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Introduction to Marketing
Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.
Chapter 8 Objectives
1. Understand the basic concepts and
importance of segmenting and
targeting markets.
2. Explain advantages and
disadvantages of segmentation and
target marketing.
Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.
Chapter 8 Objectives
3. Identify and explain the process of
target-market selection, including
criteria for segmentation, bases for
segmentation, profiling market
segments, and positioning.
Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.
Chapter 8 Objectives
4. Appreciate how segmenting
business markets differs from
segmenting consumer markets.
5. Identify special considerations in
segmenting global markets.
Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.
Market Segmentation and Target Markets
• The focus of a successful marketing
program is the customer.
• The process of understanding the
customer and designing a specialized
marketing mix for that customer is
target marketing.
Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.
Markets and Target Marketing
•
Market- any individual, group of
individuals, or organizations willing,
able, and capable of purchasing a firm’s
product.
•
Before a firm can effectively market its
products to you, it must fully understand
your needs and wants from that product.
Objective 1
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Markets and Target Marketing
•
Heterogeneous demand- different
groups of customers have differing
needs from specific products.
•
Market Segmentation- the separation of
markets into distinctive groups based
on homogeneous (similar)
characteristics.
Objective 1
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Markets and Target Marketing
•
Market Segment- a group of consumers
that are alike based on some
characteristics.
•
Target Market- the specific group of
customers toward which a firm directs
its market efforts.
Objective 1
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Markets and Target Marketing
•
Target Marketing- the process of
matching a specialized marketing mix
with the needs of a specific market
segment.
Objective 1
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Target the Mass Market versus the Individual
Consumer
•
The options for the size of a market
segment range from one mass market to
one individual.
•
Niche Marketing- the process of
targeting a small market segment with a
specific, specialized marketing mix.
Objective 1
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Target the Mass Market versus the Individual
Consumer
•
Micromarketing- the process of targeting
small, narrowly defined market segments.
•
For example, the Target Corporation
researches the demographic characteristics
of consumers who live within three miles of a
store, and then stocks merchandise that fits
the neighborhood consumers’ needs.
Objective 1
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Target the Mass Market versus the Individual
Consumer
•
On the individual consumer end of the
continuum, a firm may decide to target
individual consumers and personalize
marketing efforts toward each.
Objective 1
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Segmentation and Target Marketing
• There is a trend toward greater
customization of marketing efforts to
meet individual consumer needs.
• Segmentation and target marketing
have advantages and disadvantages.
Objective 2
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Advantages of Segmentation and Target
Marketing
• Identification of the market allows a
company to know whom to analyze in
its efforts to better understand potential
and actual consumers.
• A detailed analysis and understanding
of the market allows a firm to develop
and implement a marketing mix tailored
to the specific needs of the market.
Objective 2
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Advantages of Segmentation and Target
Marketing
• Identification of the market allows a
company to assess potential demand
for its products.
• Knowing the market allows firms to
identify competing products in their
specific market, and develop
responsive competitive positions.
Objective 2
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Advantages of Segmentation and Target
Marketing
• Targeting market segments with a
marketing mix customized for specific
market needs increases the likelihood
of sales effectiveness and cost
efficiencies in reaching the market.
Objective 2
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Advantages of Segmentation and Target
Marketing
• Defining and analyzing a target market
allows a firm to position its products to
the market based on assessed needs
and preferences.
• Defining a target market allows a firm to
identify opportunities.
Objective 2
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Disadvantages of Segmentation and Target
Marketing
• Targeting multiple markets generally
increases marketing costs.
• Efforts toward personalization and
individualization of markets can lead to
proliferation of products that becomes
overly burdensome and costly to
manage.
Objective 2
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Disadvantages of Segmentation and Target
Marketing
• Efforts to overly segment markets into
too small niches may be viewed
cynically by the targeted individual, and
negatively affect consumer response to
marketing efforts.
• Efforts to personalize marketing efforts
require that vast amounts of data about
each consumer be collected and
analyzed.
Objective 2
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Disadvantages of Segmentation and Target
Marketing
• Narrowly segmenting a market to target
may actually prevent a product from
developing brand loyalty.
• Target marketers have been widely
criticized for unethical or stereotypical
activities.
Objective 2
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Disadvantages of Segmentation and Target
Marketing
• The most public criticism of segmenting
and target marketing comes from
minority and consumer groups who
claim that the practice of aiming
potentially harmful products to
disadvantaged or vulnerable markets is
highly unethical.
Objective 2
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Disadvantages of Segmentation and Target
Marketing
• The process of segmenting and
targeting markets is akin to
stereotyping and has been criticized for
that reason.
Objective 2
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The Target Market Selection Process
•
The target market selection processthe process of selecting a potential
market, segmenting, analyzing, and
profiling the market to better target it
with a customized marketing mix.
– A priori segmentation
– Post hoc segmentation
Objective 3
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The Target Market Selection Process
•
A priori segmentation- occurs when
variables for segmenting markets, such as
age or income, are selected first, then
customers are classified accordingly.
•
Post hoc segmentation- involves the
examination of existing customer data,
then segmenting it to classify the
customers into segments, or clusters,
based on similarities of variables.
Objective 3
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The Target Market Selection Process
1.
2.
3.
4.
5.
Identify the total market
Determine need for segmentation
Determine basis for segmentation
Profile each selected segment
Assess potential profitability of segment
and select target segment
6. Select positioning strategy
7. Develop and implement appropriate
marketing mix
8. Monitor, evaluate, and control
Objective 3
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Identify the Total Market
•
The first step in the target market
selection process is to specifically
define the total market of all potential
customers for a product category.
Objective 3
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Determine Need for Segmentation
•
For segmentation to be warranted,
there must be differences with
respect to customer needs or
demands, potential product variations
must be cost-effective, and
implemented product differences
must be apparent to customers.
Objective 3
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Determine Need for Segmentation
•
Criteria for successful segmentation
–
–
–
–
–
Heterogeneous
Measurable
Substantial
Actionable
Accessible
Objective 3
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Determine Need for Segmentation
•
Segmentation Strategy
– Undifferentiated targeting strategy
– Concentrated strategy
– Differentiated strategy
Objective 3
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Determine Need for Segmentation
•
External Factors that may affect the
success of segmentation
–
–
–
–
–
–
Age of the product
Profitability
Market share
The competition
The product itself
The market
Objective 3
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Determine Bases for Segmentation
•
Segmenting means dividing markets
into homogenous groups based on
similar characteristics or traits.
•
To divide a market into segments,
firms use segmentation variables that
describe the characteristics of each
part of the market.
Objective 3
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Determine Bases for Segmentation
•
Most generally accepted bases for
segmenting markets:
–
–
–
–
–
–
Demographics
Geographics
Psychographics
Benefits sought
Situation
Behavior or usage patterns
Objective 3
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Sources of Segmentation Data
•
Information for segmenting markets
may be obtained from internal or
external sources.
Objective 3
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Sources of Segmentation Data
•
Internal Database Sources
– Data Mining
•
External Database Sources
– Spidering
Objective 3
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Profile Each Selected Segment
•
Profile- a detailed picture of a market
segment.
•
The profile should paint a clear
picture of the typical customer for the
company’s product using all
applicable segmentation variables.
Objective 3
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Assess Potential Profitability of Each
Segment and Select Segments for Targeting
•
Determine Forecast Demand
•
Estimate Costs
Objective 3
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Select Positioning Strategy
•
Key to developing the appropriate
marketing mix is the positioning
strategy of the product.
Objective 3
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Select Positioning Strategy
•
Effective positioning means determining:
1. What consumers currently think about the
product, especially in relation to competing
products
2. What the marketer wants consumers to think
about the product
3. Which positioning strategy will elevate the
consumers’ current product image to the
desired product image.
Objective 3
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Select Positioning Strategy
•
Perceptual Mapping- creating a visual
depiction about consumer
perceptions of a product on two or
more dimensions in relation to
competitors.
Objective 3
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Select Positioning Strategy
•
The positioning strategy must determine
where a company wants to go and specify
how to get there by positioning the product
according to any of the following ways:
–
–
–
–
–
–
–
Price/Quality
Product Attributes
Product User
Product Usage
Product Class
Competition
Symbol
Objective 3
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Select Positioning Strategy
•
Repositioning- the process of
creating a new image about an
existing product in consumers’
minds.
Objective 3
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Develop and Implement Appropriate Marketing Mix
and Monitor, Evaluate, and Control
•
The final steps are to develop and
implement a marketing mix matched
to the needs of the target market and
evaluate and control the plan.
•
This is done by developing a specific
plan of action and timeline.
Objective 3
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Segmenting Business Markets
•
Segmenting the business market can
help a firm analyze the market, select
the best markets for targeting, and
manage marketing programs.
Objective 4
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Segmenting Business Markets
•
While the steps in the target market
selection process are essentially the same
for business markets, there are three major
differences:
–
–
–
The purchasing process, which differs greatly
from the household consumer market.
The use of different segment variables.
The differences in how the segmentation is
implemented.
Objective 4
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Segmenting Business Markets
•
Segmentation variables used to
segment business markets:
–
–
–
–
–
–
Demographics
Operating characteristics
Purchasing approaches
Product usage
Situational factors
Buyer’s personal characteristics
Objective 4
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Segmenting Global Markets
•
Increasingly, companies must reach
out to foreign countries to prosper, as
opportunities for domestic growth in
many industries decline.
Objective 5
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Segmenting Global Markets
•
Global markets may be segmented based
on:
–
–
–
–
–
–
–
–
–
Demographics
Geographics
Psychographics
Benefits sought
Situation
Usage
Economic
Legal/political
Cultural factors
Objective 5
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