Chapter 4 Segmenting and targeting markets

1. Chapter 4Segmenting and targeting markets

2. Learning objectives 1 Describe the characteristics of markets and market segments 2 Explain the importance of market segmentation 3 List the steps involved in segmenting markets 4 Describe the bases commonly used to segment consumer markets 5 Describe the bases for segmenting business markets

3. Learning objectives (cont.) 6 Discuss the criteria for successful market segmentation 7 Discuss alternative strategies for selecting target markets 8 Explain how and why organisations implement positioning strategies and how product differentiation plays a role 9 Discuss global market segmentation and targeting issues

4. Learning objective 1 Describe the characteristics of markets and market segments Define the term marketing

5. 1 Market segmentation Market People or organisations with needs or wants and the ability and willingness to buy. Market segment A subgroup of people or organisations sharing one or more characteristics that cause them to have similar product needs. Market segmentation The process of dividing a market into meaningful, relatively similar and identifiable segments or groups.

6. Learning objective 2 Describe four marketing management philosophies. Explain the importance of market segmentation

7. 2 The importance of market segmentation • Nearly all markets include people with different product needs and preferences. • It helps to define needs and wants more precisely. • Decision-makers can define objectives and allocate resources more accurately. • More precise objectives = better evaluation of performance.

8. Learning objective 3 Describe four marketing management philosophies. List the steps involved in segmenting markets

9. 3 Steps in segmenting a market • Select a market for study. • Choose bases for segmentation. • Select descriptors. • Profile and analyse segments. • Select target markets. • Design, implement and maintain marketing mix.

10. Learning objective 4 Describe the bases commonly used to segment consumer markets

11. 4 Segmentation bases Characteristics of individuals, groups or organisations used to divide a total market into segments (variables).

12. 4 Bases for segmentation • Geography • Demographics • Psychographics • Benefits sought • Usage rate

13. 4 Geographic segmentation Segmenting markets by region of the country or world, market size, market density or climate.

14. 4 Geographic segmentation • Region of the country or world • Market size • Market density • Climate

15. 4 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.

16. 4 Demographic segmentation Segmenting markets by age, gender, income, ethnic background and family life cycle.

17. 4 Bases for demographic segmentation • Age • Gender • Income • Ethnic background • Family life cycle

18. 4 Family life cycle • Age • Marital status • Children

19. 4 Psychographic segmentation Market segmentation on the basis of personality, motives, lifestyles and geodemographics.

20. 4 Bases for psychographic segmentation • Personality • Motives • Lifestyles • Geodemographics

21. 4 Lifestyle segmentation • How time is spent • Beliefs • Socioeconomic characteristics

22. 4 Geodemographic segmentation Segmenting potential customers into neighborhood lifestyle categories. Combines geographic, demographic and lifestyle segmentation.

23. 4 Benefit segmentation The process of grouping customers into market segments according to the benefits they seek from the product.

24. 4 Usage-rate segmentation Dividing a market by the amount of product bought or consumed.

25. The 80/20 principle A principle holding that 20 per cent of all customers generate 80 per cent of the demand.

26. Learning objective 5 Describe the bases for segmenting business markets

27. 5 Macrosegmentation The process of dividing business markets into segments based on general characteristics, such as geographic location, customer type, customer size and product use.

28. 5 Microsegmentation The process of dividing business markets into segments based on the characteristics of decision-making units within a macrosegment.

29. 5 Business marketing segmentation Geographic Customer type Macro- segmentation Customer size Business markets Product use Purchasing criteria Purchasing strategy Micro- segmentation Importance Personal characteristics

30. Learning objective 6 Discuss the criteria for successful market segmentation

31. 6 Criteria for successful segmentation • Substantiality • Identifiability • Accessibility • Responsiveness

32. 6 Criteria for segmentation Substantiality Segment must be large enough to warrant a special marketing mix. Identifiability/ measurability Segments must be identifiable and their size measurable. Accessibility Members of targeted segments must be reachable with marketing mix. Responsiveness Unless segment responds to a marketing mix differently, no separate treatment is needed.

33. Learning objective 7 Discuss alternative strategies for selecting target markets

34. 7 Target market A group of people or organisations for which an organisation designs, implements and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.

35. Undifferentiated strategy Concentrated strategy Multi-segment strategy 7 Strategies for selectingtarget markets

36. 7 Undifferentiated targeting strategy Marketing approach that views the market as one big market with no individual segments and thus requires a single marketing mix.

37. 7 Undifferentiated targeting strategy (cont.) Advantages: • Potential savings on production and marketing costs Disadvantages: • Unimaginative product offerings • Company more susceptible to competition

38. 7 Concentrated targeting strategy A strategy used to select one segment of a market for targeting marketing efforts.

39. 7 Niche One segment of a market.

40. 7 Concentrated targeting strategy (cont.) • 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

41. 7 Multi-segment targeting strategy A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.

42. 7 Multi-segment targeting strategy (cont.) • Advantages: • Greater financial success • Economies of scale • Disadvantages: • High costs • Cannibalisation

43. 7 Costs of multi-segment targeting • Product design costs • Production costs • Promotion costs • Inventory costs • Marketing research costs • Management costs • Cannibalisation

44. Learning objectives 8 Explain how and why organisations implement positioning strategies and how product differentiation plays a role

45. 8 Positioning Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line or organisation in general.

46. 8 Position The place a product, brand or group of products occupies in consumers’ minds relative to competing offerings.

47. 8 Effective positioning • Assess the positions of competing products. • Determine the dimensions of these positions. • Choose an effective market position.

48. 8 Product differentiation A positioning strategy that some firms use to distinguish their products from those of competitors.

49. 8 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.

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