Download Chapter 9

Part 3: Target Market Selection
8. Marketing Research, DecisionSupport Systems, and Sales
Forecasting
9. Market Segmentation, Targeting,
and Positioning
10. Relationship Marketing,
Customer Relationship
Management (CRM), and One-toOne Marketing
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Chapter 9
Market
Segmentation,
Targeting, and
Positioning
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Chapter Objectives
1. Identify the essential components of a market.
2. Outline the role of market segmentation in developing a
marketing strategy.
3. Describe the criteria necessary for effective
segmentation.
4. Explain each of the four bases for segmenting consumer
markets.
5. Identify the steps in the market segmentation process.
6. Discuss four basic strategies for reaching target
markets.
7. Summarize the types of positioning strategies.
8. Explain the reasons for positioning and repositioning
products.
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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
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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.
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The Role of Market Segmentation
 Market Segmentation
Division 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.
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No Market Segmentation
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Segmented by Sex
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Segmented by Age
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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.
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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.
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 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)
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 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
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 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.
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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
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 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
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 Segmenting by Age
Identify market segments on the
basis of age
Products designed to meet the
specific needs of certain age groups
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 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
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 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.
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 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
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 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
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 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
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 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
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 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”
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 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
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 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
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 Product-Related Segmentation
Dividing 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
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 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”)
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 Brand Loyalty
Segmenting consumers grouped according
to the strength of brand loyalty felt toward a
product
Frequent flyer programs of airlines and
many hotels
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 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
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The Market Segmentation Process
 Develop a Relevant Profile for each
Segment
 Forecast Market Potential
 Forecast Probable Market Share
 Select Specific Market Segments
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Strategies for Reaching
Target 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
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 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
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 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
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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
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Positioning map
Graphic illustration that shows differences
in consumers’ perceptions of competing
products
Reposition
Marketing strategy to change the position
of its product in consumers’ minds relative
to the positions of competing products
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Hypothetical
Competitive
Positioning
Map for
Selected
Retailers
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