CHAPTER SIX

© 2001 South-Western College Publishing

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CHAPTER SIX

SEGMENTING AND TARGETING MARKETS

Prepared byJack Gifford

Miami University (Ohio)


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WHAT IS A MARKET?

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.

INDIVIDUALS

ORGANIZATIONS

NEEDS

WANTS

PRODUCTS

SERVICES

QUALIFIERS

ABILITY

WILLINGNESS

AUTHORITY


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TYPES OF MARKETS?

CONSUMER: Intend to consume or benefit, but not to make a profit

ORGANIZATIONAL: Resale Direct use in production Use in daily operations


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THE IMPORTANCE OF MARKET SEGMENTATION

Market segmentation plays a key role in the marketing strategy of almost all successful organizations.

Because market segments differ in size and potential, segmentation helps decision makers more accurately define marketing objectives and better allocate resources.


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MARKET SEGMENTATION

There are very few products which can be sold to all people or organizations. Therefore, marketers must segment potential customers into subsets, or target markets that can be effectively and efficiently reached.

A viable target market must be…


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VIABLE TARGET MARKETS

IDENTIFIABLE MEASURABLE ACCESSIBLE SUBSTANTIAL RESPONSIVE


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MARKET SEGMENTATION

Almost any variable may be used as a segmentation variable as long as the marketer remembers…Not all buyers are alikeMeaningful sub groups must have similar

purchasing motives Every time a marketer adds another segmentation

dimension, the market gets smaller


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MAYBE I WON’T SEGMENT MY MARKET AT ALL

MASS MARKETING+ Economies of scale+ Appropriate if all consumers have the same needs

and wants+ Simplicity -------------------------------------

Ideal method IF all consumers have identical purchasing motives. Reality = RARELY HAPPENS


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DEVELOPING A TARGET MARKET STRATEGY

Analyze consumer demand Segment the market into like

clusters Select one or more segments

to target with a specific marketing mix

Position the product or service so that it is perceived by each target market segment as satisfying their needs better than the opposition.


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COMMON CONSUMER MARKET SEGMENTATON BASES

Geographic segmentation Demographic segmentation Family Life-Style segmentation Psychographic segmentation Behavioral segmentation

Occasions Benefits sought User rates Loyalty

Personal characteristics Multi-dimensional cross-classification

segmentation matrices


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GEOGRAPHIC AND DEMOGRAPHIC SEGMENTATION

GEOGRAPHIC USA / JAPAN /

AUSTRALIA SMALL TOWNS TOURIST

DESTINATIONS RURAL LIVING CLIMATE POPULATION DENSITY

DEMOGRAPHICS MARITAL STATUS INCOME EDUCATION OCCUPATION ETHNIC GENDER AGE RELIGION


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FAMILY LIFE STYLE SEGMENTATION

FAMILY LIFE STYLE SINGLE YOUNG MARRIED W/O

CHILDREN YOUNG MARRIED WITH

CHILDREN MIDDLE AGED MARRIED

WITH CHILDREN MIDDLE AGED MARRIED

W/O DEPENDENT CHILDREN

OLDER MARRIED OLDER UNMARRIED

DIVORCED WITH CHILDREN

DIVORCED WITHOUT CHILDREN

YOUNG MIDDLE AGED OLD


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PSYCHOGRAPHIC SEGMENTATION PERSONALITY MOTIVES LIFESTYLES VALUES ATTITUDES BELIEFS PERCEPTIONS OF RISK REFERENCE GROUPS NEEDS

VALS2•RESOURCES

•SELF-ORIENTATION


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BEHAVIORAL SEGMENTATION

BENEFIT SEGMENTATION

USAGE SEGMENTATION

LOYALTY SEGMENTATION

•Nutrition, taste, calories, value to price, alcohol content, longevity, etc.

•Light, medium or heavy user; purchase pattern, how product is used, family or economy size vs singles, etc.

•Level of brand, company, family of brands, store loyalty; situation specific brand loyalty


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THE 80/20 PRINCIPLE

20% OF YOUR CUSTOMERS ACCOUNT FOR 80% OF YOUR PROFITABLE SALES.


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MUST ALSO AVOID THE MAJORITY FALLICY

Some marketers blindly pursue the largest and most visible target markets and miss very attractive niche markets

JUNIORSPETITES

MISSES

XLT


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BASIS FOR SEGMENTING BUSINESS MARKETS

PRODUCERS RESELLERS INSTITUTIONS GOVERNMENT

Marketers further divide one or more of these segments into microsegmentation or macrosegmentation variables


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MACROSEGMENTATION VARIABLES

Geographic location Customer type Customer size Product use

For example, Home Depot (retailer) targets two principal segments:

Professionals DIY Consumers


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MICROSEGMENTATION

Key purchasing criteria

Purchasing strategies

Importance of purchase

Personal characteristics

EXAMPLES

•Technical support

•Product quality

•Satisficers

•Optimizers

•Routine & small

•Major expenditure


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MICROSEGMENTATION

Personal characteristics

Demographics Decision style Tolerance for risk Confidence level Job responsibilities


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STEPS IN SEGMENTING A MARKET

1 Select a market or product category for study2 Choose a basis or bases for segmenting the market3 Select the specific segmentation variables for use

(descriptors)4 Profile and evaluate segment(s)

A SizeB Expected growthC Purchase frequencyD Current brand usageE Brand loyaltyF Long-term sales and profit potential


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STEPS IN SEGMENTING A MARKET

5 Select the target market(s)6 Design, implement and maintain appropriate

marketing mixes (product, price, promotion, distribution)

Steps five and six are actually marketing activities that follow market segmentation, but are natural outcomes of the segmentation process.


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ALTERNATIVE STRATEGIES

UNDIFFERENTIATED

CONCENTRATED

MULTISEGMENT

Sale of barley, oats or wheat by College Corner Cooperative (undifferentiated product to any buyers)

Marketing of Skool 17” electric chainsaws to Sears for home use by consumers (differentiated product to fill specific need

Dell Optiplex Gxi with custom configuration to student market


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POSITIONING AND PERCEPTUAL MAPPING( IN CONSUMER’S MIND RELATIVE TO ALTERNATIVES)

•Price

•Cleanliness

•Recreational facilities

•Room amenities

•In-house food service

•Location

•Parking facilities

•Safety

•Other ???

HOTELSWhat two dimensions are the most important to a female business executive when selecting a hotel?


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PERCEPTUAL MAP: HOTELS

1 Days Inn/AmeriHost

2 Embassy Suites

3 Holiday Inn

4 Holiday Express

5 Howard Johnson

6 Hyatt

Using your two dimensions, where would you place on this perceptual map each of these hotels?


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REPOSITIONING

Sometimes a firm finds itself in a quadrant of the perceptual map that has become saturated with competing customers. In this case the company may choose to REPOSITION itself in a less competitive quadrant to draw customers who value other product or service attributes


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GLOBAL SEGMENTATION

CHAPTER SIX

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