Test 2/Marketing Segmentation and Targeting

Market
1) people or organizations with
2) needs or wants, and with
3) the ability and
4) the willingness to buy.

People or organizations with needs or wants, and with the ability and the willingness to buy.

– Group lacking any one of these characteristics is NOT A MARKET

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 marketing into meaningful, relatively similar, identifiable segments or groups.
Marketing Concept
Marketers should understand and identify consumer needs and create a marketing mix to meet those needs better than their competitors.
Mass Marketing
Marketing to everyone and hoping that the consumers whose needs we meet happen to be out there somewhere, which is extremely inefficient.

– Market to everyone
– Hope consumers whose wants and needs we can meet are out there and reached
– Can be extremely inefficient

Segment Marketing
Segmenting the market and determining the specific target market or markets whose needs we meet and whose needs are not currently being met by our competitors. Markets can be segmented a lot or a little (just by gender, by age, by both, etc.)

– Market to segment of market
– Determine target markets whose needs we met and whose needs we are not currently meeting
– Is fairly efficient, especially compared to mass marketing

Three Components of Segmentation
Market Segmentation
Targeting
Product Positioning
Types of Segment Marketing
Focus Strategies
One Product and Multiple Market Segments
Multiple Products and Multiple Market Segments
Mass Customization
Focus Strategies
– Type of Segment Marketing
– Focusing on meeting the needs of one specific target market
– Often the best strategy for small companies in a large market
– Can be risky if the target market is not large enough to be profitable
One Product and Multiple Market Segments
– Type of Segment Marketing
– Offering the same product to several different target markets
– May involve slightly different marketing mixes but only one product design
– Often the best strategy when a product may be used differently by different consumers
Multiple Products and Multiple Market Segments
– Type of Segment Marketing
– Using several different marketing mixes to target several different target markets
– Allows companies to target a larger number of customers
– Can lead to higher market share overall for the company
– Can be difficult to maintain cost efficiencies with multiple marketing mixes
Mass Customization
– Customizing the marketing mix to meet individual needs
– Ideal because marketers are meeting the needs of individual customers
– Requires very detailed information on customers
– Can be very difficult and expensive to implement
Steps in Segment Marketing
1) Group potential buyers into segments
2) Group products to be sold into categories
3) Develop a market-product grid and estimate size of markets
4) Select target markets
5) Take marketing actions to reach target markets
Methods of Market Segmentation
– Demographic Segmentation (age, gender, income, ethnic)
– Geographic Segmentation
– Psychographic Segmentation (personality, motives, lifestyle, geodemographic)
– Benefits Desired
– Purchase Behavior
Age Segmentation
– Marketers can segment markets by age, such as generation, grade, etc.
Gender Segmentation
– Marketers can segment markets by gender
– 70 percent of consumers goods purchases are made by women
Income Segmentation
– Marketers can segment markets by how much money consumers make each year
– Determines consumers wants and buying power
Ethnic Segmentation
– Marketers can segment markets by ethnicity
– Largest ethnic markets:
Hispanic Americans
African Americans
Asian Americans
Family Life Cycle
Equal parts age, children and marital status. All affect the purchasing decisions of a family
Geographic Segmentation
– Based on geographic locations
– Can be combined with demographics
– Zip code data: geodemographics
Assumes consumers who live in the same neighborhoods have the same demographics and the same psychographics
Psychographic Segmentation
– Based on social class, lifestyles, personality and beliefs
– Often generalized from activities, interests, and opinions
– Can be difficult to categorize consumers, but categorizations are likely to be more accurate than simple demographics or geographics
Bases for Psychographic Segmentation
Personality
Motives
Lifestyles
Geodemographics
Personality Segmentation
– Part of Psychographic Segmentation
– Reflects a person’s traits, attitudes and habits
Motives Segmentation
– Part of Psychographic Segmentation
– Marketers might appeal to emotional, rational, or status motives, among others
Lifestyle Segmentation
– Part of Psychographic Segmentation
– How time is spent
– Importance of things around them
– Beliefs
– Socioeconomic characteristics
Geodemographic Segmentation
– Part of Psychographic Segmentation
– Segmenting potential customers into neighborhood lifestyle categories
– Combines geographic, demographic, and lifestyle segmentation
Usage-Rate Segmentation
– Part of Psychographic Segmentation
– Dividing a market by the amount of product bought or consumed
– 80/20 Principal: principal that 20 percent of all customers generate 80 percent of the demand
Benefits Desired Segmentation
– What products offer multiple benefits, marketers can segment based on which benefits are important to which customers
– Requires extensive market research to determine the benefits consumers want
– Easier to specifically design the marketing mix to focus on consumers wants
Purchase Behavior Segmentation
– Usage rate, brand loyalty, current or past user status
– Often results in reward-based or loyalty-building programs
– Can be used to simulate individual marketing
Steps in Segmenting Markets (Diagram)
1) Select a market for study
2) Choose bases for segmentation
3) Select descriptors
4) Profile and analyze segments
5) Select target markets
6) Design, implement, and maintain marketing mix
Criteria for “Good” Segmenting
– Consumers within a segment are homogeneous
– Consumers between segments are heterogeneous
– Segment is profitable
– Segment is reachable
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
Targeting Strategies
– Evaluate each market segment’s attractiveness
1) Develop measures of segment attractiveness
Can evaluate by size, expected growth, competition, cost of reaching the segment, company objectives and resources
2) Select the target market
Strategies for Selecting Target Markets
– Undifferentiated Targeting Strategy
– Concentrated Targeting Strategy
– Multisegment Targeting Strategy
Undifferentiated Targeting Strategy
– Strategy for selecting target markets
– Marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix (all are the same)
– Saves in money, but not very creative
Concentrated Targeting Strategy
– Strategy for selecting target markets
– Marketing approach used to select one segment of a market for targeting marketing efforts
– Niche: one segment of a market
– Focus on one area/ get that area, but segments are too small
Niche Market
One segment of a market
Multisegment Targeting Strategy
– Strategy for selecting target markets
– Marketing strategy that chooses two or more well-definied market segments and develops a distinct marketing mix for each
– Greater financial success, higher costs
Positioning
Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general
– Effective Positioning by…
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
Positioning strategy that some firms use to distinguish their products from those of competitors
Perceptual Mapping (Diagram)
Means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds