Transcript Ch 08: Market Segmentation, Targeting, and Positioning

Chapter 7
Sharpen the Focus:
Target Marketing Strategies
and Customer Relationship
Management
Chapter Objectives
1. Identify the steps in the target marketing process
2. Understand the need for market Segmentation and
the approaches available to do it
3. Explain how marketers evaluate segments and
choose a Targeting strategy (there are 4 main ones)
4. Understand how marketers develop and implement
a Positioning strategy
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Target Marketing Strategy: Selecting
and Entering a Market
 Market fragmentation means…
The existence of many consumer groups due
to the diversity of their needs and wants
 Target marketing strategy:
Dividing the total market into different
segments based on customer characteristics,
selecting one or more segments, and
developing products to meet those segments’
needs
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Figure 7.1
Steps in the Target Marketing
Process
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Market Segmentation
Market Segmentation - division of the total market
into smaller, relatively homogeneous (similar)
groups
Key Points –
1. There is often more than one viable target
market for a product.
2. No single marketing mix can satisfy every target
market, therefore, different marketing mixes
must be developed for different target markets.
3. You have to find ways to logically slice and dice
society into viable target markets for each
unique product.
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No Market Segmentation
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Segmented by Gender
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Segmented by Age
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Criteria for Effective Segmentation
 To be effective, segmentation must meet the
following basic requirements.
1. The market segments must be measurable
in terms of both purchasing power and size.
2. Marketers must be able to effectively reach
(promote to and serve) a market segment.
3. Market segments must be sufficiently large
enough to be potentially profitable.
4. The firm must be financially able to market
to the segments selected.
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Segmenting Consumer Markets
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Segmenting Consumer Markets
1. Geographic Segmentation: Dividing an
overall market into groups on the basis of their
locations (region, country, etc)
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Using Geographic Segmentation
 Does not ensure that all consumers in a location
will make the same buying decision, though
helpful in identifying some general patterns.
 Most major brands get 40-80 percent of their
sales from what are called core regions
 Climate is another important segmentation factor
Northern consumers, for example, eat more
soup than Southerners
Southerners use more chlorine for their
swimming pools than Northern residents
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Segmenting Consumer Markets
2. Demographic segmentation: Dividing
consumer groups according to characteristics
such as gender, age, income, occupation,
education, household size, and stage in the
family life cycle
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Segmenting by Gender
Marketers must ensure that traditional
assumptions are not false
Some products appeal to men in similar
ways to women and some products don’t
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 Segmenting by age
 Products are often
designed to meet the
specific needs of
certain age groups
 Examples: baby food
and denture cream.
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 Segmenting by age – The Cohort Effect
Cohort effect is a tendency among
members of a generation to be
influenced and drawn together by
significant events occurring during their
key formative years, roughly 17 to 22
years of age
Sociologists attribute different
consumer needs and wants among
various age groups to the cohort effect
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 Boomers—People
born from 1946 until
1964. About 40
percent of U.S. adults
were born in this
period. Values of this
age group were
influenced both by the
Vietnam War and the
career-driven era.
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Segmentation by Age, specifically
Boomers. Young consumers tend
to buy products to feel older,
while older consumers tend to
buy products to feel younger !
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 Segmenting by
Ethnic Group
 Census Bureau projects
that by 2050, & possibly
much sooner, nearly 1/2
of the US population will
be nonwhite.
 The 3 largest and
fastest-growing
racial/ethnic groups in
the US are African
Americans, Hispanics,
and Asian Americans.
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Would this ad have run in the U.S
10 years ago? Why not?
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 Segmenting by
Family Life Cycle
Stages
 Life Cycle - The process
of family formation and
dissolution.
 The underlying theme
is that life stage, not
age per se, is the
primary determinant of
many consumer
purchases.
 One important trend Women are having
children at a later age.
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Segmenting Consumer Markets
3. Psychographic Segmentation
Divides a population into groups that have
similar psychological characteristics,
values, and lifestyles
VALS (Values and Lifestyles) – a
psychographic segmentation system
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VALS 2
ACTUALIZERS
8%
Principle
Oriented Status
FULFILLED
11%
BELIEVERS
16%
Oriented Action
ACHIEVERS
13%
STRIVERS
13%
STRUGGLERS
12%
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Abundant Resources
Oriented
EXPERIENCERS
12%
MAKERS
13%
Minimal Resources
 Using Psychographic
Segmentation
Psychographic
profiles produce rich
descriptions of
potential target
markets
The greater detail
aids in matching a
company’s image
and its offerings with
the types of
consumers who are
likely purchasers
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Segmenting Consumer Markets
4. Product-related segmentation: dividing a
consumer population into homogeneous
groups based on characteristics of their
relationships to the product
 Can take the form of segmenting based on:
Benefits that people seek when they buy
Usage rates for a product – 80/20 rule
Consumers’ brand loyalty toward a product
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Strategies for Reaching
Target Markets
Undifferentiated
Marketing
Differentiated
Marketing
Concentrated
Marketing
Customized
Any of the 4 strategies may prove
effective for a particular situation
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Undifferentiated
Marketing
 Undifferentiated marketing: when a firm
produces only one product or product line
and promotes it to all customers with a single
marketing mix
Sometimes called mass marketing
Much more common in the past
Q. Can you think of an example?
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 Differentiated marketing: when a firm produces
numerous products and promotes them with a
different marketing mix designed to satisfy smaller
segments
Tends to raise costs
Firms may be forced to practice differentiated
marketing to remain competitive
Best Example – Procter & Gamble:
www.pg.com
Differentiated
Marketing
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Concentrated
Marketing
 Concentrated marketing: When a firm commits
a large percentage of its marketing resources to
serve a single market segment
Attractive to small firms with limited resources
and to firms offering highly specialized goods
and services
Q. Can you think of an example?
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 Customized: involves
targeting potential
customers at a very
basic level, such as by
ZIP code, specific
occupation, lifestyle, or
even individual
Customized
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Figure 7.3
Choosing a Target Marketing Strategy
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Segmenting B2B Markets
 Segmentation helps B2B firms understand
the needs and characteristics of potential
customers
 Firms can be segmented by:
 Organizational demographics
 Production technology used
 Whether customer is a user/nonuser of product
 North American Industry Classification System
(NAICS)
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Positioning
*After segmenting the market, selecting target
markets, and choosing the strategy to reach the
target markets, the next step is Positioning
Positioning: Striving to create a certain image
in buyers’ minds which is differentiated from the
competition.
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Steps in Developing a Positioning
Strategy
1. Analyze competitors’ positions
2. Offer a good or service with a competitive
advantage
3. Finalize the marketing mix by matching mix
elements to the selected segment
4. Evaluate target market’s responses and
modify strategies as needed
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Modifying Positioning Strategies
 Repositioning is commonly used to change the
brand image
Requires redoing a product’s position in
response to marketplace changes.
Ex: Domino’s
 Repositioning may breathe life into Retro brands
A once-popular brand that has been revived to
experience a popularity comeback, often by
riding a wave of nostalgia. Ex: Old Spice
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Positioning
map: Graphic
illustration that
shows
differences in
consumers’
perceptions of
competing
products
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Class Discussion
Where would you position these automobiles on
this Positioning Map?
BMW Conv
VW Bug Accord
Expensive
Low Quality
Prius
High Quality
Inexpensive
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Corolla