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Targeting the market Charles Blankson, Ph.D., Dept. of Marketing & Logistics Target market selection Presentation and Discussion Charles Blankson, Ph.D. Charles Blankson, Ph.D., Dept. of Marketing & Logistics Segmenting & targeting markets • What is Market Segmentation ? Dividing the market (consumers/buyers) into parts, portions, sections, “segments” etc. Charles Blankson, Ph.D., Dept. of Marketing & Logistics Operationalization of market segmentation • Identify bases to segment (to divide into parts). • Develop profiles of the segments – look for profit of emerging segments etc. Targeting • Develop measures having decided on the strategy – e.g. single or multi segments or sole or multi product. • Select target segments Charles Blankson, Ph.D., Dept. of Marketing & Logistics Major segmentation variables for consumer markets • Geographic: • Region, county size, borough, city, population density, climate. • Demographic: • Age, gender/sex, family size, family life cycle, income, occupation, education, religion, race, ethnic background, nationality. • Psychographic: • Social class, life style, personality. • Behavioral: • Occasions, benefits, user status, usage rate, loyalty status, readiness state, attitude toward the offering. Charles Blankson, Ph.D., Dept. of Marketing & Logistics Major segmentation variables for industrial/business markets • • • • • • • • • • Demographic: Industry, company size, location Operating variables: Technology, user/non-user status, customer capabilities Purchasing approaches: Purchasing structure, nature of existing relationships, general purchase policy, purchasing criteria. Situation factors: Urgency, specific application, size order Personal characteristics: Buyer-seller similarity, attitude toward risk/risk aversion, loyalty. Charles Blankson, Ph.D., Dept. of Marketing & Logistics Prioritizing target markets Segment Identification: • Involves the process of aggregating customers into segments in order to satisfy a particular problem. Segment Qualification: • The process whereby the operational relevance of the segments identified is assessed. This relates to how easily the segments can be characterized, measured, targeted and served. Charles Blankson, Ph.D., Dept. of Marketing & Logistics Prioritizing target markets Segment Attractiveness: • This concerns deciding which segments to serve and which to ignore. This involves a range of market attractiveness criteria such as: (a) market growth, (b) future potential, © level and structure of competition, (d) company assets (resources), (e) nature of customer needs and (f) entry barriers. Charles Blankson, Ph.D., Dept. of Marketing & Logistics High School students in Philadelphia, PA Charles Blankson, Ph.D., Dept. of Marketing & Logistics Market Attractiveness Criteria • • Literature area Kotler (1994, 2000) • Webster (1991) • Hutt and Speh (1989) • Porter (1980) • Attractiveness criteria • Measurability, accessibility, substantiality, actionability. • Measurable, relevance to major customer group, operational relevance for market strategy. • As Webster, plus segment compatibility with current marketing and business strengths. • • Competitive rivalry, Threat of substitutes, Supplier power, Buyer power, Threat of new entrants. Charles Blankson, Ph.D., Dept. of Marketing & Logistics Criteria for selecting target markets • • • • • Profitability Market growth Market size Likely customer satisfaction Sales volume • • • • • Competitive rivalry Market share Relative strengths in key functions Customers’ price sensitivity Customer image of company • Likelihood of sustainable differential advantage Ease of access of business Opportunities in the industry Product differentiation • • • • • • • • • Technological factors Fit with business strategy Stability of market Environmental factors Threat of substitutes Barriers to entry Negotiating powers of buyer Ease of profiling customers Supplier power. • • • Charles Blankson, Ph.D., Dept. of Marketing & Logistics Diversity of criteria and approaches • • • • • Life is simple How many customers Where located Profit levels Sales levels • • • • • Short but effective Brand loyalty Contributions ($) Market growth rates Competitive intensity • • • • • • Forward thinking Customer fit Future potential sales volumes Customers’ needs Likely differential advantage Financial value to the business. • • • • • • Analytical Weight Variable 3 Market size 3 Margin 3 Market share 3 Differential advantage/business strengths Charles Blankson, Ph.D., Dept. of Marketing & Logistics Three alternative market selection strategies • Undifferentiated marketing: typically mass marketing • Differentiated marketing: Company pursues one segment at a time with a specific marketing mix tactic • Concentrated: Company uses all efforts to pursue one identified segment at a time. Other profitable segments may be pursued later on and when appropriate. • • • • • • Lecture based on: Simkin, L. and Dibb, S. (1998), Prioritizing Target Markets, Marketing Intelligence & Planning, Vol.16, No. 6 & 7, pp.407-417. Others: Webster F.E. (1991), Industrial Marketing Strategy, John Wiley, New York, N.Y. Hutt, M.D. and Speh, T.W. (1989), Business Marketing Management, The Dryden Press, Chicago, IL. Porter, M.E. (1980), Competitive Strategy, Free Press, New York, N.Y. Charles Blankson, Ph.D., Dept. of Marketing & Logistics Reading for next week • Read Chapters 1, 2, 3 and 4 by next week. Charles Blankson, Ph.D., Dept. of Marketing & Logistics