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A FRAMEWORK for MARKETING MANAGEMENT Chapter 7 Identifying Market Segments and Targets Kotler Keller Cunningham Chapter Questions • How can a company identify the segments that make up a market? • What criteria can a company use in selecting attractive segments to enter through target marketing? © Copyright 2008 Pearson Education Canada 7-2 Profile: Canadian Marketing Excellence LULULEMON • lulelemon athletica was founded in 1998 by Chip Wilson, a yoga enthusiast • To get instant feedback, the company put its design room in the middle of its retail store • Yoga instructors were asked to test the clothing and began recommending it to their own students • Products are priced at a premium to reflect their innovative design which houses high performance athletic wear • lululemon now has stores across Canada, the United States, Tokyo, and Melbourne © Copyright 2008 Pearson Education Canada 7-3 Effective Targeting Requires... • Identifying and profiling distinct groups of buyers who differ in their needs and preferences • Selecting one or more market segments to enter • Establishing and communicating the distinctive benefits of the market offering © Copyright 2008 Pearson Education Canada 7-4 Levels of Market Segmentation Segment marketing Niche marketing Local marketing Customerization © Copyright 2008 Pearson Education Canada 7-5 Customerization Customerization combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice © Copyright 2008 Pearson Education Canada 7-6 Figure 7.1 Basic Market-Preference Patterns © Copyright 2008 Pearson Education Canada 7-7 Segmenting Consumer Markets Geographic Demographic Psychographic Behavioural © Copyright 2008 Pearson Education Canada 7-8 Segmenting Consumer Markets Bases for Segmentation • • • • Geographic Demographic Psychographic Behavioural • • • • • Nation or country Province or region City or metro size Density Climate © Copyright 2008 Pearson Education Canada 7-9 Segmenting Consumer Markets Bases for Segmentation • • • • Geographic Demographic Psychographic Behavioural • • • • • • • • Age, race, gender Income, education Family size Family life cycle Occupation Religion, nationality Generation Social class • Example: RBC Financial created a “gender intelligent sales force” that led to a 29% increase in customer satisfaction in women entrepreneurs © Copyright 2008 Pearson Education Canada 7-10 Segmenting Consumer Markets Bases for Segmentation • • • • Geographic Demographic Psychographic Behavioural • Lifestyle • Activities • Interests • Opinions • Personality • Core values © Copyright 2008 Pearson Education Canada 7-11 Segmenting Consumer Markets Bases for Segmentation • • • • Geographic Demographic Psychographic Behavioural • • • • • • • Occasions Benefits User status Usage rate Loyalty status Buyer-readiness Attitude © Copyright 2008 Pearson Education Canada 7-12 Behavioural Segmentation: Decision Roles Initiator Influencer Decider Buyer User © Copyright 2008 Pearson Education Canada 7-13 Behavioural Segmentation Variables Occasions Attitude Benefits Variables Loyalty Buyerreadiness User status Usage rate © Copyright 2008 Pearson Education Canada 7-14 Loyalty Status Hard-core Split loyals Shifting loyals Switchers © Copyright 2008 Pearson Education Canada 7-15 Major Segmentation Variables for Business Markets Demographic Operating variable Purchasing approaches Situational factors Personal characteristics © Copyright 2008 Pearson Education Canada 7-16 Sequential Segmentation and Stage of Purchase Process First-time prospects Novices Sophisticates © Copyright 2008 Pearson Education Canada 7-17 Effective Segmentation Criteria Measurable Actionable Substantial Accessible Differentiable © Copyright 2008 Pearson Education Canada 7-18 Marketing Skills: Evaluating Segments THE GLOBE & MAIL •The Globe and Mail is only one of two national daily newspapers in Canada •Aims to provide a national and international flavour to its newspaper content •It decided that it needed to reassert its leadership in its original geographic segment, Toronto •The paper consolidated its local news coverage with the launch of a daily Toronto section •The intention was to more effectively reach Toronto’s influential readership © Copyright 2008 Pearson Education Canada 7-19 Steps in Segmentation Process Needs-based segmentation Segment identification Segment attractiveness Marketing-mix strategy Segment profitability Segment positioning Segment acid test © Copyright 2008 Pearson Education Canada 7-20 Figure 7.3 Patterns of Target Market Selection © Copyright 2008 Pearson Education Canada 7-21 Additional Considerations • Segment-by-segment invasions • Updating segmentation schemes • Ethical choices of target markets: • The Concerned Children’s Advertisers (CCA) © Copyright 2008 Pearson Education Canada 7-22 For Discussion How would you classify yourself in terms of the various segmentation schemes discussed in the chapter? © Copyright 2008 Pearson Education Canada 7-23