Segmenting and targeting markets

Editor's Notes

• #6: Notes: The term market means different things to different people. Consider supermarket, stock market, labor market, fish market, and flea market. All these types of markets share several characteristics. Markets are composed of people or organizations with needs and wants that can be satisfied by particular product categories. They have the ability to buy the products they seek, and are willing to exchange their resources for the desired products.
• #7: Notes: Within a market, a market segment is a subgroup of people or organizations with one or more common characteristics that cause them to have similar product needs. Market segmentation is the division of a market into meaningful, identifiable segments or groups.
• #10: Notes: Until the 1960s, market segmentation was not used extensively. Consider Coca-Cola with its one product aimed at the entire soft drink market. Today over a dozen different products are marketed by the company to different market segments. Market segmentation plays a key role in the marketing strategy of organizations, leading to competitive advantage. The benefits are described on this slide. Discussion/Team Activity: Discuss how Coca-Cola’s product lines fit the needs of different market segments. Name different fashion retailers and identify their marketing segmentation strategies.
• #12: Notes: Markets are segmented for three reasons: Segmentation enables the identification of groups of customers with similar needs, and the analysis of the buying behavior of these groups. Segmentation provides information for the specific matching of the design of marketing mixes with the characteristics of the segment. Segmentation helps marketers satisfy customers wants and needs while meeting the organization’s objectives. A segmentation scheme must produce segments that meet the four basic criteria as defined above.
• #14: Notes: One or more of the characteristics listed above is used to segment markets and described on subsequent slides.
• #15: Notes: Geographic segmentation of markets is based on the region, market size, market density (number of people within a unit of land), or climate.
• #16: Notes: Demographic information is widely available and often related to consumer behavior and buying. Some common bases are age, gender, income, ethnic background, and family life cycle. Consider age segmentation… There are about 20 million tweens (ages 9-12) in the U.S. This group spends over $20 billion per year. Retailers such as Limited Too and Abercrombie serve this market.Baby boomers (born between 1946 and 1964) represent more than $2 trillion in spending per year. There is marketing potential for products such as retirement properties, health and wellness products, automobiles with features for them, as well as other goods and services.
• #17: Notes: Exhibit 7.2 demonstrates both traditional and contemporary FLC patterns and shows how families’ needs, incomes, etc. differ at each stage. Married couples make up just 50.7% of the U.S. population. Unmarried Americans make up 42% of the workforce and 40% of home buyers. Discussion/Team Activity: Find examples of advertisements that target different stages of the family life cycle.
• #19: Online Martha Stewart Living Good Housekeeping Use psychographic segmentation to classify the kinds of consumers who would be interested in the products offered by Martha Stewart and Good Housekeeping online. Notes: Demographic segmentation provides the “skeleton,” but psychographic segmentation adds “meat to the bones.” Personality reflects a person’s traits, attitudes, and habits. Consider the personality types that describe segmented Porsche buyers. Motives: Carmakers appeal to customers with status-related motives, whereas baby products appeal to emotional motives. Lifestyles and geodemographics are described on subsequent slides.
• #20: Notes: Benefit segmentation is different from other segmentation bases because it groups potential customers on the basis of their needs and wants instead of some other characteristic. For example, Exhibit 7.3 in the textbook shows the lifestyle segmentation of the snack food market.
• #21: Notes: Most segmentation is based on the assumption that the selected variable(s) and customers’ needs are related. On the other hand, benefit segmentation groups potential customers on the basis of their needs or wants only. Segmenting by usage rate enables marketers to focus efforts on heavy users or to develop multiple marketing mixes aimed at different segments. The focus of marketing is often on the heavy-user segment, based on the 80/20 principle. Discussion/Team Activity: What programs do companies use to develop customers into heavy users? The list should include airline frequent flyer programs and in-store coupon dispensing.
• #24: Notes: The purpose of market segment is to identify marketing opportunities. This slide traces the steps in segmenting a market. Keep in mind that markets are dynamic and must be monitored proactively for changes in age, etc. Even though the segmentation classifications are static, the customers and prospects are changing.
• #26: Notes: Market segmentation is the first step in determining whom to approach about buying a product. The next task is to choose one or more target markets. A target market is a group of people or organizations for which the organization creates a marketing mix to meet that group’s needs. Because most markets will include customers with different lifestyles, backgrounds, and income levels, it is unlikely that a single marketing mix will attract all segments of the market.
• #27: Notes: The three general strategies for selecting target markets are illustrated in Exhibit 7.4 and on this slide. A description of each follows.
• #28: Notes: An undifferentiated targeting strategy is essentially a mass-market philosophy—viewing the market as one big market and using one marketing mix.
• #29: Notes: The first firm in an industry sometimes uses an undifferentiated strategy. Consider Coca-Cola when it had a single product and a single size of its original soft drink. Marketers of commodity products, such as flour and sugar, are also likely to use this strategy. Additionally, small stores in small towns with no competition may offer one marketing mix and be successful. Even toilet tissue manufacturers have different segments—both industrial and consumer--and adopt different marketing mixes for different segments.
• #30: Notes: 1. With a concentrated targeting strategy, a firm selects a niche for targeting its efforts.
• #31: Notes: A concentrated strategy of focusing on a narrow market is sometimes more profitable than spreading resources over several different segments. A concentrated strategy often enables small firms to compete effectively with much larger firms. However, a concentrated strategy can also be disastrous for a firm that is not successful in its narrowly defined target market. Discussion/Team Activity: Identify firms that have adopted a niche strategy. Examples: watchmakers Patek Philippe, Rolex, and Breguet. Porsche, OshKosh B’Gosh, Orvis, Starbucks, AOL, and Enterprise Rent-A-Car.
• #33: Notes: Examples of multisegment targeting strategy include Best Buy, Gap, Wal-Mart. Discussion/Team Activity: Wal-Mart recently opened a pilot store in Plano, Texas, that stocks plasma TVs, fine jewelry, expensive wine, etc. Discuss ways that Wal-Mart can attract upper-end customers. What marketing mix would you suggest?
• #34: Notes: Multisegment targeting does come with a price, including those costs shown on this slide. Before deciding on this strategy, firms should compare the benefits and costs of multisegment targeting to those of undifferentiated and concentrated targeting.
• #36: Notes: Position is the place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings. Positioning assumes that consumers compare products on the basis of important features. Effective positioning requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions, and choosing a position in the market where the marketing efforts will have the greatest impact.
• #37: Notes: Exhibit 7.6 compares the unique positions for Procter & Gamble’s laundry detergents. Discussion/Team Activity: Discuss specific advertisements for these detergents and how these ads illustrate the unique positions listed on this slide. Examine the positioning message of other product advertisements.
• #39: Notes: Exhibit 7.7 shows Levi’s brands and subbrands, based on price and fashion style. Discussion/Team Activity: What is the target market and marketplace perception of some of Levi’s brands? What are Levi’s strengths in the marketplace? What are Levi’s weaknesses? How can Levi’s use perceptual mapping to enhance its product strategy?
• #40: Notes: The following bases for positioning are used: Attribute: Association of a product with a product feature, an attribute, or customer benefit. Price and quality: High price as a symbol of quality, or low price as an indicator of value may be used to position a product. Use or application: Stressing use or applications. Product user: Positioning base focuses on a personality or type of user. Product class: Product is positioned as associated with a particular category of products. Competitor: Positioning against competitors is a part of any positioning strategy. Emotion: Positioning using emotion focuses on how the product makes customers feel. One or more positioning bases is often used.
• #41: Notes: Products are repositioned to sustain growth in slow markets or to correct positioning mistakes A good example of repositioning was the National Pork Board’s campaign of “the other white meat.” Also, consider the expansion of Wal-Mart into the supermarket industry. A consultant predicts that two supermarkets will go out of business for every Wal-Mart superstore that opens in the U.S. Discussion/Team Activity: As giant Wal-Mart expands into the supermarket industry, what repositioning strategies should its competitors consider? How do you compete with the low-price position of Wal-Mart?