Chapter 9 • Market Segmentation, Targeting, and Positioning
Chapter Objectives • Identify the essential components of a market. • Outline the role of market segmentation in developing a marketing strategy. • Describe the criteria necessary for effective segmentation. • Explain each of the four bases for segmenting consumer markets. • Identify the steps in the market segmentation process. • Discuss four basic strategies for reaching target markets. • Summarize the types of positioning strategies. • Explain the reasons for positioning and repositioning products.
Selecting a Target Market • Before a marketing mix strategy can be implemented, the marketer must identify, evaluate, and select a target market. • Market:people or institutions with sufficient purchasing power, authority, and willingness to buy • Target market: specific segment of consumers most likely to purchase a particular product
Types of Markets • Consumer products:goods or services purchased by an ultimate consumer for personal use • Business products:goods or services purchased for use either directly or indirectly in the production of other goods and services for resale • The key to classification is to identify the purchaser and the reasons for buying the goods.
The Role of Market Segmentation • Market SegmentationDivision of the total market into smaller, relatively homogeneous groups • No single marketing mix can satisfy everyone. Therefore, separate marketing mixes should be used for different market segments.
Criteria for Effective Segmentation • Market segmentation cannot be used in all cases. To be effective, segmentation must meet the following basic requirements. • The market segments must be measurable in terms of both purchasing power and size. • Marketers must be able to effectively promote to and serve a market segment. • Market segments must be sufficiently large to be potentially profitable. • The number of segments must match the firm’s capabilities.
Segmenting Consumer Markets • Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locations • Does not ensure that all consumers in a location will make the same buying decision. • Help in identifying some general patterns.
Urban Data Classified • Core Based Statistical Area (CBSA) • Metropolitan Statistical Area (MSA) • Micropolitan Statistical Area • Consolidated Metropolitan Statistical Area (CMSA) • Primary Metropolitan Statistical Area (PMSA)
Using Geographic Segmentation • Demand for some goods and services can vary according to the geographic region • Most major brands get 40-80 percent of their sales from what are called core regions • Climate is another important segmentation factor • Northern consumers, for example, eat more soup than Southerners • Southerners use more chlorine for their swimming pools than Northern residents
Geographic Information Service (GIS):computer technology that records several layers of data on a single map • Simplifies the job of analyzing marketing information by placing data in a spatial format . . . The result of which is a geographic map overlaid with digital data about consumers in a particular area.
Segmenting Consumer Markets • Demographic Segmentation:dividing consumer groups according to characteristics such as sex, age, income, occupation, education, household size, and stage in the family life cycle • A primary source for demographic data in the United States is the Census Bureau
Segmenting by Gender • Marketers must ensure that traditional assumptions are not false • Recently, the lines have increasingly blurred • Some companies market successfully to both genders
Segmenting by Age • Identify market segments on the basis of age • Products designed to meet the specific needs of certain age groups
Tweens and Teens • Rapidly growing market • Significant purchasing power • Cohert Effect • Tendency among members of a generation to be influenced and drawn together by significant events occurring during their key formative years, roughly 17 to 22 years of age
Baby Boomers • Born from 1946 until 1965 • Nearly 42 percent of U.S. adults • Values influenced both by the Vietnam War and the career-driven era • Huge disposable income • Seniors • By 2025, 1 in 5 over age 65 • Median age is now 35.2 years • Life expectancy 74 for men and 79 for women • Heads of households aged 55-plus control about three-quarters of the country’s total financial assets.
Segmenting by Ethnic Group • By 2050, nearly half of the population of the US will belong to nonwhite minority groups. • Hispanic • African Americans • Asian Americans • Native Americans • People of Mixed Race
Family Life Cycle Stages Segmentation • The process of family formation and dissolution • Life stage, not age per se, is the primary determinant of many consumer purchases • Segmenting by Household Type • Today’s U.S. households are very diverse • Married couples and their children • Blended by divorce or loss of spouse • Headed by single parent, same-sex parents, grandparents
Segmenting by Income and Expenditure Patterns • Engel’s Laws,as family income increases: • A smaller percentage of expenditures go for food • The percentage spent on housing and household operations and clothing remains constant • The percentage spent on other items (such as recreation and education) increases
Demographic Segmentation Abroad • Obtaining the data necessary for global demographic segmentation is often difficult • Many countries do not operate regularly scheduled census programs • For example, the most recent census of Holland is now over 20 years old, and Germany skipped its census from 1970 to 1987 • Daily life cycle data is difficult to apply in global demographic segmentation efforts
Psychographic Segmentation • Divides a population into groups that have similar psychological characteristics, values, and lifestyles • Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities • The most common method for developing psychographic profiles of a population is to conduct a large-scale survey • AIO statements • VALS and VALS 2 “Values and Lifestyles”
Psychographic Segmentation of Global Markets like those done by Roper Starch can paint useful pictures of the residents of various countries • Roper found six psychographic consumer segments that are common to 35 nations • Strivers • Devouts • Altruists • Intimates • Fun seekers • Creatives
Using Psychographic Segmentation • Psychographic profiles produce rich descriptions of potential target markets • Greater detail aids in matching a company’s image and its offerings with the types of consumers who are likely purchasers
Product-Related SegmentationDividing a consumer population into homogeneous groups based on characteristics of their relationships to the product • Can take the form of segmenting based on: • Benefits that people seek when they buy • Usage rates for a product • Consumers’ brand loyalty toward a product
Benefits • Focuses on the attributes that people seek in a good or service and the benefits that they expect to receive from that good or service • Groups consumers into segments based on what they want a product to do for them • Usage Rates • Segmenting by grouping people according to the amounts of a product that they buy and use • Markets often divided into heavy-user, moderate-user, and light-user segments • The 80/20 principle (“Praedo’s Law”)
Brand Loyalty • Segmenting consumers grouped according to the strength of brand loyalty felt toward a product • Frequent flyer programs of airlines and many hotels
Using Multiple Segmentation Bases • Increase accuracy in reaching the right markets • Combine multiple bases • Geographic and Demographic • Product-related with income and expenditure patterns • Others
The Market Segmentation Process • Develop a Relevant Profile for each Segment • Forecast Market Potential • Forecast Probable Market Share • Select Specific Market Segments
Strategies for ReachingTarget Markets • Undifferentiated Marketing: when a firm produces only one product or product line and promotes it to all customers with a single marketing mix • Differentiated Marketing: when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments
Concentrated Marketing (niche marketing): when a firm commits all of its marketing resources to serve a single market segment • Micromarketing: involves targeting potential customers at a very basic level, such as by ZIP code, specific occupation, lifestyle, or individual household
Selecting and Executing a Strategy • No single, best choice strategy suits all firms • Determinants of a market-specific strategy: • Company resources • Product homogeneity • Stage in the product life-cycle • Competitors’ strategy
Positioning: a marketing strategy that emphasizes serving a specific market segment by achieving a certain position in buyers’ minds • Attributes • Price/quality • Competitors • Application • Product user • Product class
Positioning mapGraphic illustration that shows differences in consumers’ perceptions of competing products • RepositionMarketing strategy to change the position of its product in consumers’ minds relative to the positions of competing products