Transcript File

Strategic Marketing
Chapter 7
210 - 234
 A Market is
 Comprised of people or organizations (Consumer or Business)
 Have needs, abilities, and willingness to buy
 Markets have market segments
 A Market Segment consists of a subgroup of people who share one or more
common characteristic that causes them to have similar product needs
 Theoretically anything can be grouped together
 Market segmentation is only valuable if the group is meaningful to the marketer
 The marketing mix is tailored to the market segment defined
LOI
The Concept of Market Segmentation
Chapter 7
Copyright ©2009, Cengage Learning. All rights reserved
3
 Market Segmentation helps marketers define customer needs and wants
more precisely
 Segments differ in size & potential so companies look at particular segments
and determine more accurate marketing objectives
 Accurate marketing objectives lead to:
 Improved allocation of resources
 Better marketing results
 Market Segmentation accomplishes the following:
 Identify specific groups that you can analyze characteristics & buying behavior of
 Design marketing mixes specific to segmented groups
 Allows you to meet customer needs & wants while meeting company objectives
 To be useful, a segmentation scheme must produce segments that meet four
basic criteria:
 Sustainability
 Needs to be large enough to matter. Not enough potential; it wont last.
 Identifiability & Measurability
 Need to be able to identify the group being targeted & its size
 Easy to determine amount of people in certain subgroups; not easy to determine willingness or
interest
 Accessibility
 Important to devise marketing mixes that allow your segments to access your product
 Seniors citizens, Disabled, Language deficient, etc…don’t access information or products as easily
as everyone else
 Responsiveness
 If the majority of customers respond positively to a marketing mix; then creating a separate
marketing mix strategy for “unresponsive” group may not be necessary
 Segmentation Bases (Variables)
 Characteristics of individuals, groups, or organizations used to divide a total
market into segments
 Marketers choose “bases” that are
 Substantial
 Identifiable
 Measurable
 Accessible
 Responsive
 One Base or Variable is not as precise but is simple and easy
 Multiple variables allows for precision but
 Is Harder to use
 Usable secondary resources are less likely
 The size of group gets smaller
 Current trend is to use more variables then less variables
 One Variable
 Segment a population based on gender
 Multiple Variable
 Gender
 Age
 Race
 Education
 Marital status
 Geographics
 Interests
 Most Common Variables used to segment markets
 Geography
 Demographics
 Psychographics
 Benefits Sought
 Usage Rate(s)
 Segment by:
 Region
 Country
 World
 Market size
 Market density
 # of people within a unit of land
 Climate
 Important because purchasing needs vary based on weather conditions

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
 Restaurants offering menu items that reflect
local taste interest
 Cracker Barrel & McDonald’s alters menu to
reflect local tastes
 Menu in south is different than menu in Northeast
 Miller Lite developed a True to Texas Marketing
Campaign
 Magazines like Midwest or Southwest Living
 Pepsi packaging products based on NFL Cities
Local Retailers
 Demographic Segmentation
 Easy to obtain demographic information
 Correlates to consumer buying
 Age
 Gender
 Income
 Ethnic Background
 Family Life Cycle
 Facts About Female Consumers
 75% of Family Finances
 51% of new electronics sold
 75% over-the-counter drugs
 65% of new cars
 Companies are realizing that women buy more
than packaged goods
 Ace Hardware:
 42% of customers are female who spend 30% - 40%
more than men per visit
 Wider, well-lit aisles, clear signage, instructions on
product use.
 Income segmentation tells
marketers what consumers can
afford
 Segment by wants & buying power
 Examples:
 Housing
 Clothing
 Automobiles
 Food
 In the past marketers would present ads as anglo-centric
 White all-American family
 Mass marketing approach
 In large part this occurred because the majority of the population fit this mold
 1970’s a shift in culture started
 Ethnic Foods started to be introduced into stores
 Roles in music, movies, & politics became more prominent
 As population of minorities increases so does marketing efforts towards them
 A lot of marketers are choosing to target urban areas versus specific ethnic groups
La
Raza:
Geely Automobile Holdings Ltd
Pantene Pro-V
 Family Life Cycle is a series of stages determined by a combination of age,
marital status, & presence or absence of children
 46% of households are maintained by unmarried men or women
 102 unmarried Americans over the age of 18
 240.144 million people living in the United States over the age of 18
 A families needs, income, resources, & expenditures differ at each stage of
the life cycle
LO4
Chapter 7
Copyright ©2009, Cengage Learning. All rights reserved
Family Life Cycle
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 Psychographics is segmenting based on
 Personality
 Motives
 Emotional:
 Rational:
 Status-Related:
Caring for others
Appeals to economy, Reliability, & Dependability
Customers want to look a certain way
 Lifestyle:
 Way consumers spend their time
 Importance of things around them
 Beliefs
 Socioeconomic Factors: Income & Education
 Explorers, Achievers, Builders, & Masters
 Geodemographics: Combines geographic, demographic, & lifestyle segments
http://www.claritas.com/MyBestSegments/Default.jsp?ID=30&pageNam
e=Segment%2BExplorer
 Benefit Segmentation:
 Process of grouping customers into market segments according to the benefits they
seek from a product
 Segmentation typically connects variables to needs
 If you are this age, living in this city, & you like to do….then this is the product you want
 Benefit segmentation is different because it is based on their needs and wants
 Advertises the benefit of a product
 Start with a product and break it down into the benefits it offers
 Healthy product, Better tasting, Low price, etc….
 Usage-Rate Segmentation:
 Dividing a market by the amount of product bought or consumed.
 Examples of markets:
 Former users
 Potential users
 First-time users
 Light or irregular users
 Medium users
 Heavy users
 Heavy users are the group most commonly marketed towards
 80/20 Principle
 A principle holding that 20 percent of all customers generate 80 percent of
the demand.
Time Warner Cable Example
 Fewer than 10% of its subscribers consume 75% of its bandwidth
 The goal is to turn customers into heavy users
 Frequency & customer loyalty programs are designed around this concept
 Business Market consists of four broad segments:
 Producers
 Profit-oriented individuals & organizations that use purchased goods to produce other products
 Examples: Construction, Manufacturing, Transportation, Finance, Real Estate, & Food Services
 Resellers
 Wholesalers & Retailers
 Buy & resell products
 Government
 Selling to Federal, Municipal, & Local officials.
 Most lucrative industry. Usually requires bids
 Institutions
 Schools, churches, civic clubs, hospitals, unions, colleges, nonbusiness organizations, etc..
 The four types of business segments that are marketed towards are broken down by
Company Characteristics & Buying Process
 Company Characteristics
 Geographic location
 Vendors close by may have advantage because it is usually cheaper
 Type of company
 Target companies specifically based on a company's particular need
 Company size
 Larger companies may get different opportunities because they buy more
 Volume of purchase
 Heavy, Moderate, or light users of a product
 Product use
 Targeting a company based on what they are producing, purchasing & using
 Buying Process deals with how a company purchases products
 Two main purchasing profiles that have been identified are:
 Satisficers:
Choosing what company to place an order with based on their ability to satisfy product &
delivery requirements
 Optimizers:
Consider numerous suppliers (both familiar and unfamiliar), solicit bids, & study all
proposals carefully before selecting one.
 Buyer characteristics can also be determined by
 Demographic Characteristics
 Decision-Style
 Tolerance for risk
 Confidence Level
 Job responsibilities
 Select a market or product category for study
 Can be a market they are currently in or a product category they are interested in
joining
 Anheuser-Busch looked at market closely before introducing Light Beers
 Anheuser-Busch looked at snack food market closely prior to introducing Eagle
Brand
 Choose a “base” for segmenting the market
 Choosing between demographics, geographics, psychographics, usuage-rate, &
benefits sought
 Whatever segmentation is chosen must meet be sustainable, identifiable,
measurable, accessible & responsive
 Select Segmentation Descriptors
 After choosing segmentation bases; the marketer must choose a descriptor
 Descriptors identify the specific segmentation variables being used
 Example:
Company selects demographics as its base; Descriptors could be
 Age
 Gender
 Occupation
 Education
 Income
 Profile & Analyze Segments
 Profile includes the segments size, expected growth, purchase frequency, current
brand usage, brand loyalty, & long-term sales and potential profit.
 Allows firm to look at information and rank them according to potential
 Profit
 Opportunity
 Risk
 Consistency with organizational goals
 Select Target Markets
 Natural outcome of segmentation process
 Determines companies Marketing Mix
 Design, Implement, & Maintain Appropriate Marketing Mixes
 Strategies created for:
 Product
 Place
 Price
 Promotional
 Markets are dynamic
 Dynamic = Changing
 Classification is static
 Static = Consistent. No Change
 Consumers will move in and out of the classifications so marketers have to
make adjustments and proactively monitor their segmentation strategies
 People in classification will not always stay there
 If you target 21-35 year-olds a person can only be in that group at most for 15 years
 A target market is a group of people for which an organization designs,
implements, and maintains a marketing mix intended to meet the needs of
that group, resulting in mutually satisfying exchanges.
 Most markets will include customers with different buying characterisitcs,
lifestyles, backgrounds, & income levels; it is unlikely that a single marketing
mix will attract all segments of the market
 Example:
 Chevy sells cars that sell for $13,000 & for $60,000
 The three general
strategies for selecting
target markets are:
 Undifferentiated
 Concentrated
 Multi-segment Targeting
Undifferentiated Targeting
A marketing approach that views the
market as one big market with no
individual segments and thus
requires a single marketing mix.
Requires a product that has little
competition & no substitutes.
Examples of Product Segmented this
way:
Flour
Sugar
Concentrated Targeting
A strategy used to select one
segment of a market for targeting
marketing efforts.
Companies select a marketing niche
to target and they focus on the needs,
motives, & satisfactions of that group
Examples:
Starbucks – Gourmet coffee
Rolex – High priced watch
OshKosh B’Gosh – Kids clothes
Multisegment Targeting
A strategy that chooses two or more
well-defined market segments and
develops a distinct marketing mix for
each.
Example:
A College offering a variety of programs
Day Programs
MBA Degrees
Evening programs
Weekend programs
 A Business can choose to create a product that meets these
specific customer bases & descriptors
 Different product for each classification
 Businesses can also create promotional strategies geared
towards each base
 Similar to consumer market
 Anheuser-Busch sells beer to different ethnic groups. Ad changes;
product doesn’t
 Product Design Costs
 Production Costs
 Promotion Costs
 Inventory Costs
 Marketing Research Costs
 Management Costs
 Cannibalization
Situation that occurs when sales of a new product cut into sales of a firm’s existing
products.
Example: Code Red Mountain Dew took away 25% of Mountain Dew Drinkers
Undifferentiated
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Multisegment
Concentrated
 One-to-One Marketing is an individualized marketing method that utilizes
customer information to build long-term, personalized, and profitable
relationships with each customer.
 Goal is to sell multiple products to one customer
 Reduces customer retention costs
 Increases customer loyalty and revenue
 Provides a more focused marketing approach
 Personalized marketing that encourages communication between company &
consumer
 Allows for customized products to be made
 Four Trends Leading Towards One-to-One Marketing
1. One Size fits all approach to marketing no longer works.
 Customers want to be treated as individuals not as part of a large group
2. Direct and personal marketing will grow to meet needs of busy consumers.
 Takes less time for a consumer to make a purchasing decision
3. Consumers will be loyal to companies that have earned—and reinforced—their
loyalty.
 One-to-One marketing focuses on pleasing the firms best customers so they are happy
4. Mass-media approaches will decline as technology allows better customer
tracking.
1.
One-to-One marketing is more personalized and cost-effective with improved technology
Positioning
Developing a specific marketing mix to influence potential customers’ overall
perception of a brand, product line, or organization in general.
Position
The place a product, brand, or group of products occupies in consumers’ minds
relative to company offerings
Companies assume that consumers compare products on the basis of important
features. If features being emphasized are unimportant then consumer will not
buy and brand will take a hit.
Consumer Goods marketers are extremely concerned with positioning.
Brand
Positioning
Market
Share
Tide
Tough, powerful cleaning
31.1%
Cheer
Tough cleaning, color protection
8.2%
Bold
Detergent plus fabric softener
2.9%
Gain
Sunshine scent and odor-removing formula
2.6%
Era
Stain treatment and stain removal
2.2%
Dash
Value brand
1.8%
Oxydol
Bleach-boosted formula, whitening
1.4%
Solo
Detergent and fabric softener in liquid form
1.2%
Dreft
Outstanding cleaning for baby clothes, safe
1.0%
Ivory Snow
Fabric & skin safety on baby clothes
0.7%
Ariel
Tough cleaner, aimed at Hispanic market
0.1%
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Effective Positioning Requires Companies to:
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
Example:
Campbell’s Select Soup is targeted towards upscale adults who are willing
to try something new.
 Product Differentiation is a positioning strategy that some
firms use to distinguish their products from those of
competitors.
 Distinction can either be real or perceived
 Most consumer goods are very similar therefore their distinction is
more perceived than real
 Companies will try to make consumer believe that they really need
the product being advertised
 Occurs also when companies try to emulate other products
Product Differentiation Ads
 Perceptual Mapping is a
means of displaying or
graphing, in two or more
dimensions, the location of
products, brands, or
groups of products in
customers’ minds.
 Example is of Levi’s Jeans
 Sell to teens
 Sell to high-end consumers
 Firms use a variety of variables to determining positioning approach:
 Attribute:
Product features & benefits
 Price & Quality:
High Price = Quality; Low Price = Value
 Use or Application:Emphasize how a product can be used
 Product User:
Personality or type of user is focused on.
 Product Class:
Positioned in accordance to other products.
Can be done to compare or prove difference
 Competitor:
Comparing products to their competitors.
In reality all companies do this on some level
 Emotion:
Positioned based on how it makes the customer feel.
Each Product Positioning Approach
is Used in the Got Milk Ad on right
 Product Attribute
 Use or Application
 Product User
 Product Class
 Competitor
 Emotion
 Repositioning involves
changing consumers’
perceptions of a brand in
relation to competing brands.
Grocery Stores v. Walmart
 Every time a Walmart opens;
two grocery stores close in that
community
 Harris Teeter does not position
itself directly against Walmart