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Market Segments and Targets CH07 Copyright © 2003 Prentice-Hall, Inc. Copyright © 2003 Prentice-Hall, Inc. Target Marketing Target marketing requires marketers to take three major steps: Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation) Select one or more market segments to enter (market targeting) For each target segment, establish and communicate the key distinctive benefit(s) of the company’s market offering (market positioning) Copyright © 2003 Prentice-Hall, Inc. Market Segmentation Market segmentation is the division of a market into distinct groups of buyers who have distinct needs, characteristics, or behaviour and who might require separate products or marketing mixes Market segment is a group of consumers who respond in a similar way to a given set of marketing efforts Geographic segmentation Demographic segmentation Psychographic segmentation Behavioral segmentation Copyright © 2003 Prentice-Hall, Inc. Market Segmentation Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product Copyright © 2003 Prentice-Hall, Inc. Steps in Segmentation Process Description 1. Needs-Based Segmentation Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem. 2. Segment Identification For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable). 3. Segment Attractiveness Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment. 4. Segment Profitability Determine segment profitability. 5. Segment Positioning For each segment, create a “value proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics. Copyright © 2003 Prentice-Hall, Inc. Market Segmentation Requirements for Effective Segmentation To be useful, market segments must be: Measurable Accessible Differentiable Copyright © 2003 Prentice-Hall, Inc. Substantial Actionable Major Segmentation Variables for Business Markets Demographic 1. Industry: Which industries should we serve? 2. Company size: What size companies should we serve? 3. Location: What geographical areas should we serve? Operating Variables 4. Technology: What customer technologies should we focus on? 5. User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers? 6. Customer capabilities: Should we serve customers needing many or few services? Purchasing Approaches 7. Purchasing-function organization: Should we serve companies with highly centralized or decentralized purchasing organizations? 8. Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on? Copyright © 2003 Prentice-Hall, Inc. Market Targeting Copyright © 2003 Prentice-Hall, Inc. Market Targeting Market targeting is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter • Undifferentiated marketing targets the whole market with one offer • Differentiated marketing targets several different market segments and designs separate offers for each • Concentrated marketing targets a small share of a large market • Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations Copyright © 2003 Prentice-Hall, Inc. Differentiation and Positioning Product position is the way the product is defined by consumers on important attributes —the place the product occupies in consumers’ minds relative to competing products Perceptions Impressions Feelings Copyright © 2003 Prentice-Hall, Inc. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to build a position Choosing the right competitive advantages Selecting an overall positioning strategy Developing a positioning statement Build on Points-of-Difference and Points-of- Parity Copyright © 2003 Prentice-Hall, Inc. Differentiation and Positioning • There are two important concepts when it comes to positioning: points of parity and points of difference. • When a brand establishes a frame of reference, or competitive set, there are obvious points of parity. These are features and benefits offered by basically everyone. They do not differentiate, but a brand that falls short on these dimensions will surely be hurt. For example, all small cars have four wheels, a steering wheel, lights and pretty good gas mileage. These are all points of parity. • Points of difference are the things that help a brand stand out. These are the factors that drive purchase. Small cars are all pretty similar but the Mini Cooper is uniquely sporty and fun to drive. Copyright © 2003 Prentice-Hall, Inc. Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to build a position by providing superior value from: Product differentiation Service differentiation Channel differentiation People differentiation Image differentiation Copyright © 2003 Prentice-Hall, Inc. Adding Further Differentiation Exceed customer expectations with a three-step process 1. 2. 3. Defining the customer value model Building the customer value hierarchy Deciding on the customer value package Copyright © 2003 Prentice-Hall, Inc. Marketing Mix & an Integrated Marketing Program The marketing mix is the set of tools (four Ps) the firm uses to implement its marketing strategy. It includes product, price, promotion, and place. Integrated marketing program is a comprehensive plan that communicates and delivers the intended value to chosen customers. Copyright © 2003 Prentice-Hall, Inc.