Chapter 8 Segmenting and Targeting Markets Market Segmentation Market people or organizations with needs or wants and the ability and willingness to buy Market Segment a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs Market Segmentation The process of dividing a market into meaningful relatively similar identifiable segments or groups Importance of Market Segmentation Nearly all markets include people with different wants and needs Helps define customers needs and wants more precisely Decision makers can define objectives and allocate resources more accurately Ex Chicos aims at women 33 to 55 who like to be comfortable yet fashionable Criteria for successful segmentation Reasons why Marketers segment markets o Segmentation enables marketers to identify groups of consumers with similar needs and to characterize the buying habits of these consumers o Segmentation provides marketers with information to help them design marketing mixes that match their customers o Marketing segmentation is consistent with the marketing concept of satisfying customers wants and needs while meeting organizational objectives Four Criteria for successful Segmentation o 1 Sustainability A market must me large enough to warrant developing and maintaining a special marketing mix o 2 Identifiably and Measurability Different aspects of the segment must be measurable o 3 Accessibility o 4 Responsiveness Bases for Segmenting Consumer Markets needed Members of targeted segments must be reachable with marketing mix Unless segment responds to marketing mix differently no separate treatment is Segmentation Bases or variables Characteristics of individuals groups or organizations o Key is to identify bases that will produce substantial measurable and accessible segments that exhibit different response patterns to marketing mixes o Markets can be segmented using a single variable or many variables Single variable segmentation is less precise but more simple Current trend is toward using more as opposed to fewer variables to segment a Typical characteristics used to segment a market o Geographic Segment segmenting markets by region of a country market size market market density or climate Refers to number of people within a land Climate is often used because of how much climate effects peoples needs Consumer good companies take regional approach Benefits of Regional Approach Easy to find new ways to generate sales in sluggish and competitive markets Computerized scanner data allows assessment of best selling brands in region 1 Regional brands appeal to local preferences Allows for a quicker reaction to competition o Demographic Segmentation segmenting markets by age gender income ethnic background and family life cycle Age Segmentation Teens o Tech savvy o Social consumers Gen Y 1982 2003 o 1 3 of U S population o Formidable purchasing power o More civic minded then baby boomers o Likely to pay attention to a companies overall message o Engages in peer to peer marketing Gen X 1965 1981 o Skeptical of big business o Many are parents o Desire an experience not just a product Baby Boomers o Represent of all spending o Make up of all affluent households o Want attention and service when they shop o Not very brand loyal o Very diverse Seniors o War Generation o Great Depression Generation o G I generation Gender Segmentation Women make up over 70 of purchases of consumer goods Marketers of products such a s cosmetics are going after less traditional male markets Income Segmentation Income level influences consumers wants and determines their buying power High income consumers look for luxury and want great customer service Ethnic Segmentation changed that In the past ethnic groups were expected to conform to a homogenized ideal Today increasing buying power and number of ethnic minorities have To meet needs and wants of ethnic populations some companies make product geared toward a specific group Family Life Cycle a series of stages determined by a combination of age marital status and the presence or absence of children Today married coupled make up less then of all U S households What differs at each stage of the FLC o Needs o Income 2 o Psychographic Segmentation market segmentation on the basis of 4 psychographic o Resources o Expenditures variables Personality Motives for buying Emotional motives Rational motives Status related motives Lifestyle Reflects a persons traits attitudes and habits Dividing people into groups according to o The way they spend their time o Importance of things around them o Their beliefs o Socioeconomic characteristics Geodemographics segmenting potential customers into neighborhood lifestyle categories Combines geographic demographic and lifestyle segmentations Helps marketers develop marketing programs tailors to prospective buyers who live in small geographic regions OR who have very specific lifestyle and demographic characteristic The Psychographic variable can be combined with other segmenting variables to make more detailed segments o Benefit Segmentation the process of grouping customers into market segments according to the benefits they seek from the product Groups potential customers on the basis of their wants and needs Ex People eat snack foods to get different benefits o Usage Rate Segmentation diving market by amount of product bought or consumed Categories would include Former users Potential users First time users Light or irregular users Medium users Heavy users 80 20 Principle Says that 20 of all customers generate 80 of the demand Needs of heavy users differ from the needs of other usage groups Developing customers into heavy users is the goal behind most frequency loyalty Bases for segmenting Business Markets programs Market Segmentation offers just as many benefits to the business market as it does to the consumer market Forms of Business to Business Market Segmentation o Company Characteristics Charateristics include Geographic location Type of company Company size 3 Product use Allows business markets to tailor their marketing mixes to the unique needs of particular types of organizations Volume of Purchase is a basis for business segmentation Many business marketers find it helpful to segment prospective business customers o Buying Processes on the basis of how they buy 2 Purchasing Profiles Satisfiers business customers who place an order with the first familiar supplier at satisfy product
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