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Part 2 Reaching Your Market Reaching Your Market How does a company identify its market? Why do customers buy certain products? How can competitors influence a company’s decisions? How does marketing research influence marketing decisions? How are for-profit and not-for profit companies similar and different? Friends or Food? Burger King – Whopper Sacrifice Campaign Part 2 Reaching Your Market Chapter 5 Targeting a Market Learning Goals define business opportunity explain the components of a marketing strategy describe the four qualities of a target market identify the four strategies in the marketing mix define mass marketing and target marketing and state the advantages and disadvantages of each (Continued) Learning Goals explain how segmentation helps to determine which market to target explain each of the four segmentation categories and list the variables for each describe how marketers create and use a market segment profile Marketing Terms business opportunity mass marketing target marketing market segmentation segmentation variable geographic segmentation census demographic information demographic segmentation generation (Continued) Marketing Terms disposable income discretionary income psychographic segmentation behavioural segmentation 80/20 rule market segment or consumer profile Business Opportunity Business opportunity a chance for success based on a product idea and a market that will buy it To turn a business opportunity into a successful business, develop a business plan and a marketing plan. The marketing plan includes the marketing strategy. Target Market Target market segment of a larger market whose wants and needs you will try to meet with a specific marketing mix Marketers focus on the target market while making marketing mix decisions. (Continued) Target Market Qualities of a good target market clearly defined needs and wants that your company can meet money to buy your product willingness and authority to buy your product enough customers in the market to be profitable Marketing Mix Marketing mix decisions are marketing mix strategies. Both are made with the target market in mind. Product Strategies Product strategies decisions about goods, services, or ideas made with the target market in mind Types of decisions quality, quantity, size, colour, features, technical support, packaging, warranties, brand name, and brand image Price Strategies Price strategies decisions about price made with the target market and profit in mind Types of decisions list price and discounts Place Strategies Place strategies decisions about where the product will be sold made with the target market in mind Types of decisions what types of stores will carry the product, whether to sell online, and how to transport the product Promotion Strategies Promotion strategies decisions about how to tell the customer about the product and the company made with the target market in mind Types of decisions advertising, personal selling, customer service, publicity, promotional events, and design and layout of stores Mass Marketing Mass marketing only one marketing mix assumes that everyone’s wants and needs for a product are exactly the same It is difficult to be successful with a mass marketing strategy. (Continued) Mass Marketing Two problems with mass marketing diversity of consumer markets profitability problems (Continued) Mass Marketing Consumer markets are diverse. contain many subgroups with very different needs and wants needs within a mass market differ example: one type of shoe will not meet the needs of everyone who wears shoes (Continued) Mass Marketing Profitability if a product doesn’t meet enough consumers’ needs, there might not be enough sales to make a profit advertising to a mass market is expensive Target marketing is the answer to problems with mass marketing. Target Marketing When target marketing choose a subgroup of the mass market that has the same needs and wants for your product this subgroup is your target market create a unique marketing mix for your target market Choosing Your Target Market Four ways to choose a target market target market first product idea first product and target market together old product, new target market (Continued) Choosing Your Target Market Target market first choose a target market create a product that this market wants and needs Approach works well when there is a large and distinct target market that has money to spend. Teens are a popular target market. (Continued) Choosing Your Target Market Product idea first develop a product idea find a target market that would buy the product Potential problem: You might never find a market. Potential benefit: You might create a huge market. (Continued) Choosing Your Target Market Product and target market together usually occurs when you observe a need in a particular group Example MAC cosmetics line developed specifically for make-up artists (Continued) Choosing Your Target Market Old product, new target market usually occurs when a long-existing product is losing sales company promotes the old product to a new market or for a new use Example: baking soda was promoted as a baking ingredient now promoted as a cleaning product Advantages of Targeting a Market Target marketing allows a business to focus on meeting the needs of one small group often more profitable than trying to meet the needs of everyone in a large group (Continued) Advantages of Targeting a Market Target marketing enables smaller businesses to compete with larger companies smaller businesses can target a group whose needs are not being met by the larger companies market niche: smaller segment of a larger market whose needs are not being met by the main providers (Continued) Advantages of Targeting a Market Example of niche market Kaepa athletic shoes developed specifically for cheerleaders niche market in the larger athletic shoe market Disadvantages of Targeting a Market If you target a market that is too small, there will not be enough sales to make a profit. You will… need to broaden your market If you choose the wrong target market, it won’t buy your product. You will… need to find a new target market (Continued) Disadvantages of Targeting a Market When sales come from one small market, if that market has a setback then the business will suffer too. Despite the potential disadvantages, most companies use target marketing. Segmenting a Market Market segmentation process of dividing a large market into smaller parts each of these smaller parts is called a segment Market Market Segments (Continued) Segmenting a Market The purpose of market segmentation is to find a target market with similar wants and needs for your product money to buy your product the will and authority to buy your product enough size to be profitable (Continued) Segmenting a Market Segmentation variable customer characteristic used to segment a market Adult Baby High Medium Child Senior Low Teen Age Income (Continued) Segmenting a Market Segmentation variables are organized into four categories. geographic demographic psychographic behavioural Geographic Variables Geographic segmentation dividing a market based on where customers live Geographic variables include location climate community size Location Location customs of place (not the same as climate) Example: car manufacturer Canadian market: metric system indicators U.S. market: imperial system indicators Climate Different climates require different types of products, such as clothing automobile tires housing heating and air conditioning Demographic Variables Demographic information statistics (numbers) that describe the characteristics of a population collected in a census Census count of the people in a country made by the government on a regular basis Statistics Canada: conducts census every 5 years (Continued) Demographic Variables Demographic information is organized into demographic variables, including age gender ethnicity income family size and make-up (Continued) Age People of different ages have different needs and wants. Generation group of people who were born or grew up during a particular period of history people in the same generation generally have similar attitudes, wants, and needs. the Canadian consumer market is often segmented by generations. Ethnicity Needs for many products vary with culture and ethnicity. Examples ingredients for culture-specific dishes items for religious practices In Canada, people enjoy products produced for a wide range of cultures. Income Marketers are interested in two categories of income. disposable income money left after taxes are taken out discretionary income money left after taxes are taken out and after necessities are paid for A market is often segmented based on income levels. Family Make-up Families of different sizes have different needs. Psychographic Variables Psychographic segmentation based on psychological characteristics of customers Psychographic variables include hobbies social activities lifestyle interests attitudes Hobbies and Activities People who participate in the same hobbies and activities often buy similar things. Examples of hobbies and activities photography crafts stamp collecting sports cultural events Lifestyle To discover lifestyle and values, marketers may use the VALS™ Survey. eight VALS™ segments organized by level of resources and personal motivation information used to meet the unique needs of the target market Take the VALS™ survey Behavioural Variables Behavioural segmentation dividing a market based on the way customers use a product Behavioural variables include features desired usage rate brand loyalty Usage Rate 80/20 rule most of the profits (80%) come from a few customers (20%) who show the greatest brand loyalty Marketers often segment the market based on customer usage rates. heavy, moderate, light, nonuse Combining Variables Marketers often target a market based on two or more segmentation variables. Geographic location and income is a common combination. Market Segment Profile Market segment profile a detailed description of the typical customer in a market segment includes information on geographic variables demographics psychographics behaviour relevant to the product Review What is a business opportunity? What are the two parts of a marketing strategy? List the four qualities that a target market should have. Why are mass marketing strategies usually unsuccessful? Describe the four approaches to choosing a target market. (Continued) Review What is market segmentation? What is the purpose of market segmentation? List the four categories of variables often used to segment markets. Give an example of a segmentation variable and how you would use it to segment a market. Glossary Back 80/20 rule. Majority of a business’s profits come from a small number of customers; based on research that shows that 80 percent of the sales come from 20 percent of the customers in many businesses. behavioural segmentation. Segmenting a market based on the way customers use a product or behave toward a product. (Continued) Glossary Back business opportunity. Chance for success provided by the combination of a product idea and a market that is willing and able to buy the product. census. Count of the people in a country made by the government on a regular basis. demographic information. Statistics (numbers) that describe the characteristics of a population, such as age or income. (Continued) Glossary Back demographic segmentation. Segmenting a market based on demographic variables, that is, characteristics of a population. discretionary income. Income left after taxes and after the necessities of life have been paid for. disposable income. Income a person has available to spend (dispose of) after taxes have been taken out. (Continued) Glossary Back generation. Group of people born during a particular period of history. geographic segmentation. Segmenting a market based on where customers live. market segmentation. Process of dividing a large market into smaller parts. (Continued) Glossary Back market segment or consumer profile. Detailed description of the typical consumer in a market segment. mass marketing. Development of only one marketing mix for a specific product. (Continued) Glossary Back psychographic segmentation. Segmenting a market based on psychological characteristics of customers. segmentation variable. Customer characteristic that is used to segment a market. target marketing. Development of a unique marketing mix for a market segment (target market).