Segmenting and Targeting Markets

Segmenting and Targeting Markets
Chapter 6
Prepared by
Deborah Baker
Texas Christian University
Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 1

©2005 South-Western/Thomson Learning
Learning Objectives
1. Describe the characteristics of markets

and market segments.
2. Explain the importance of market

segmentation.
3. Discuss criteria for successful market

segmentation.

Learning Objectives (continued)
4. Describe the bases commonly used to

segment consumer markets.
5. Describe the bases for segmenting

business markets.
6. List the steps involved in segmenting

markets.

Learning Objectives (continued)
7. Discuss alternative strategies for

selecting target markets.
8. Explain how and why firms implement

positioning strategies and how product
differentiation plays a role.
9. Discuss global market segmentation

and targeting issues.

1 Learning Objective
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http://www.kidscuts.com
Describe the
characteristics
of markets and
market segments.

1 Market Segmentation
People
People or
or organizations
organizations with
with
Market
Market needs
needs or
or wants
wants and
and the
the ability
ability and
and
willingness
willingness to
to buy
buy
AA subgroup
subgroup of of people
people or
or
Market
Market organizations
organizations sharing
sharing one
one or
or more
more
Segment
Segment characteristics
characteristics that
that cause
cause them
them to
to
have
have similar
similar product
product needs.
needs.
The
The process
process ofof dividing
dividing aa market
market
Market
Market into
into meaningful,
meaningful, relatively
relatively similar,
similar,
Segmentation
Segmentation identifiable
identifiable segments
segments or or groups.
groups.
1 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.
1 The Concept of Market Segmentation

Explain the
importance of
market
segmentation.

The Importance of
2
Market Segmentation
 Markets have a variety of product

needs and preferences
 Marketers can better define

customer needs
 Decision makers can define objectives

and allocate resources more accurately

Discuss criteria for

successful market
segmentation.

3 Criteria for Segmentation
Segment
Segment must
must be
be large
large
Substantiality
Substantiality enough
enough to
to warrant
warrant aa special
special
marketing
marketing mix.
mix.
Identifiability
Identifiability Segments
Segments must
must be
be identifiable
identifiable
Measurability
Measurability and
and their
their size
size measurable.
measurable.
Members
Members ofof targeted
targeted segments
segments
Accessibility
Accessibility must
must be
be reachable
reachable with
with
marketing
marketing mix.
mix.
Unless
Unless segment
segment responds
responds to to aa
Responsiveness
Responsiveness marketing
marketing mix
mix differently,
differently, no
no
separate
separate treatment
treatment isis needed.
needed.
Describe the bases

commonly used to
segment consumer
markets.

4 Segmentation Bases
Characteristics of individuals,
groups,
or organizations used
to divide a total market
into segments.
(variables)

4 Bases for Segmentation
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Geography
Geography
Demographics
Demographics
Psychographics
Psychographics
Benefits
Benefits Sought
Sought
Usage
Usage Rate
Rate
4 Geographic Segmentation
Segmenting markets by
region of the country or world,
market size, market density,
or climate.

4 Geographic Segmentation
 Region of the country or world
 Market size
 Market density
 Climate

4 Benefits of Regional Segmentation
 New ways to generate sales in

sluggish and competitive markets
 Scanner data allow assessment of
best selling brands in region
 Regional brands appeal to local
preferences
 React more quickly to competition

4 Demographic Segmentation
Segmenting markets
by age, gender, income, ethnic
background,
and family life cycle

Bases for
4
Demographic Segmentation
 Age
 Gender
 Income
 Ethnic background
 Family Life Cycle

4 Ethnic Background
 Largest ethnic markets are:

African-American
Hispanic-American
Asian-American
 Will comprise 1/3 of U.S. population

by 2010 with buying power of a
trillion dollars

4 Family Life Cycle
Age
Marital Children
Status

4 Family Life Cycle

4 Psychographic Segmentation
Market segmentation on
the basis of personality,
motives, lifestyles, and
geodemographics.

Bases for
4
On
Psychographic Segmentation
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Personality
Personality
Motives
Motives
Lifestyles
Lifestyles
Psychographic
Psychographic
Segmentation
Segmentation
Geodemographics
Geodemographics
4 Taxonomy of Porsche Buyers

4 Lifestyle Segmentation
 How time is spent

 Importance of things
around them
 Beliefs
 Socioeconomic
characteristics

4 Geodemographic Segmentation
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Segmenting potential
customers into neighborhood
lifestyle categories.
Combines geographic,
demographic, and lifestyle
segmentation.

4 Benefit Segmentation
The process of grouping

customers into market
segments according to
the benefits they seek
from the product.

Benefit Segmentation
4
of the Snack-Food Market

4 Usage-Rate Segmentation
Dividing a market by the

amount of product
bought or consumed.

4 The 80/20 Principle
A principle holding that

20 percent of all customers
generate 80 percent
of the demand.

Describe the bases

for segmenting
business markets.

5 Business Marketing Segmentation
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Segmentation
Segmentation
Bases
Bases
Company
Company Buying
Buying Customer
Customer
Characteristics
Characteristics Processes
Processes Relationship
Relationship

List the steps

involved in
segmenting
markets.

6 Steps in Segmenting a Market
Select Choose Select Profile Select Design,

a bases descrip- and target imple-
market for tors analyze markets ment,
for segmen- segments maintain
study tation mkting
mix

Discuss alternative
strategies for
selecting target
markets.

7 Target Market
A group of people or
organizations for which an
organization designs,
implements, and maintains a
marketing mix intended to meet
the needs of that group,
resulting in mutually satisfying
exchanges.

Strategies for Selecting
7
On
Target Markets
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Undifferentiated Concentrated Multisegment

Strategy Strategy Strategy
Undifferentiated
7
Targeting Strategy
Marketing approach that

views the market as one big
market with no individual
segments and thus requires a
single marketing mix.

Undifferentiated
7
Targeting Strategy
Advantages:
 Potential savings on
production and marketing
costs
Disadvantages:
Disadvantages
 Unimaginative product
offerings
 Company more
susceptible to competition

Concentrated
7
Targeting Strategy
A strategy used to select one

segment of a market for
targeting marketing efforts.

7 Niche
One segment of
a market.

Concentrated
7
Targeting Strategy
Advantages:
Advantages
 Concentration of resources
 Meets narrowly defined
segment
 Small firms can compete
 Strong positioning
Disadvantages:
Disadvantages
 Segments too small, or
changing
 Large competitors may
market to niche segment
Multisegment
7
Targeting Strategy
A strategy that chooses

two or more well-defined
market segments and
develops a distinct marketing
mix for each.

Multisegment
7
Targeting Strategy
Advantages:
Advantages
 Greater financial success
 Economies of scale
Disadvantages:
Disadvantages
 High costs
 Cannibalization

7 Costs of Multisegment Targeting
$ Product design costs

$ Production costs
$ Promotion costs
$ Inventory costs
$ Marketing research costs
$ Management costs
$ Cannibalization
7 Cannibalization
Situation that occurs when

sales of a new product
cut into sales of a
firm’s existing products.

Explain how and

why firms implement
positioning strategies
and how product
differentiation plays
a role.

8 Positioning
Developing a specific marketing

mix to influence potential
customers’ overall perception of
a brand, product line, or
organization in general.

8 Position
The place a product, brand,

or group of products occupies
in consumers’ minds relative
to competing offerings.

Positioning of
8
Procter & Gamble Detergents

On
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8 http://www.pg.com
http://www.pg.com Effective Positioning
1. Assess the positions of

competing products
2. Determine the dimensions of

these positions
3. Choose an effective market

position
8 Product Differentiation
A positioning strategy that

some firms use to distinguish
their products from those of
competitors.

8 Perceptual Mapping
A means of displaying or
graphing, in two or more
dimensions, the location of
products, brands, or groups of
products in customers’ minds.

Perceptual Map and Positioning
Strategy for Levi Strauss Products

8 Positioning Bases
Attribute
Attribute
Price
Price and
and Quality
Quality
Use
Use or
or Application
Application
Product
Product User
User
Positioning
Positioning
Bases Product
Product Class
Class
Bases
Competitor
Competitor
8 Repositioning
Changing consumers’
perceptions of a brand
in relation to
competing brands.

Discuss global
market
segmentation and
targeting issues.

9 Global Issues
Trends
Trends
 Global Market
Standardization
 Target smaller,
defined markets


Segmenting and Targeting Markets

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Segmenting and Targeting Markets

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 1

1. Describe the characteristics of markets

2. Explain the importance of market

3. Discuss criteria for successful market

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 2

4. Describe the bases commonly used to

5. Describe the bases for segmenting

6. List the steps involved in segmenting

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 3

7. Discuss alternative strategies for

8. Explain how and why firms implement

9. Discuss global market segmentation

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 4

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 5

(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

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 8

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 9

 Markets have a variety of product

 Marketers can better define

 Decision makers can define objectives

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 10

Discuss criteria for

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 11

Describe the bases

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 13

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 14

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 16

 Region of the country or world

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 17

 New ways to generate sales in

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 18

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 19

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 20

 Largest ethnic markets are:

 Will comprise 1/3 of U.S. population

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 21

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 22

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 23

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 24

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 26

 How time is spent

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 27

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 28

The process of grouping

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 29

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 30

Dividing a market by the

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 31

A principle holding that

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 32

Describe the bases

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 33

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 34

List the steps

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 35

Select Choose Select Profile Select Design,

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 36

Chapter 6 Essentials of Marketing 4e Lamb Hair McDaniel 37