Download Consumer Behavior: People in the Marketplace

Identifying Market
Segments and Selecting
Target Markets
10-1
Copyright © 2003 Prentice-Hall, Inc.
Kotler on
Marketing
“Don’t buy
market share.
Figure out
how to earn
it.”
What dose he
mean ?!
10-2
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Chapter Objectives
 We focus on the following questions:
 How can a company
identify the segments
that make up a
market?
 What criteria can
a company use to
choose the most
attractive target
markets?
10-3
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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).
10-4
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Steps in Segmentation,
Targeting, and Positioning
6. Develop Marketing
Mix for Each Target Segment
5. Develop Positioning
for Each Target Segment
4. Select Target
Segment(s)
Market
Positioning
Market
Targeting
3. Develop Measures
of Segment Attractiveness
2. Develop Profiles
of Resulting Segments
1. Identify Bases
for Segmenting the Market
Market Segmentation
10-5
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tep 1. Market Segmentation
evels of Market Segmentation
Mass Marketing
Same product to all consumers
(no segmentation)
Segment Marketing
Different products to one or more segments
(some segmentation)
Niche Marketing
Different products to subgroups within segments
( more segmentation)
Micromarketing
Products to suit the tastes of individuals or locations
(complete segmentation)
10-6
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Definition
 Market Segmentation:
 The act of dividing a market into smaller
groups of buyers with distinct needs,
characteristics, or behaviors who might
require separate products and/or marketing
mixes.
If
all consumers respond the same way, then
there should be no need to segment a market
10-7
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Levels and Patterns of Market Segmentation
Levels of Market Segmentation:


Mass marketing: one product for all buyers (Coke)
Micromarketing: segments, niches, local areas, and individuals.
1. Segment marketing:

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Market segment: a group of customers who share a similar
set of wants (car buyers: low cost VS luxurious).
Sector: young and middle-income buyers
Marketer doesn’t create the segment but identify & target it.
Flexible market offering
 Naked solution: product and service elements all segment’s
members value.

 Discretionary options: some segment’s members value. (Mobile)
Segment marketing offers several benefits over mass
marketing (best product, distrib. and comm. channels,
understand competitors well).
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2. Niche Marketing

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Niche: customers with distinct set of needs.
Niches attract smaller competitors than segments.
Niche has size, profit and growth potential.
3. Local Marketing


Tailored marketing programs fit the local needs
and wants.
Has several problems: more costs, logistical
problems, affect company’s brand image.
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4. Individual Customer Marketing


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Mass-customization: Individually designed
products, services, programs and comm. To meet
each customer’s requirements.
Choiceboard: interactive online services.
Choiceboard advantages include: facilitate selling,
real-time market research, reduces company’s
costs.
Customization: allow customers to design their
own products and services of their choice.
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Patterns for Market Segmentation
 Preference segments
 Homogeneous preferences: all customers have
roughly the same preferences.
 Diffused preferences: customers vary greatly in
their preferences.
 Clustered preferences:
 Natural market segments: distinct preference clusters.
 Concentrated marketing: to be positioned in the
largest market segment.
10-11
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Attribute
Y
BASIC MARKET PREFERENCE
PATTERNS
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Attribute X
Attribute X
Attribute X
A.Homogeneous
Preferences
B.Diffused
Preferences
C.Clustered
Preferences
10-12
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Market Segmentation Procedure
 Needs-based market segmentation approach
Grouping customers into segments based on similar needs and
benefits sought by them.
 Market partitioning: to investigate the hierarchy of
attributes consumers examine in choosing a brand
(example: nation, manufacturer, product).
 Brand-dominant hierarchy
 Nation-dominant hierarchy
 The hierarchy of attributes can reveal customer
segments (price, type, brand).
10-13
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Requirements for Effective
Segmentation
Measurable
• Size, purchasing power,
profiles of segments can be
measured.
Accessible
• Segments must be effectively
reached and served.
Substantial
• Segments must be large or
profitable enough to serve.
• Segments must respond
Differential
differently to different marketing
mix elements & actions.
effective programs can be
designed for attracting and
serving the segments.
Actionable
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Segmenting Consumer Markets
Geographic
Nations, states,
regions or cities
Demographic
Age, gender, family size
and life cycle, or income
Psychographic
Social class, lifestyle,
or personality
Behavioral
Occasions, benefits,
uses, or responses
10-15
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The Classic Segmentation Variables
for Consumer Markets
FIGURE10-16
7.3
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Segmenting Consumer
Markets
 Geographic Segmentation: Dividing an overall
market into homogeneous groups on the basis
of their locations
 Does not ensure that all consumers in a
location will make the same buying
decision.
 Help in identifying some general patterns.
• ( Where they live ? )
10-17
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Segmenting Consumer Markets
 Demographic segmentation:
 (Who they are )
10-18
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 Segmenting by gender
 Marketers must ensure that traditional
assumptions are not false
 Other firms start by targeting one gender
and then switch to both
 To some companies market successfully to
both genders
10-19
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 Segmenting by age
 Many firms identify
market segments on
the basis of age
 Products are often
designed to meet the
specific needs of
certain age groups
 Examples: baby food
and denture cream.
Dole: Developing a
Product Specifically
for Children
10-20
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 Ethnic Group
Segmentation
 Census Bureau
projects that by 2050,
nearly half of the
population of the US
will belong to
nonwhite minority
groups.
 The three largest and
fastest-growing
racial/ethnic groups
in the US are African
Americans,
Hispanics, and Asian
Americans.
10-21
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 Family Life Cycle
Stages Segmentation
 The process of family
formation and
dissolution.
 The underlying theme
is that life stage, not
age per se, is the
primary determinant
of many consumer
purchases.
 Today, the average
woman gives birth to
two children .
 She usually has her
children at a later
age—about 35.
10-22
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 Segmenting by household type
 The “traditional family” has declined over the years
 Single-parent families, single-person households, and
non-family group households have more than doubled
during the same time
 Non-traditional households make likely buyers of
single-serving and convenience foods
10-23
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 Jaguar
 Segmentation
based on income
10-24
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Demographic Segmentation
Variables
Goal 2: Understand the major bases for segmentation
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10-25
Psychographic Segmentation
Variables
Psychographics is the science of using psychology
and demographic to better understand consumer.
Divides Buyers Into Different Groups Based on:
Social Class
Lifestyle
Personality
(How they behave ? )
10-26
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 Psychographic Segmentation
 Divides a population into groups that have
similar psychological characteristics, values,
and lifestyles
 Lifestyle: people’s decisions about how to live
their daily lives, including family, job, social,
and consumer activities
 The most common method for developing
psychographic profiles of a population is to
conduct a large-scale survey:
VALS and VALS 2.
“Values and Lifestyles”
10-27
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 Product-related segmentation:
 dividing a consumer population into
homogeneous groups based on characteristics
of their relationships to the product
 Can take the form of segmenting based on:
 Benefits that people seek when they buy
 Usage rates for a product
 Consumers’ brand loyalty toward a product
 (Why they buy ? )
10-28
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Behavioral Segmentation
Variables
 Benefits Sought:
 Buyers can be classified according to the
benefits they seek.
 Usage Rates
 Segmenting by grouping people according to
the amounts of a product that they buy and use
 Markets often divided into heavy-user,
moderate-user, and light-user segments
Goal 2: Understand the major bases for segmentation
Copyright © 2003 Prentice-Hall, Inc.
10-29
 Brand Loyalty
 Segmenting consumers grouped according to
the strength of brand loyalty felt toward a
product
 A practical example of this would be the
frequent flyer programs of airlines and
many hotels
10-30
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Behavioral Segmentation
Variables
 Loyalty Status:
 Buyers can be divided into four groups
according to brand loyalty status:
1- Hard core loyals : consumers who buy only one brand
all the time.
2-Split loyals:consumers who are loyal to two or three
brands.
3-Shifting loyals : consumers who shift loyalty from one
brand to another.
4-Switchers:consumers who show no loyalty to any brand.
10-31
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Behavioral Segmentation
Variables
 Occasions:

Special promotions and labels for holidays.
 Special products for special occasions.
(e.g., Kodak disposable cameras)
Goal 2: Understand the major bases for segmentation
Copyright © 2003 Prentice-Hall, Inc.
10-32
Behavioral Segmentation
Variables
 Attitude:
 Five attitude groups can be found in a market:
1-Enthusiastic
2-Positive
3-Indifferent
4-Negative
5-Hostile
Goal 2: Understand the major bases for segmentation
Copyright © 2003 Prentice-Hall, Inc.
10-33
Segmenting Business Markets
Demographics
Operating Variables
Purchasing Approaches
Business
Marketers Use
Many of the
Same Consumer
Variables, Plus:
Situational Factors
Personal Characteristics
10-34
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Segmenting Business Markets
 Demographic segmentation
1-Industry:Which industries should we serve?
2- company size: What size companies should we serve?
3- location : What geographical areas should we serve?
10-35
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Segmenting Business Markets
 Operating variables
1-Technology: What customer technologies should we
focus on?
2- User or non-user status: Should we serve heavy
users, medium user, light users, or nonusers?
3- Customer capabilities: Should we serve customers
needing many or few services?
10-36
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Segmenting Business Markets
 Purchasing Approaches
1-Purchasing-function organization: Should we serve
companies with highly centralized or decentralized purchasing
organizations?
2- Power structure: Should we serve companies that are
engineering dominated,financially dominated and so on?
3- Nature of existing relationships: Should we serve companies
with which we have strong relationships or simply go after the
most desirable companies?
4- General purchase policies: Should we serve companies that
prefer leasing?service contracts? System purchase?
5- Purchasing criteria: Should we serve companies that are
seeking quality? Service? Price?
10-37
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Segmenting Business Markets
 Situational factors
1-Urgency: Should we serve companies that need quick
and sudden delivery or service?
2-specific application: Should we focus on certain
application of our product of our product rather than all
applications?
3- size of order: Should we focus on large or small
orders?
10-38
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Segmenting Business Markets
 Personal characteristics
1-Buyer-seller similarity: Should we companies whose
people and values are similar to ours?
2- Attitudes toward risk: Should we serve risk-taking or
risk-avoiding customers?
3-loyalty: Should we serve companies that show high
loyalty to their suppliers?
10-39
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Evaluating Market
Segments
 Segment Size and Growth
 Analyze current segment sales, growth rates, and expected
profitability.
 Segment Structural Attractiveness
 Consider effects of: competitors, existence of substitute
products, and the power of buyers & suppliers.
 Company Objectives and Resources
 Examine company skills & resources needed to succeed in
that segment.
 Offer superior value and gain advantages over competitors.
10-40
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Target Marketing Strategies
10-41
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Market Targeting
 Evaluating and Selecting the Market Segments
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Single-Segment Concentration
Selective Specialization
Product Specialization
Market Specialization
Full Market Coverage
 Undifferentiated marketing
 Differentiated marketing
10-42
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Market Targeting
 Higher costs using differentiated
marketing include:

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


Product modification cost
Manufacturing cost
Administrative cost
Inventory cost
Promotion cost
10-43
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Target Marketing
 Target Market
 Consists of a set of buyers who share
common needs or characteristics that the
company decides to serve
Goal 3: Know how companies identify and target attractive segments
Copyright © 2003 Prentice-Hall, Inc.
10-44
Target Marketing
 Evaluating Market Segments
 Segment size and growth
 Segment structural attractiveness
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Level of competition
Substitute products
Power of buyers
Powerful suppliers
 Company objectives and resources
Goal 3: Know how companies identify and target attractive segments
Copyright © 2003 Prentice-Hall, Inc.
10-45
Target Marketing
 Selecting Target Market Segments
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Undifferentiated (mass) marketing
Differentiated (segmented) marketing
Concentrated (niche) marketing
Micromarketing (local or individual)
Goal 3: Know how companies identify and target attractive segments
Copyright © 2003 Prentice-Hall, Inc.
10-46
Choosing a Target
Marketing Strategy
 Considerations include:
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
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Company resources
The degree of product variability
Product’s life-cycle stage
Market variability
Competitors’ marketing strategies
Goal 3: Know how companies identify and target attractive segments
Copyright © 2003 Prentice-Hall, Inc.
10-47
Targeting Strategies
 Classic mass marketing, all things to all people
approach
 Ignore segments
 One mm for all customers
 Rarely used today – Name an undifferentiated FIGURE10-48
7.2
product?
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FIGURE 7.2
10-49
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Differentiated Strategy (cont.)
 The firm targets several
separate segments and
designs separate marketing
strategies for each
 GM’s “a car for every
purpose, purse, and
personality”
 vs. Fords one car for
every purpose for every
purse for every
For most firms, this means they go for
a small
personality”
share of the larger, total aggregate market (one
or two mm for one or two segments (out of
maybe six or seven)
10-50
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Concentrated Marketing
 The firm goes for a large share of a single (or
very few) segments
 Jeep vs. GM
 Can be niched or larger
FIGURE10-51
7.2
Copyright © 2003 Prentice-Hall, Inc.
IT IS CRITICAL TO
UNDERSTAND THAT
 Mass marketers do not often practice mass
marketing today
 They practice differentiated marketing
 Often they do not change the product to
appeal to different segments
 They change price, place, and promotion
10-52
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Target Marketing
 Socially Responsible Targeting
 Some segments, especially children, are at
special risk
 Many potential abuses on the Internet,
including fraud Internet shoppers
 Controversy occurs when the methods used
are questionable
Goal 3: Know how companies identify and target attractive segments
Copyright © 2003 Prentice-Hall, Inc.
10-53
Positioning
 Positioning:
 The place the product occupies in consumers’ minds
relative to competing products.
 Typically defined by consumers on the basis of
important attributes.
 Involves implanting the brand’s unique benefits and
differentiation in the customer’s mind.
 Positioning maps that plot perceptions of brands are
commonly used.
Goal 4: Realize how companies position their products
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10-54