area
A segmenter A combiner
The Strategy
Strategyone
strategyStrategy
three
Strategytwo
The
Using single targetmarket approach can aim at one sub-market with one marketing mix
Using multiple targetmarket approach canaim at two or more sub-markets with differentmarketing mixes.
Using combined targetmarket approach can aim at two or more submarkets with the same marketing mixes.
What is the conceptual philosophy underlying target marketing?
P
Q0
D
P
Q0
P
Q0
0
0
0 0
0 0
0 0
A. Mass marketer sees one demand curve for its target market
B. Combiner sees one demand curve for its combined target market
C. Segmenter sees one demand curve for each submarket
That there are different demand curves in different market segments
Detailed View of Demographic Variables
Age Gender Race Ethnicity Income Education
Occupation Family Size Family Life Cycle Religion Social Class
Detailed View of Geographic Variables
Region Urban, Sub-
urban, Rural City Size County Size
State Size Market Density Climate Terrain
Detailed View of Psychographic Variables
Personality Attributes Motives Lifestyles
Detailed View of Behavioristic Variables
Volume Usage End Use Benefit Expectations Brand Loyalty Price Sensitivity
Target Market Selection Process
2. Determine Which Segmentation Variables to Use2. Determine Which Segmentation Variables to Use
1. Identify the Appropriate Targeting Strategy1. Identify the Appropriate Targeting Strategy
3. Develop Market Segment Profiles3. Develop Market Segment Profiles
5. Select Specific Target Markets5. Select Specific Target Markets
4. Evaluate Relevant Market Segments4. Evaluate Relevant Market Segments
How to Evaluate Market Segments
Market Potential (growth in overall market)
Company Sales Potential (market share)
Competitive Assessment (nature of competition)
Cost Estimates (competitive advantage)
How is target marketing accomplished?
Narrowing Down to Target MarketsAll needs in the world
Some generic needs
Some “broad” product-markets
One “broad” product-market
Homogeneous “narrow” product markets
Singletargetmarket
approach
Multipletargetmarket
approach
Combinedtargetmarket
approach
Disaggregatingi.e.,NAMINGbroad product-markets
Aggregatingi.e.,SEGMENTINGinto possible target markets
Selecting targetmarketing approach
Every individual has his or her own unique position in a market - those with similar positions can be
aggregated into potential target markets
C
A B
A. Product-market showing three segments B. Product-market showing six segments
AB
C
D
E
F
Dependability dimension
Stat
us d
imen
sion
Dependability dimension
Stat
us d
imen
sion
Requirements for Effective Market Segmentation
• Is the market heterogeneous?
• Is the segment identifiable and divisible?
• Can you compare and estimate the sales potential, costs,
and profits from the segments?
• Do one or more of the segments offer enough profit?
• Is it possible to reach the segment?
Segmentation Base
A characteristic of individuals or groups that is related to product use
and that can be used to divide the total market into segments.
Finding the Relevant Segmenting Dimensions
Determining dimensions(product type)
Determining dimensions(brand specific)
All potential dimensions
Qualifying dimensions
Generally relevant topurchasing behavior
Relevant to including a customer type in the product-market
Affect the customer’spurchase of a specifictype of product
Affect the customer’schoice of a specificbrand
Two approaches to choosing a segmentation base
Single-variable Segmentation
Less than$10,000
$10,000-$19,999
$20,000-$40,000
More than$40,000
e.g., Annual household income
Multivariable Variable Segmentation
Light UserModerate User
Heavy User
Urban
Suburban
Rural
Less than$10,000
$10,000-$19,999
$20,000-$40,000
More than$40,000
Annual Income
Popu
latio
n D
ensi
tyVo
lume U
sage
Demographic Trends
U.S. Age Distribution and Projections
13.0
22.7
16.3
13.6
5.7
12.8
12.0
18.7
13.4
17.5
12.0
6.2
12.4
7.7
9.2
6.6
0.0 5.0 10.0 15.0 20.0 25.0
65 and older
45 to 64
35 to 44
25 to 34
18 to 24
14 to 17
5 to 13
Younger than 5
Age
gro
ups
Percent of Population
19852000
Birth Rates (1976 and 2000)3,665
2,797
69.7%
67.2%
33%
19%
54%
34%
TOTAL BIRTHS (IN THOUSANDS)
OVERALL FERTILITY RATE (PER 1,000 WOMEN)
PERCENTAGE OF BIRTHS TO WOMEN IN THEIR 30s
CHILDLESS WIVES, 30-40 PLANNING TO HAVE CHILDREN
2000 1976
Boom and Bust
• 1945 - 1965 Baby “boom”
• 1965 - 1976 Baby “bust”
• 1976 - 1996 “Eco” Boom
• 2008 - another boom????
Impact of slowing birth rates
• Markets affected?
• Is it the same across all population
groups?
• When will it recover?
Me, Myself, and I
• 29 million Americans live alone
• 25% of Americans who love alone are divorced
• 60% of Americans who live alone are over 50
• 80% of women who live alone are over 65
• Boomer women will begin to turn 65 in 2011
Cohort Analysis
The Kids Market (4 - 10 years)
“Children are the brightest stars in the consumer constellation”
The Kids Market (4 - 10 years)
Why are they so important?
• They have their own buying power
• They influence family sending
• They are the future consumer markets
“Cradle-to-Grave” Marketing
Eco Boomers (11 - 23), a.k.a. Generation Y
The “About to be……..” generation
To Be About to Be• Inside the head of a 21 year old:
– Sophisticated– Challenge authority– Close to parents physically and emotionally– Skeptical consumers– Hardened to advertising– Less brand loyal– Attached to technology
• Automobiles: “home Sweet Car”– View driving as a social activity– And as a means of escape– And a home on wheels
• Technology: “Going Mobile”– Integrated in the very fabric of their lives– Full spectrum users
To Be About to Be
• Fashion: “More than midriffs”– Both males and females are into shopping– Lifestyle clothing
• Media and advertising: “Lifestyle interruptions”– Heavy media users– Lifestyle interruptions– Immune to ads – prefer entertainment
To Be About to Be
• Ethnic influences:– Multicultural roots– Ethnic influences on popular culture
• Customization: “Having it their way”– Customized products to suits own tastes and whims– Having it now
To Be About to Be
College Crowd+ (20-24)
a.k.a. Generation Xers
“Marketers realize that, when it comes to buying, college students lose their virginity over and over again!”
Generation Xers• more than half have cars• two-thirds have credit cards• two-thirds have telephone calling cards• half own a computer• three-quarters have cable TV premium
channels
• not prone to extravagance-dislike hype• savvy--no nonsense• demanding--cynical• visually driven• performance based consumers• bound to home• high racial/ethnic awareness
GenXers-Psychographics
The Face of the New Homemaker
The Face of the New Homemaker
• more educated
• more savvy
• more hectic lifestyles
• more hold jobs
• more are male
• want to shed the “home maker”image
The Mature Market
The Mature Market
Perhaps no other consumer market justifies segmentation
more than the mature market..the older they get the more dissimilar they become
• Healthy Indulgers (18% of 55+ group)
• Healthy Hermits (36% of 55+ group)
• Ailing Outgoers (29% of 55+ group)
• Frail Recluses (17% of 55+ group)
The Mature Market
Courtesy: American Demographics
Demographic Trends
Products Using Age Segmentation
Ownership of Cats and Dogs by Age
42
67
42
22.4
53.5
29.7
55.9
32.6 35.930.5 29
17.3
0
10
20
30
40
50
60
70
18-24 25-34 35-44 45-54 55-64 65+
Dogs Cats
Products Using Race Segmentation
Category 1990 2001 1990 2001
Total Minority
$439.9 $860.6 10.6% 12.2%
Black 307.8 572.1 7.4 8.1
Hispanic 207.5 452.4 5.0 6.4
Asian 112.9 253.8 5.0 6.4
Native American
19.2 34.8 0.5 0.5
Buying Power in $bills % Market shareMinority Buying Power
personal care (women)
personal care (men & women)
personal care (men)
apparel for kids under 2
hosiery
women’s accessories
$312 $532 41.4%
$349 $530 34.2%
$160 $212 24.3%
$379 $456 17.0%
$94 $108 12.6%
$139 $157 11.4%
All
hhlds
Black
hhlds
Percent
diff
2000 SpendingRace
Average Annual Spending(index of 100 = all US hhs)
Non-Hispanic hhs(index =$35,525)
Hispanic hhs(Index $29,333)
Food at home 99 117Cereal & baked goods 100 103Beef 96 146Pork 96 143Poultry 97 130Fish and seafood 94 162Eggs 91 176Fresh milk & cream 98 132Fruits and vegetables 97 128Sugars/sweets 101 90Fats and oils 99 114Non-alcoholic beverages. 99 107Food away from home 102 78
Sub-cultural Differences in Movie Going Behavior
All Non-Hispanic
white
Black Hispanic
Frequent attendees (2X/months+) 15% 13% 13% 36%
Low spenders $1-9/person 30% 35% 19% 16%
Medium spenders $10-11/person 30% 30% 28% 31%
High spenders $12-30/person 36% 31% 52% 49%
Regularly buy refreshments 42% 40% 40% 54%
Would stop buying refreshments if they were more expensive
74% 75% 77% 63%
Shopping Preferences
01020304050607080
discountdepartmnet
store
drugstore regulardepartment
store
specialitystore
whites blacks
Income
48
47
41
40
37
36
28
24
0 10 20 30 40 50
Buy fewer booksCut back on cell and home phone useGo to fewer concertsCut back on clothing purchasesCut back on electronics purchaseGo to fewer theaters and rent moviesForgo vacationsEat out less often
Ranking Products Consumers Would Cut Back on if Spending Decreased
Detailed View of Geographic Variables
Region Urban, Sub-
urban, Rural City Size County Size
State Size Market Density Climate Terrain
Population by State (all figures in thousands)
4,978
2,869
30,953
1,014
1,2511,773
3,995
17,338
1,589
3,362
445
784 634
710
2,519
3,102
1,580
5561,251
4,978
2,424
5,259
2,733
4,451 4,9029,336
11,628 5,630
10,91412,001
17,941
1,767
3,718
5,094
2,659 4,186 6,964
13,925
3,658
6,970
6,530
1,268
1,209(NH) 6,026(MA) 1,104(RI) 3,327(CT) 7,952(NJ) 5,020(MD) 710(DE) 598(DC)
0-1,000
1,001-2,000
2,001-4,000
4,001-5,000
5,001-8,000
8,001-17,000
over 17,000
Note: The height of the block in each state shows its relative population level
1993 Population:
Percent Change in Population by State, 1990-2000
19.2
7.2
4.0
15.0
21.1
23.1 20.5
14.1 .1
3.0
-1.4
12.1
-2.6
-4.7
.8
17.9
-2.0
1.5
2.8 4.2
3.7
-7.6
3.8-.5
-.5
-.3 -.9
-.3
-1.5-7.3
5.9
6.6 5.5 19.4
20.3
10.1
11.011.8
11.7
-2.7
1.2
4.95.116.7
3.5
4.65.18.211.510.23.2
Decreasing 0.1-3.9% 4.0-9.9% 10.0-15.9% 16-29.9%
Percent Change in population:
Detailed View of Psychographic Variables
Personality Attributes Motives Lifestyles
Brain Reserve
10 MAJOR CULTURAL TRENDS AFFECTING U.S.
CONSUMERS
10 MAJOR CULTURAL TRENDS
1. Cashing out
2. Cocooning
3. Down-aging
4. Egonomics
5. Fantasy/adventure
6. 99 lives
7. S. O. S
8. Small indulgencies
9. Staying alive
10. Vigilante consumer
10 MAJOR CULTURAL TRENDS
Lifestyle
ConsumerConsumerMarket Market
SegmentationSegmentationVariablesVariables
DemographicDemographic GeographicGeographic
PsychographicPsychographic BehavioristicBehavioristic
Detailed View of Behavioristic Variables
Volume Usage End Use Benefit Expectations Brand Loyalty Price Sensitivity
Volume Usage
End Usage
Benefits Expectation
Benefit Expectations
1Dial
Lifebuoy6
Lava
3Lux
5
4 Dove
Tone7
2
8 Coast
Zest
Lever 2000
Safeguard
Deoderant
High Moisturizing
Low Moisturizing
Nondeoderant
Brand Loyalty
Minority Consumers: Brand Loyalty
0
10
20
30
40
50
60
70
Statement A Statement B Statement C
16 to 2425 to 3435 to 4950 +
Statement A: spend more to get the bestStatement B: buy brand to feel I’ve made itStatement C: buy brands to let others know I’ve made it
Price Sensitivity
The Market Segmentation Process
Target Market Selection Process
2. Determine Which Segmentation Variables to Use2. Determine Which Segmentation Variables to Use
1. Identify the Appropriate Targeting Strategy1. Identify the Appropriate Targeting Strategy
3. Develop Market Segment Profiles3. Develop Market Segment Profiles
4. Evaluate Relevant Market Segments4. Evaluate Relevant Market Segments
5. Select Specific Target Markets5. Select Specific Target Markets
Toothpaste Market Segment Description
The sensorysegment
The sociablessegment
The worrierssegment
The independentsegment
Principal benefitsought
Flavor, productappearance
Brightness of teeth
Decayprevention Price
Demographicstrengths Children Teens, young
people Large families Men
Special behavioral
characteristics
Users of spearmintflavored
toothpaste
Smokers Heavy users Heavy users
Brandsdisproportionately
flavored
Colgatestrip
Macleans PlusWhite Ultra
BriteCrest Brands on sale
Personalitycharacteristics
High self-involvement
Highsociability
High hypochon-driasis High autonomy
Life-stylecharacteristics Hedonistic Active Conservative Value-oriented
Segment Name
Target Market Selection Process
2. Determine Which Segmentation Variables to Use2. Determine Which Segmentation Variables to Use
1. Identify the Appropriate Targeting Strategy1. Identify the Appropriate Targeting Strategy
3. Develop Market Segment Profiles3. Develop Market Segment Profiles
5. Select Specific Target Markets5. Select Specific Target Markets
4. Evaluate Relevant Market Segments4. Evaluate Relevant Market Segments
How to Evaluate Market Segments
• Market Potential
• Company Sales Potential
• Competitive Assessment
• Cost Estimates
One-on-One Marketing