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Identifying Market Segments and Targets KEY CONCEPTS Segmentation-Targeting-Positioning (STP) Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation). Select one or more segments to enter (market targeting). Establish and communicate the offering’s distinctive benefit(s) to each target segment (marketing positioning). Levels of Market Segmentation Segment marketing Niche marketing Local marketing Individual marketing Segment Marketing Market segment—a group of customers who share a similar set of needs and wants. Homogeneous preferences—exist when all consumers have roughly the same preferences. Diffused preferences—consumers vary greatly in their preferences. Niche Marketing Niche—a more narrowly defined customer group seeking a distinctive mix of benefits. Attractive when: Customers have a distinct set of needs Fairly small but has size, profit, and growth potential Customers will pay a premium Nicher gains certain economies through specialization Local Marketing Marketing programs tailored to the needs and wants of local customer groups in particular trading areas, neighborhoods, even individual stores. Grassroots marketing—concentrating on getting as close and personally relevant to individual customers as possible. Individual Marketing Leads to: “Segments of one” “Customized marketing” “One-to-one marketing” 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. Bases for Segmenting Consumer Markets Geographic Demographic Psychographic Behavioral Geographic Segmentation Dividing the market into different geographical units such as: Nations States Regions Counties Cities Neighborhoods Demographic Segmentation Divide the market into groups based on age and other variables: Life-cycle stage Life stage Gender Income Generation Social class Psychographic Segmentation Psychographics—the science of using psychology and demographics to better understand consumers. Buyers divided into groups on the basis of: Psychological/personality traits Lifestyle Values Behavioral Segmentation Divide consumers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. Behavioral variables: Occasions Benefits User status Buyer-readiness stage Loyalty status Attitude Bases for Segmenting Business Markets DEMOGRAPHIC OPERATING VARIABLES PURCHASING APPROACHES SITUATIONAL FACTORS PERSONAL CHARACTERISTICS Effective Segmentation Criteria Measurable Substantial Accessible Differentiable Actionable Evaluating and Selecting Market Segments Must look at two factors: Segment’s overall attractiveness Company’s objectives and resources Patterns of Target Market Selections Single-segment concentration Focus on one segment Selective specialization Select a number of segments Product specialization Specialize in making a certain product for several segments. Market specialization Serve many needs of a particular customer group. Full market coverage Serve all customer groups with all the products they might Full Market Coverage Undifferentiated marketing—firm goes after the whole market with one market offering. Differentiated marketing—operate in several market segments and design different programs for each segment.