Fundamentals of Marketing

Chapter 1, Section 3

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Critical Thinking…

• Take 2-3 minutes to reflect on one recent marketing trend you have noted (either through the media or by your own observation)

• You will share your observation in a few minutes!

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Key Terms

• Market• Consumer market• Industrial market• Market share• Target market• Customer profile• Marketing mix

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Market and Market Identification

• FYI: There are A LOT of terms in this section that are important for your future studies in Marketing…PAY ATTENTION AND TAKE GOOD NOTES!

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The Reality…

• Marketers know that their products or services cannot appeal to EVERYONE

• It is essential that marketers look for people who:– A) have an interest or need for their

product and,– B) have the ability to pay for their

product

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Market• All people who share similar needs

and wants and who have the ability to purchase a given product

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Consumer versus Industrial Markets

• Consumer Market– Consists of consumers who purchase goods

and services for personal use

– Consumers’ purchase goods and services based on these main areas:

• Save money• Make life easier• Improve appearance• Create status in the community• Provide satisfaction related to some other personal

motivation

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Consumer Versus Industrial Market

• Industrial Market– Also called business-to-business (B2B)

market, includes all businesses that buy products for use in their operations.

– Goals are different in this market:• Increase profits• Improve productivity• Increase sales• Decrease expenses• Make their work more efficient

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Consumer versus Industrial Market• Companies producing products for

the consumer market classify resellers as a part of the industrial market

• Therefore, these companies require two distinct marketing plans to reach each market!

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Market Share

• A market is further defined by the total sales in the product category

• Market Share– A company’s percentage of total sales volume

generated by all companies that compete in a given market

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Market Share, cont.

• Knowing one’s market share helps marketers analyze their competition and their status in a given market

• Market shares change all the time as new competitors enter the market and the size of the market increases or decreases in volume

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Target Market and Market Segmentation

• Businesses know that not EVERYONE will buy their products or services

• They look for ways to offer their products or services to the people who are most likely to be

interested

• This involves segmenting, or breaking the market into smaller groups that have similar

wants and needs

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Target Market and Market Segmentation

• Segmentation goes beyond classification into the consumer or industrial market

• Market segmentation seeks to find the group of people most likely to become customers

• The group that is identified for a specific marketing program is the target market

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Target Marketing – Why?• Identifying a target market is very

important because all marketing strategies are directed at this group.

• When a business fails to identify a target market, its marketing plan has no focus.

• Identifying a target market correctly is a key to success.

• Businesses look for ways to connect to their current and potential customers

• The surest way to do this is to know them well

• When factors like this are analyzed, they can identify groups of people who have many things in common

Identifying and Analyzing Markets

Knowing and Selecting Your Target Market

• 1st step = Market Segmentation– Classifying people who form a given

market into even smaller groups

• Example: – Who buys jeans?– At what price?– What special features do they want?

Marketing Segmentation for Jeans

• By age: – Jeans for kids, teens, and adults

• By price: – Marketers need to reach different socio-

economic groups – Mossimo vs. Banana Republic vs. 7 For All

Mankind

• By desired feature:– Tight fit vs. comfortable fit– Newest fashion vs. classic favorite– Unique design vs. basic styling

Selecting a Target Market• It is usually too expensive

to target all the potential target markets

• Must identify the markets where it has an advantage – It will enable it to survive

against its competition for a long time

– Called “sustainable competitive advantage”

Ways to Describe a Target Market• Demographics

– Statistics that describe personal characteristics such as:• Age• Gender• Income• Marital Status• Ethnic Background• Education• Occupation

Age as a Factor

• Easy to segment a market by age

• U.S. Census provides information that might help in deciding on the age categories

• There are common labels that are used in segmenting the population by generation

Gender• Another key ingredient

• Case Study Example:– Jockey was once just a men’s

underwear company– Added a women’s line and doubled

its sales

Income – Marketers look at two different kinds

• Disposable income – the money left after taking out taxes– Marketers of products that are

necessities are interested in this

• Discretionary income – money left after paying for basic living necessities such as food, shelter, and clothing– Marketers who sell luxury and

premium products are interested in this

Marital Status• Important factor because it plays a

role in lifestyle and buying habits

• Food for thought:– U.S. Census shows that married

couples slipped to 50.7% of total households (2006)

– In the 1950’s, it was at 80%

Ethnic Background• U.S. population is becoming more

ethnically diverse

• Marketers must take growing ethnic groups into consideration when crafting their campaigns

• Case Study Example:– HP’s “You on You” campaign softly

showcases a multicultural message– http://www.youtube.com/watch?v=euMRCbJJ-CQ&feature=player_embedded

Geographics

• Segmentation of the market based on where people live

• Close to demographic data because it is fairly certain

• Can refer to local, regional, national, or global markets

Psychographics• Involves grouping people based

on lifestyle similarities, as well as shares attitudes, values, and opinions

• Consumer lifestyles include how people spend their time and money

Attitudes, Values, & Opinions• Require special research to learn

about a group’s personality traits, values, and motivation (focus groups)

Behavioral

• Based on product-related behavior– Look at benefits desired by

consumers– Shopping patterns– Usage rate

• Case study example: MasterCard

How Marketers Use Consumers’ Behavioral Patterns

• Marketers study shopping patterns to determine usage rates

• Example:– Studies show that most teenagers spend

less than $50 a month on entertainment

• The 80/20 Rule– Means that 80% of a company’s sales

come from 20% of its most loyal customers

Mass Marketing• When products have universal

appeal and few features to differentiate them from competitors

• Not as popular as it once was

• Niche marketing has taken over – Markets are narrowed down and

defined with extreme precision– http://www.pbs.org/wgbh/pages/frontline/video/flv/generic.html?s=frol02p7

4&continuous=1

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Consumers versus Customers• A product may have more than one

target market

• Case Study Example: Build-a-Bear knows they need to target children and parents differently.

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Consumers versus Customers, cont.

Case Study Example, cont.:• Children are the consumers, the ones

who will ask for the bears and play with them

• Parents are the customers, the ones who need to approve it, and the ones who will pay

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Customer Profiles• Lists information about the target

market such as– Age– Income Level– Ethnic Background– Occupation– Attitudes– Lifestyle– Geographic Residence

• Businesses develop these to get a clear picture of their target market

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Think Critically & Discuss…

• Work in a group of four (4) to build a customer profile for Dierberg’s

• You will share with the class in 10 minutes

• Be prepared to back up your ideas!

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Marketing Mix• These are the tools marketing

professionals use and control to influence potential customers

• Include the four basic P’s of marketing strategies:– Product– Place– Price– Promotion

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Marketing Mix, cont.• Some would add a 5th “P”, PEOPLE,

as it is necessary to have a clearly defined target market before you can create marketing strategies

• All of the “P’s” are interconnected– Actions in one area, affect decisions in

another

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Product

• This “P” revolves around making decisions about what to make and sell

• Some marketing strategy examples of this P include:– Features of the new iPhone– The brand name of a new Nabisco breakfast food– How to package a new organic Hershey candy

bar– What the warranty of a Sony Bravia LCD will

entail– How to update and improve the Ford Focus so it

can remain competitive

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Place• The means of getting the product into the consumer’s hands

• It is important to know where one’s target market shops!

• Examples of marketing decisions based on place include:– Whether a local bakery should build additional stores on

the Illinois side of the river– Whether Build-a-Bear should create a website where

customers can purchase their products– Whether Tropicana should have products shipped via air or

rail

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Price• What is exchanged (monetarily) for the product

• This strategy must consider what customers are willing and able to pay

• Examples of pricing strategy decisions include– Toyota’s suggested manufacturer’s retail price on the

Camry– Wal-Mart offering credit terms (i.e., their own credit

card) at their stores– Hollister having an “End of Summer Sale” on select

items

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Promotion• Deal with how potential customers will

be told about a company’s products

• Examples of promotion strategy include– The 2010 Nike Shox campaign:

• The message used (language, style, approach)• The media that is used to spread the word

about the shoe• The special offers Nike will employ to create

buzz and business• The timing of the campaigns and the product

roll-out

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Quick Review…• What is the difference between the

consumer and industrial markets?

• What is the relationship among market segmentation, target markets, and customer profiles?

• Name the four P’s of the marketing mix and explain the importance of a target market for each of them.