MKT Chapter 8

A Market Is
people or organizations with

needs or wants, and with

the ability and

the willingness to buy.

Market
Segment
A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.
Market
Segmentation
The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.
The Importance of 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
Markets are segmented for three reasons:
Segmentation enables the identification of groups of customers with similar needs, and the analysis of the buying behavior of these groups.
Segmentation provides information for the specific matching of the design of marketing mixes with the characteristics of the segment.
Segmentation helps marketers satisfy customers wants and needs while meeting the organization’s objectives.
Criteria for Segmentation
1. Substantuality
2. Identifiability and Measurability
3. Accessibility
4. Responsiveness
Substantiality
Segment must be large enough to warrant a special marketing mix.
Identifiability and Measurability
Segments must be identifiable and their size measurable.
Accessibility
Members of targeted segments must be reachable with marketing mix.
Responsivenes
Unless segment responds to a marketing mix differently, no separate treatment is needed.
Bases for Segmentation
1. Geogrphy
2. Demographics
3. Psychographics
4. benefits Sought
5.Usage rate
Geographic segmentation
of markets is based on the region, market size, market density (number of people within a unit of land), or climate.
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
Quicker reaction to competition
Demographic Segmentation
age, gender, income, ethnic background, and family life cycle.
Age Segmentation
The War Generation (ages 61-66)
The Great Depression Generation (ages 67-76)
The G.I. Generation (ages 77+)

Tweens
Teens
Generation Y
Generation X
Baby Boomers

Ethnic segmentation
Largest ethnic markets are:
Hispanic Americans
African Americans
Asian Americans
Psychographic Segmentation
Market segmentation on the basis of personality, motives, lifestyles, and geodemographics.
Bases for Psychographic Segmentation
Personality, Motives, Lifestyle, Geodemographics
Personality
Reflects a person’s traits, attitudes, and habits.
Motives
Marketers might appeal to emotional, rational, or status motives, among others
Lifestyle segmentation
divides people into groups according to how time is spent, the importance of things around them, beliefs, and socioeconomic characteristics such as income and education.
Geodemographic
Segmentation
Segmenting potential
customers into
neighborhood lifestyle
categories.
Combines geographic,
demographic, and lifestyle segmentation.
Benefit Segmentation
The process of grouping customers into market segments according to the benefits they seek from the product.
Usage-Rate Segmentation
Dividing a market by the amount of product bought or consumed
80/20 Principle
A principle holding that 20 percent of all customers generate 80 percent of the demand.
Bases for Segmenting Business Markets
Producers
Resellers
Government
Institutions
Company characteristics
geographic location, type of company, company size, and product use.
Satisficers
Business customers who place an order with the first familiar supplier to satisfy product and delivery requirements.
Optimizers
Business customers who consider numerous suppliers, both familiar and unfamiliar, solicit bids, and study all proposals carefully before selecting one.
Buyer Characteristics
1. Demographic Characteristics
2. Decision style
3.Tolerance for risk
4. Confidence level
5. Job responsibilities
Steps in Segmenting Markets
(1) selecting a market or product category for study;
(2) choosing a basis or bases for segmenting the market;
(3) selecting segmentation descriptors;
(4) profiling and analyzing segments;
(5) selecting target markets; and
(6) designing, implementing, and maintaining appropriate marketing mixes.
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 Target Markets
three general strategies for selecting target markets are undifferentiated, concentrated, and multisegment targeting.
Undifferentiated Targeting Strategy
A marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix.
Undifferentiated
Strategy
Advantage:

Potential savings on production and marketing costs
Disadvantages:

Unimaginative product offerings
Company more susceptible to competition

Concentrated Targeting Strategy
A strategy used to select one segment of a market for targeting marketing efforts.
Niche One segment of
a market.
Concentrated Targeting Strategy
Advantage:

Concentration of resources
Meets narrowly defined segment
Small firms can compete
Strong positioning
Disadvantages:

Segments too small, or changing
Large competitors may market to niche segment

Multisegment Targeting Strategy
A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.
Multisegment Targeting Strategy
Greater financial success

Economies of scale
Disadvantages:

Higher costs
Cannibalization

Examples of multisegment targeting strategy include Best Buy, Gap, Walmart.

Costs of Multisegment Targeting Strategy
Product design costs
Production costs
Promotion costs
Inventory costs
Marketing research costs
Management costs
Cannibalization
Cannibalization
is a situation that occurs when sales of a new product cut into sales of a firm’s existing products.
One-to-One
Marketing is
1. Individulaized
2. Information intensive
3. Long- term
4. Personalized
One-to-One Marketing
Has a Goal of
! cost reducation
2. customer retention
3. increased revenue
4. customer loyalty
One-to-One Marketing Trends
One-size-fits all marketing no longer relevant

Direct and personal marketing efforts will grow to meet needs of busy consumers.

Consumers will be loyal to companies that have earned—and reinforced—their loyalty.

Mass-media approaches will decline as technology allows better customer tracking.

Positioning
developing a specific marketing mix to influence potential customers’ overall perception or a brand, product line, or organization in general.
Effective Positioning
1. Assess the positions occupied by competing products
2. Determine the dimensions underlying these positions
3. Choose a market position where marketing efforts will have the greatest impact
Product Differentiation
a positioning strategy that some firms use to distinguish their products from those of competitors.
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.
Positioning Bases
Attribute: Association of a product with an attribute, a product feature, or customer benefit.

Price and quality: High price as a symbol of quality, or low price as an indicator of value may be used to position a product.

Use or application: Stressing use or applications.

Product user: Positioning base focuses on a personality or type of user.

Product class: Product is positioned as associated with a particular category of products.

Competitor: Positioning against competitors is a part of any positioning strategy.

Emotion: Positioning using emotion focuses on how the product makes customers feel.

Repositioning
changing consumers’ perceptions of a brand in relation to competing brands