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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).