Segmenting & Targeting Markets

1. Segmenting & Targeting Markets Strategic Marketing Chapter 7 210 - 234

2. Characteristics of Markets & Market Segments • A Market is • Comprised of people or organizations (Consumer or Business) • Have needs, abilities, and willingness to buy • Markets have market segments • A Market Segment consists of a subgroup of people who share one or more common characteristic that causes them to have similar product needs • Theoretically anything can be grouped together • Market segmentation is only valuable if the group is meaningful to the marketer • The marketing mix is tailored to the market segment defined

3. The Concept of Market Segmentation LOI

4. Market Segmentation • Market Segmentation helps marketers define customer needs and wants more precisely • Segments differ in size & potential so companies look at particular segments and determine more accurate marketing objectives • Accurate marketing objectives lead to: • Improved allocation of resources • Better marketing results

5. Market Segmentation Review • Market Segmentation accomplishes the following: • Identify specific groups that you can analyze characteristics & buying behavior of • Design marketing mixes specific to segmented groups • Allows you to meet customer needs & wants while meeting company objectives

6. Market Segmentation • To be useful, a segmentation scheme must produce segments that meet four basic criteria: • Sustainability • Needs to be large enough to matter. Not enough potential; it wont last. • Identifiability & Measurability • Need to be able to identify the group being targeted & its size • Easy to determine amount of people in certain subgroups; not easy to determine willingness or interest • Accessibility • Important to devise marketing mixes that allow your segments to access your product • Seniors citizens, Disabled, Language deficient, etc…don’t access information or products as easily as everyone else • Responsiveness • If the majority of customers respond positively to a marketing mix; then creating a separate marketing mix strategy for “unresponsive” group may not be necessary

7. Market Segmentation Bases • Segmentation Bases (Variables) • Characteristics of individuals, groups, or organizations used to divide a total market into segments • Marketers choose “bases” that are • Substantial • Identifiable • Measurable • Accessible • Responsive

8. Market Segmentation • One Base or Variable is not as precise but is simple and easy • Multiple variables allows for precision but • Is Harder to use • Usable secondary resources are less likely • The size of group gets smaller • Current trend is to use more variables then less variables

9. Market Segmentation Examples • One Variable • Segment a population based on gender • Multiple Variable • Gender • Age • Race • Education • Marital status • Geographics • Interests

10. Market Segmentation • Most Common Variables used to segment markets • Geography • Demographics • Psychographics • Benefits Sought • Usage Rate(s)

11. Geographics • Segment by: • Region • Country • World • Market size • Market density • # of people within a unit of land • Climate • Important because purchasing needs vary based on weather conditions

12. Why Segment with Geographics? • 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 • Quicker reaction to competition

13. Examples of Geogrpahic Marketing • Restaurants offering menu items that reflect local taste interest • Cracker Barrel & McDonald’s alters menu to reflect local tastes • Menu in south is different than menu in Northeast • Miller Lite developed a True to Texas Marketing Campaign • Magazines like Midwest or Southwest Living • Pepsi packaging products based on NFL Cities

14. Examples of Geogrpahics: Local Retailers

15. Demographic Segmentation • Demographic Segmentation • Easy to obtain demographic information • Correlates to consumer buying • Age • Gender • Income • Ethnic Background • Family Life Cycle

16. Age Demographics

17. Gender Segmentation • Facts About Female Consumers • 75% of Family Finances • 51% of new electronics sold • 75% over-the-counter drugs • 65% of new cars • Companies are realizing that women buy more than packaged goods • Ace Hardware: • 42% of customers are female who spend 30% - 40% more than men per visit • Wider, well-lit aisles, clear signage, instructions on product use.

18. Gender Segmentation

19. Income Segmentation • Income segmentation tells marketers what consumers can afford • Segment by wants & buying power • Examples: • Housing • Clothing • Automobiles • Food

20. Income

21. Ethnic Segmentation • In the past marketers would present ads as anglo-centric • White all-American family • Mass marketing approach • In large part this occurred because the majority of the population fit this mold • 1970’s a shift in culture started • Ethnic Foods started to be introduced into stores • Roles in music, movies, & politics became more prominent • As population of minorities increases so does marketing efforts towards them • A lot of marketers are choosing to target urban areas versus specific ethnic groups

22. LaRaza:Hispanic Rights Organization

23. Ethnic Segmentation Ads Geely Automobile Holdings Ltd Pantene Pro-V

24. Family Life-Cycle Segmentation • Family Life Cycle is a series of stages determined by a combination of age, marital status, & presence or absence of children • 46% of households are maintained by unmarried men or women • 102 unmarried Americans over the age of 18 • 240.144 million people living in the United States over the age of 18 • A families needs, income, resources, & expenditures differ at each stage of the life cycle

25. Family Life Cycle LO4

26. Life Cycle Buying Habits

27. Targeting Age, Marital Status & Children Factor

28. Psychographic Factors

29. Psychographic Segmentation • Psychographics is segmenting based on • Personality • Motives • Emotional: Caring for others • Rational: Appeals to economy, Reliability, & Dependability • Status-Related: Customers want to look a certain way • Lifestyle: • Way consumers spend their time • Importance of things around them • Beliefs • Socioeconomic Factors: Income & Education • Explorers, Achievers, Builders, & Masters • Geodemographics: Combines geographic, demographic, & lifestyle segments

30. Claritas PRIZM Lifestyle Softwarehttp://www.claritas.com/MyBestSegments/Default.jsp?ID=30&pageName=Segment%2BExplorer

31. 28277: Market Segmentation

32. 85365: Market Segmentation

33. Psychographic Ads

34. Benefit Segmentation • Benefit Segmentation: • Process of grouping customers into market segments according to the benefits they seek from a product • Segmentation typically connects variables to needs • If you are this age, living in this city, & you like to do….then this is the product you want • Benefit segmentation is different because it is based on their needs and wants • Advertises the benefit of a product • Start with a product and break it down into the benefits it offers • Healthy product, Better tasting, Low price, etc….

35. Low Carb v. High Protein v. Energy

36. Usage-Rate Segmentation • Usage-Rate Segmentation: • Dividing a market by the amount of product bought or consumed. • Examples of markets: • Former users • Potential users • First-time users • Light or irregular users • Medium users • Heavy users • Heavy users are the group most commonly marketed towards

37. Useage Rate Segmentation • 80/20 Principle • A principle holding that 20 percent of all customers generate 80 percent of the demand. Time Warner Cable Example • Fewer than 10% of its subscribers consume 75% of its bandwidth • The goal is to turn customers into heavy users • Frequency & customer loyalty programs are designed around this concept

38. Useage Rate Ads

39. Cell Phone Use Useage Rate Ads

40. Bases for Segmenting Business Markets

41. Business Markets • Business Market consists of four broad segments: • Producers • Profit-oriented individuals & organizations that use purchased goods to produce other products • Examples: Construction, Manufacturing, Transportation, Finance, Real Estate, & Food Services • Resellers • Wholesalers & Retailers • Buy & resell products • Government • Selling to Federal, Municipal, & Local officials. • Most lucrative industry. Usually requires bids • Institutions • Schools, churches, civic clubs, hospitals, unions, colleges, nonbusiness organizations, etc..

42. Business Market Segmentation • The four types of business segments that are marketed towards are broken down by Company Characteristics & Buying Process • Company Characteristics • Geographic location • Vendors close by may have advantage because it is usually cheaper • Type of company • Target companies specifically based on a company's particular need • Company size • Larger companies may get different opportunities because they buy more • Volume of purchase • Heavy, Moderate, or light users of a product • Product use • Targeting a company based on what they are producing, purchasing & using

43. Business Buyer Characterisitcs • Buying Process deals with how a company purchases products • Two main purchasing profiles that have been identified are: • Satisficers: Choosing what company to place an order with based on their ability to satisfy product & delivery requirements • Optimizers: Consider numerous suppliers (both familiar and unfamiliar), solicit bids, & study all proposals carefully before selecting one.

44. Buyer Characteristics • Buyer characteristics can also be determined by • Demographic Characteristics • Decision-Style • Tolerance for risk • Confidence Level • Job responsibilities

45. Steps in Segmenting a Market

46. Steps in Segmenting a Market • Select a market or product category for study • Can be a market they are currently in or a product category they are interested in joining • Anheuser-Busch looked at market closely before introducing Light Beers • Anheuser-Busch looked at snack food market closely prior to introducing Eagle Brand • Choose a “base” for segmenting the market • Choosing between demographics, geographics, psychographics, usuage-rate, & benefits sought • Whatever segmentation is chosen must meet be sustainable, identifiable, measurable, accessible & responsive

47. Steps in Segmenting a Market • Select Segmentation Descriptors • After choosing segmentation bases; the marketer must choose a descriptor • Descriptors identify the specific segmentation variables being used • Example: Company selects demographics as its base; Descriptors could be • Age • Gender • Occupation • Education • Income

48. Steps in Segmenting a Market • Profile & Analyze Segments • Profile includes the segments size, expected growth, purchase frequency, current brand usage, brand loyalty, & long-term sales and potential profit. • Allows firm to look at information and rank them according to potential • Profit • Opportunity • Risk • Consistency with organizational goals

49. Steps in Segmenting a Market • Select Target Markets • Natural outcome of segmentation process • Determines companies Marketing Mix • Design, Implement, & Maintain Appropriate Marketing Mixes • Strategies created for: • Product • Place • Price • Promotional

50. Market Segmentation • Markets are dynamic • Dynamic = Changing • Classification is static • Static = Consistent. No Change • Consumers will move in and out of the classifications so marketers have to make adjustments and proactively monitor their segmentation strategies • People in classification will not always stay there • If you target 21-35 year-olds a person can only be in that group at most for 15 years