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Chapter 10 Identifying Market Segments and Selecting Target Markets by Dr. Saleh Alqahtani Kotler on Marketing “Don’t buy market share. Figure out how to earn it.” Dr. Saleh Alqahtani Levels and Patterns of Market Segmentation Levels of Market Segmentation Mass marketing Micromarketing Segment marketing Market segment Sector Flexible market offering Naked solution Discretionary options Dr. Saleh Alqahtani Levels and Patterns of Market Segmentation Niche Marketing Niche Local Marketing Individual Customer Marketing Mass-customization Choiceboard Customerization Segments Individuals Dr. Saleh Alqahtani Steps in Market Segmentation, Targeting,and Positioning Market Segmentation 1. Identify segmentation variables and segment the market 2. Develop profiles of resulting segments Dr. Saleh Alqahtani Market Targeting 3. Evaluate attractiveness of each segment 4. Select the target segment(s) Market Positioning 5. Identify possible positioning concepts for each target segment 6. Select, develop, and communicate the chosen positioning concept Basic Market-Preference Patterns Sweetness Dr. Saleh Alqahtani (c) Clustered preferences Creaminess (b) Diffused preferences Creaminess Creaminess (a) Homogeneous preferences Sweetness Sweetness Bases for Segmenting Consumer Markets Geographic Region, City or Metro Size, Density, Climate Demographic Age, Gender, Family size and Fife cycle, Race, Occupation, or Income ... Psychographic Lifestyle or Personality Behavioral Occasions, Benefits, Uses, or Attitudes Dr. Saleh Alqahtani Bases for Segmenting Business Markets Demographic Operating Variables Purchasing Approaches Situational Factors Personal Characteristics Dr. Saleh Alqahtani Table 10-3: Major Segmentation Variables for Business Markets Demographic 1. Industry: Which industries should we serve? 2. Company size: What size companies should we serve? 3. Location: What geographical areas should we serve? Operating Variables 4. Technology: What customer technologies should we focus on? 5. User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers? 6. Customer capabilities: Should we serve customers needing many or few services? Purchasing Approaches 7. Purchasing-function organization: Should we serve companies with highly centralized or decentralized purchasing organizations? 8. Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on? See text for complete table Dr. Saleh Alqahtani Effective Segmentation Measurable • Size, purchasing power, profiles of segments can be measured. Substantial • Segments must be large or profitable enough to serve. Accessible Dr. Saleh Alqahtani • Segments can be effectively reached and served. Differential • Segments must respond differently to different marketing mix elements & actions. Actionable • Must be able to attract and serve the segments. Additional Segmentation Criteria Ethical Choice of Market Targets Segment Interrelationships & Supersegments Segment-by-Segment Invasion Plans Intersegment Cooperation Dr. Saleh Alqahtani Target Marketing Target marketing requires marketers to take three major steps: Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation). Select one or more market segments to enter (market targeting). For each target segment, establish and communicate the key distinctive benefit(s) of the company’s market offering (market positioning). Dr. Saleh Alqahtani Market Targeting Evaluating and Selecting the Market Segments Single-Segment Concentration Selective Specialization Product Specialization Market Specialization Full Market Coverage Undifferentiated marketing Differentiated marketing Dr. Saleh Alqahtani Five Patterns of Target Market Selection Single-segment concentration Product specialization Selective specialization M1 M2 M3 M1 M2 M3 M1 M2 M3 P1 P1 P1 P2 P2 P2 P3 P3 P3 Market specialization Full market coverage M1 M2 M3 P = Product M = Market Dr. Saleh Alqahtani M1 M2 M3 P1 P1 P2 P2 P3 P3 Segment-by-Segment Invasion Plan Customer Groups Product Varieties Airlines Railroads Truckers Large computers Mid-size computers Personal computers Company A Dr. Saleh Alqahtani Company B Company C