Lecture 4,5

Segmenting and Targeting Markets :1 Segmenting and Targeting Markets Course Instructor: Kanwal Gurleen Lecturer, LSB


Learning Objectives :2 Learning Objectives 1. Marketing Tasks 2. Describe the characteristics of markets and market segments. 3. Explain the importance of market segmentation. 4. Discuss criteria for successful market segmentation.


Learning Objectives (continued) :3 Learning Objectives (continued) 5. Describe the bases commonly used to segment consumer markets. 6. List the steps involved in segmenting markets.


Learning Objectives (continued) :4 Learning Objectives (continued) 7. Discuss alternative strategies for selecting target markets. 8. Explain how and why firms implement positioning strategies and how product differentiation plays a role.


Learning Objective :5 Learning Objective Describe the characteristics of markets and market segments.


Slide 6 :6 Marketing Tasks: 1.Developing Marketing strategies and plans 2.Capturing marketing insights 3.Connecting with customers 4.Building strong brands 5.Shaping marketing offerings 6.Delivering and communicating value 7.Creating long term growth


Market Segmentation :7 Market Segmentation


A Market is... :8 A Market is... (1) people or organizations with (2) needs or wants, and with (3) the ability and (4) the willingness to buy. A group of people that lacks any one of these characteristics is not a market.


The Importance of Market Segmentation :9 The Importance of Market Segmentation Markets have a variety of product needs and preferences Marketers can better define customer needs Decision makers can define objectives and allocate resources more accurately Competitive Advantage


Learning Objective :10 Learning Objective Discuss criteria for successful market segmentation.


Slide 11 :11 Criteria for successful segmentation:


Slide 12 :12 Clear differences in consumer preferences for a product must exist.


Slide 13 :13 Difference preferences for a product must be identifiable and capable of being related to measurable variables.


Slide 14 :14 The proposed market segment must have enough size and purchasing power to be profitable.


Slide 15 :15 Companies must be able to respond to difference preferences with an appropriate and profitable marketing mix. Actionable


Slide 16 :16 The proposed market segment must be readily accessible and reachable with targeted programs.


Slide 17 :17 Segmentation Strategy Undifferentiated targeting strategy Concentrated strategy Differentiated strategy


Slide 18 :18 Undifferentiated targeting strategy Concentrated strategy Differentiated strategy Companies might develop one marketing mix strategy that is appropriate for all members of the total market.


Slide 19 :19 Undifferentiated targeting strategy Concentrated strategy Differentiated strategy Only one marketing mix is developed and directed toward a few, or perhaps one, profitable market segments.


Slide 20 :20 Undifferentiated targeting strategy Concentrated strategy Differentiated strategy Exists when a firm develops different marketing mix plans specially tailored for each of two or more market segments.


Slide 21 :21


Slide 22 :22 External Factors that may affect the success of segmentation Age of the product Profitability Market share The competition The product itself The market


Slide 23 :23 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.


Segmentation Variables :24 Segmentation Variables Situation Segmentation Psychographic Segmentation Geographic Segmentation Behavior/Usage Segmentation Demographic Segmentation Benefits-Sought Segmentation


Demographic Segmentation :25 Family Income Level Ethnicity Education Age Demographic Segmentation


Segmentation Variables :26 Segmentation Variables Situation Segmentation Psychographic Segmentation Geographic Segmentation Behavior/Usage Segmentation Demographic Segmentation Benefits-Sought Segmentation


Geographic Segmentation :27 Geographic Segmentation When an organization localizes its marketing efforts to accommodate the unique needs of specific geographic regions


Segmenting Consumer Markets :28 Segmenting Consumer Markets Situation Segmentation Psychographic Segmentation Geographic Segmentation Behavior/Usage Segmentation Demographic Segmentation Benefits-Sought Segmentation


Psychographic Segmentation :29 Psychographic Segmentation Grouping customers together based on social class, lifestyles and psychological characteristics (attitudes, interests and opinions) PRIZM analysis from Claritas


Psychographic Targeting :30 Psychographic Targeting Psychographics represents a combination of consumers’ activities, interests and opinions (AIO items) Useful but more difficult to identify and measure compared to demographic variables


Segmenting Consumer Markets :31 Segmenting Consumer Markets Situation Segmentation Psychographic Segmentation Geographic Segmentation Behavior/Usage Segmentation Demographic Segmentation Benefits-Sought Segmentation


Benefits-Sought Segmentation :32 Benefits-Sought Segmentation Markets can be segmented based on the benefits that consumers desire from using a specific product


Segmenting Consumer Markets :33 Segmenting Consumer Markets Situation Segmentation Psychographic Segmentation Geographic Segmentation Behavior/Usage Segmentation Demographic Segmentation Benefits-Sought Segmentation


Situation Segmentation :34 Situation Segmentation Purchase situation or occasion Physical surroundings Social surroundings Temporal perspective How much time to make a purchase? Task definition Prepurchase attitude


Segmenting Consumer Markets :35 Segmenting Consumer Markets Situation Segmentation Psychographic Segmentation Geographic Segmentation Behavior/Usage Segmentation Demographic Segmentation Benefits-Sought Segmentation


Behavior/Usage Segmentation :36 Light Users 80% Heavy Users 20% Behavior/Usage Segmentation Markets can be segmented by how often or how heavily consumers use a specific product 80/20 Principle - 80% of revenue generated by 20% of customers


Criteria for Successful Segmentation :37 Criteria for Successful Segmentation


Criteria for Segmentation :38 Criteria for Segmentation


Segmentation Bases :39 Segmentation Bases Characteristics of individuals, groups, or organizations used to divide a total market into segments. (variables)


Bases for Segmentation :40 Bases for Segmentation


Geographic Segmentation :41 Geographic Segmentation Segmenting markets by region of the country or world, market size, market density, or climate.


Geographic Segmentation :42 Geographic Segmentation Region of the country or world Market size Market density Climate


Benefits of Regional Segmentation :43 Benefits of Regional Segmentation 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 React more quickly to competition


Demographic Segmentation :44 Demographic Segmentation Segmenting markets by age, gender, income, ethnic background, and family life cycle


Bases for Demographic Segmentation :45 Bases for Demographic Segmentation Age Gender Income Ethnic background Family Life Cycle


Family Life Cycle :46 Family Life Cycle Age MaritalStatus Children


Psychographic Segmentation :47 Psychographic Segmentation Market segmentation on the basis of personality, motives, lifestyles, and geodemographics.


Bases for Psychographic Segmentation :48 Bases for Psychographic Segmentation


Lifestyle Segmentation :49 Lifestyle Segmentation How time is spent Beliefs Socioeconomic characteristics


Geodemographic Segmentation :50 Geodemographic Segmentation Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic, and lifestyle segmentation.


Benefit Segmentation :51 Benefit Segmentation The process of grouping customers into market segments according to the benefits they seek from the product .


Usage-Rate Segmentation :52 Usage-Rate Segmentation Dividing a market by the amount of product bought or consumed.


The 80/20 Principle :53 The 80/20 Principle A principle holding that 20 percent of all customers generate 80 percent of the demand. 80/20


Learning Objective :54 Learning Objective List the steps involved in segmenting markets.


Steps in Segmenting a Market :55 Steps in Segmenting a Market


Learning Objective :56 Learning Objective Discuss alternative strategies for selecting target markets.


Target Market :57 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.


Undifferentiated Targeting Strategy :58 Undifferentiated Targeting Strategy Marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix.


Undifferentiated Targeting Strategy :59 Undifferentiated Targeting Strategy Advantages: Potential savings on production and marketing costs Disadvantages: Unimaginative product offerings Company more susceptible to competition


Concentrated Targeting Strategy :60 Concentrated Targeting Strategy A strategy used to select one segment of a market for targeting marketing efforts.


Niche :61 Niche One segment of a market.


Concentrated Targeting Strategy :62 Concentrated Targeting Strategy Advantages: Concentration of resources Meets narrowly defined segment Small firms can compete Strong positioning Disadvantages: Segments too small, or changing Large competitors may market to niche segment


Multisegment Targeting Strategy :63 Multisegment Targeting Strategy A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.


Multisegment Targeting Strategy :64 Advantages: Greater financial success Economies of scale Disadvantages: High costs Cannibalization Multisegment Targeting Strategy


Costs of Multisegment Targeting :65 Costs of Multisegment Targeting


Cannibalization :66 Cannibalization Situation that occurs when sales of a new product cut into sales of a firm’s existing products.


Learning Objective :67 Learning Objective Explain how and why firms implement positioning strategies and how product differentiation plays a role.


Positioning :68 Positioning Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general.


Position :69 Position The place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings.


Effective Positioning :70 Effective Positioning Assess the positions of competing products Determine the dimensions of these positions Choose an effective market position


Product Differentiation :71 Product Differentiation A positioning strategy that some firms use to distinguish their products from those of competitors.


Perceptual Mapping :72 Perceptual Mapping A means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds.


Positioning Bases :73 Positioning Bases


Repositioning :74 Repositioning Changing consumers’ perceptions of a brand in relation to competing brands.