Download Lecture Four: Marketing Segmentation

MKTG 504 - MARKET
SEGMENTATION
Breaking the Market into
Bits
Dr. Dennis Pitta
University of Baltimore
MARKET
An aggregate of people who, as
individuals or as organizations, have
needs for products in a product class
and who have the ability, willingness,
and authority to purchase such
products.
The Basics - the Market
People with needs,
who have money (or something of
value), and
a willingness to trade that value to
satisfy those needs
Types of Markets
Consumer Market (made up of ultimate
consumers)
Industrial Market (made up of producer
firms)
Intermediate Market (wholesalers and
retailers)
Government Market (federal, state, county,
or local agencies)
Institutional Market (non-profit
organizations)
Marketing’s Main Task
SATISFYING WANTS AND NEEDS
..........mostly wants....
Needs and Wants: Defined
NEED: Something that is lacking that
is necessary for physical,
psychological or social well-being.
WANT: Something that is lacking that
is desirable or useful.
Examples of Needs:
Food
Clothing
Shelter
Warmth
Safety
Belonging
Knowledge
Examples of Wants
Food
Clothing
Shelter
Warmth
Safety
Belonging
Knowledge
LOBSTER
TOMMY HILFIGER - FUBU
CONDO IN ST. BARTS
HOT TUB
.357 MAGNUM
RAVENS BOOSTER CLUB
UB – TOWSON MBA
Marketing Lesson #1
WANTS = DEMAND
Why do Wants = Demand?
_______________________
_______________________
_______________________
_______________________
Why People Buy Products
FEATURES
ADVANTAGES
BENEFITS
 = WANTS SATISFIED!
Market Aggregation
The total market is not divided into
segments.
Examples:
Pabst Blue Ribbon Beer
Miller High Life Beer
Coke (a few years back)
Salt
Market Aggregation Advantages
Lower Production and Marketing Costs
Market Aggregation Disadvantages
Vulnerability to Segmented Products
Market Segment
A group of individuals, groups, or
organizations that share one or more
characteristics which make them
have relatively similar product needs.
Examples of Three Market Segments
..........
....... I
..........
.......
Quantity
..........
.......
III
II
Age X1
Age =>
Market Segmentation
A marketing strategy in which a large,
heterogeneous market is broken down
into small, more homogeneous
segments, and a separate marketing
program is developed for each
segment.
Market Segmentation Advantages
Better match between market wants
and product benefits.
Market Segmentation
Disadvantages
Higher Marketing Costs
Higher Production Costs
Suppose you want to develop
and additional segment?
Balance is essential in
developing another segment.
There must be a net advantage over
the additional costs of serving a new
segment with a new product.
Problems with Developing
New Segments:
Cannibalism
New Competition
Criteria for Good Segments
Identifiable
Reachable
Significant
Responsive
Stable
Identifiable
Can you identify the want …..out
there…?
Reachable
Can you contact the segment
(efficiently)
….using radio
…..TV
newspaper
mail
directly (in a meeting)
the Internet
the telephone
Responsive
Do they respond to your message?
Significant
Is the segment large enough or rich
enough to justify serving them?
Stable
Will they have the same wants and
needs in a year?
The Chevrolet Camaro example...
Potential Bases for Segmentation
Descriptive Bases
Demographic variables
Socioeconomic variables
Geographic
Behavioral Bases
User Status
Usage Rate
Benefits Sought
Personality
Life Style
Social Class
Potential Bases for Segmentation
Demographic Variables:
Age
Sex
Race
Family Size
Marital Status
Religion
Place of Residence
Socioeconomic Variables:
Income
Occupation
Education
Exercise 1 - Use of Descriptive
Variables in Segmentation
Richardson Vicks
The number of young adults age 20-24 who
have skin problems now exceeds the number
of teenagers with blemishes.
Segmentation response: CLEARSIL ADULT
CARE
Williams-Sonoma
15 percent of its cookware customers
are male. The company has been
considering what to do to boost the
sales of its catalogs.
Segmentation response: _____________
_________________________________
COCA-COLA
Coca-Cola’s research found that
children of working class parents
prefer to GULP their drinks. CocaCola, and other carbonated
beverages, are difficult to gulp.
Segmentation response: MELLO
YELLOW - THE FASTEST DRINK IN
THE WEST
Behavioral variables are more
powerful means of segmenting
markets than descriptive variables.
They can be viewed as determining
variables.
Behavioral Variables
Product Usage*
Benefits Sought**
Personality and Lifestyle
Occasions
Social Class
Heavy and Light Users of
Common Consumer Products
PRODUCT (% USERS)
Soaps and
detergents (94%)
HEAVY HALF
LIGHT HALF
75%
25%
Toilet tissue (95%)
71%
29%
Shampoo (94%)
79%
21%
Paper towels (90%)
75%
25%
Cake mix (74%)
83%
17%
Laxatives (41%)
83%
17%
===>Beer (40%)
87%
13%
Dog food (30%)
81%
19%
Bourbon (20%)
95%
5%
What is the implication on
sales?
One heavy drinker (6+ per day) is
worth scores of light drinkers (6 per
year).
Capturing just this segment insures
success!
Another example
Originally Lite by
Meisterbrau aimed
at ladies - light
users.
Another example the rest
of the story…
Miller bought the
brand and
repositioned it for
men - Heavy users.
They fought - less
filling - great taste
And drank a lot of
it!
Product Usage Examples
Scheafer is the one beer to have when
you’re having more than one.
That little pink pill: Correctol laxative
You’re in the Pepsi generation
Lite Beer from Miller
Benefits Sought in Products
Levi’s Jeans: DURABILITY
Elmer’s Glue-All : ADHESION
Revlon Cosmetics: HOPE
Lego Toys: POSSIBILITIES
Close-Up Toothpaste: WHITER TEETH
AND FRESH BREATH
The Best Segmentation Base
A combination of bases!
Like…..
BENEFITS + DEMOGRAPHICS
BENEFITS + PSYCHOGRAPHICS
USAGE RATE + BENEFITS
Steps in the Segmentation
Process
Determine Market Boundaries
Decide which Segmentation Bases to
Use
Analyze (Consider) Segmentation Data
Develop a Profile of Each Segment
Target the Segments to be Served
Design a Marketing Plan
Targeting Segments
Targeting a segment involves choosing
the one or ones that are potentially
most profitable.
Also important is response sensitivity the likelihood that the segment will
react favorably to a marketing
program.
Reasons Not to Target the
Largest Segment
Large segments do not always offer the
best opportunity.
Often the largest segment faces very
heavy competition.
Consumers in those segments may be
very satisfied with the products or
brands of competitors.
Differentiated Marketing
Differentiated marketing is a
marketing strategy that aims at several
market segments, varying the
marketing mix for each segment.
Positioning
A process in which a marketer
communicates with consumers to
establish a distinct place for its
product or brand in their minds.
On the following scale please place a check on the position
that describes your beliefs about the brand:
Miller
Heavy taste
Light taste
|--------------------|--------------------|--------------------|--------------------|
Dark color
Light color
|--------------------|--------------------|--------------------|--------------------|
Budweiser
Heavy taste
Light taste
|--------------------|--------------------|--------------------|--------------------|
Dark color
Light color
|--------------------|--------------------|--------------------|--------------------|
On the following scale please place a check on the position
that describes your beliefs about the brand:
Miller
Heavy taste
Light taste
|--------------------|--------------------|--------------------|--------------------|
-10
-5
0
5
10
Dark color
Light color
|--------------------|--------------------|--------------------|--------------------|
-10
-5
Budweiser
0
5
10
Heavy taste
Light taste
|--------------------|--------------------|--------------------|--------------------|
-10
-5
0
5
10
Dark color
Light color
|--------------------|--------------------|--------------------|--------------------|
-10
-5
0
5
10
Heavy taste
o Budweiser
O MILLER BEER
O MILLER LITE
Light taste
Light color
Dark Color
O GUINESS STOUT
Expensive
High price/oz.
Bacon
and
eggs
Pancakes
Hot
cereal
Cold
cereal
Instant
breakfast
Inexpensive
Low in calories
b) Brand-positioning
map
(instant breakfast market)
Brand C
Brand B
Brand A
Low price/oz.
High in calories
(a) Product-positioning
map
(breakfast market)
Quick
Slow
Product & Brand
Positioning
Expensive
High price/oz.
Bacon
and
eggs
Pancakes
Hot
cereal
Cold
cereal
Instant
breakfast
Inexpensive
Low in calories
b) Brand-positioning
map
(instant breakfast market)
Brand C
Brand B
Brand A
Low price/oz.
High in calories
(a) Product-positioning
map
(breakfast market)
Quick
Slow
Product & Brand
Positioning
What position does this
one occupy?
The Night Time
cough medicine
Why --- it originally
was 25% alcohol
Antihistamines +
alcohol =
unconsciousness
Name the products....
The night-time cough remedy.
It's after work, it's ______ time.
We're No. 2, we try harder.
______ fights cavities.
The refrigerator deodorant.
Here's to good friends.
The quicker picker-upper.
The number one in rent-a-car.
Upcoming Topics
Consumer Behavior