Ch.4 – Focusing Marketing Strategy with Segmentation and Positioning

Market
A group of potential customers with similar needs who are willing to exchange something of value with sellers offering various goods or services – that is, ways of satisfying those needs.
Two Basic Types of Markets
Generic Market
Product-Market
Generic Market
A market with broadly similar needs – and sellers offering various, often diverse, ways of satisfying those needs.
Product-Market
A market with very similar needs and sellers offering various close substitute ways of satisfying those needs.
A complete product- market definition includes a four-part description:
What – Product Type
To Meet What – Customer (user) Needs
For Whom – Customer Types
Where – Geographic Area
Product Type
Describes the goods and/or services that customers want.
Customer (user) Needs
The needs the product type satisfies for the customer.
Customer Types
The final customer or user of a product type.
Geographic Area
Where a firm competes, or plans to compete, for customers.
Market Segmentation
A two step process of:
(1) Naming broad product-markets
(2) Segmenting these broad product-markets in order to select target markets and develop suitable marketing mixes.
Segmenting
An aggregating process – clustering people with similar needs into a “market segment.”
Market Segment
A (relatively) homogeneous group of customers who will respond to a marketing mix in a similar way.
Ideally, “good” market segments meet the following criteria:
1) Homogeneous Within
2) Heterogeneous Between
3) Substantial
4) Operational
Homogeneous Within
The customers in a market segment should be as similar as possible with respect to their likely responses to marketing mix variables and their segmenting dimensions.
Heterogeneous Between
The customers in different segments should be as different as possible with respect to their likely responses to marketing mix variables and their segmenting dimensions.
Substantial
The segment should be big enough to be profitable.
Operational
The segmenting dimensions should be useful for identifying customers and deciding on marketing mix variables.
Three Basic Ways to Develop Market-Oriented Strategies in a Broad Product-Market
1) Single Target Market Approach
2) Multiple Target Market Approach
3) Combined Target Market Approach
Single Target Market Approach
Segmenting the market and picking one of the homogeneous segments as the firm’s target market.
Multiple Target Market Approach
Segmenting the market and choosing two or more segments, and then treating each as a separate target market needing a different marketing mix.
Combined Target Market Approach
Combining two or more submarkets into one larger target market as a basis for one strategy.
Combiners
Try to increase the size of their target markets by combining two or more segments.
Segmenters
Aim at one or more homogeneous segments and try to develop a different marketing mix for each segment.
Two Different Types of Dimensions
1) Qualifying Dimensions
2) Determining Dimensions
Qualifying Dimensions
Those relevant to including a customer type in a product-market.
Determining Dimensions
Those that actually affect the customer’s purchase of a specific product or brand in a product-market.
Best-Practice Approach for Segmenting Product-Markets
Select Broad Product-Market > Identify Potential Customer Needs > Form Initial Homogeneous Submarkets > Identify Determining Dimensions > Name the Possible Product-Markets > Evaluate Product-Market Segment Behaviors > Estimate the Size of Each Product-Market Segment