Exam 2 Study Guide Chapter 8 Reasons for segmenting markets o Substantiality a segment must be large enough to warrant developing and maintaining a special marketing mix Doesn t mean the segment must have many potential customers but have many potential customers makes commercial sense o Identifiability and measurability segments must be identifiable and their size measurable Data about the population is easy to get o Accessibility firms must be able to reach members of targeting segments with customized marketing mixes o Responsiveness markets can be segmented using any criteria that seems logical but if one market segment responds to a marketing mix differently than other segments that segment needs to be treated differently Segmentation bases or variables characteristics of individuals groups or organizations to divide a total market into segments o Geographic segmentation segmenting markets by regions of a country or the world market size market density or climate Density is the number of people within a unit of land like a census Climate is used for geographic segmentation because of its dramatic impact on residents needs on purchasing behavior Why consumer goods companies take a region approach Firms need new ways to generate sales because of sluggish and intensely competitive markets Computerized checkout stations with scanners give retailers and accurate assessment of which brands sell best in their region Many packaged goods manufacturers are introducing new regional brands intended to appeal to local preferences A more regional approach allows consumer goods companies to reach more quickly to competition o Demographic segmentation age gender income ethnic background and family life cycle Family life cycle FLC series of stages determined by a combination of age marital status and the presence or absence of children o Psychographic segmentation Personality reflects a person s traits attitudes and habits Clothing Motives emotional reason for buying a product Lifestyles divides people not groups according to the way they spend their time the importance of the things around the their beliefs and socioeconomic characteristics such as income and education Geodemographics clusters potential customers into neighborhood lifestyle categories segmentations Combines geographic demographic and lifestyle Helps marketers develop marketing programs tailored to prospective buyers who live in small geographic regions who have very specific lifestyle and demographic characteristics Benefit segmentation process of grouping customers into market segments according to the benefits they seek from the product Based on the idea that this variable and customers needs are related Groups potential customers on the basis of their needs or wants rather than one on some other characteristic Usage rate segmentation divides a market by the amount of product bought or consumed Usually include categories such as former users potential users first time users light or irregular users medium users and heavy users 80 20 principle 20 percent of all customers generate 80 percent of the demand Buying processes to segment o Two purchasing profiles that identify the purchasing strategies of buyers Satisficers contact familiar suppliers and place the order with the first one to satisfy product and delivery requirements Optimizers consider numerous suppliers familiar and unfamiliar solicit bids and study all proposals carefully before selecting one Steps in segmenting a market o Select a market or product category for study Define the overall market or product category to be studied It may be a market where the firm already competes a new but related market or product category or a totally new market o Choose a basis or bases for segmenting the market Requires managerial insight creativity and market knowledge Must product segments that meet the four basic criteria o Select segmentation descriptors Marketer must select the segmentation descriptors which identify the specific segmentation variables to use o Profile and analyze segments Profile should include the segments size expected growth purchase frequency current brand usage brand loyalty and long term sales and profit potential Information can be used to rank potential market segments by profit opportunity risk consistency with organizational mission and objectives and other factors important to the firm o Select target markets A natural outcome of the process Major decision that influences and often directly determines the firm s marketing mix o Design implement and maintain appropriate marketing mixes Product place promotion and pricing strategies intended to bring about mutually satisfying exchange relationships with target markets Strategies for selecting target markets o Target market a group of people or organizations for which an organization designs implements and maintains a marketing mix intended to meet the needs of that group resulting in mutually satisfying exchanges o Undifferentiated targeting strategy Adopts a mass market philosophy viewing the market as one big market with no individual segments Assumes that individual customers have similar needs that can be met with a common marketing mix o Concentrated targeting strategy A firm selects a market niche one segment of a market for targeting its market efforts It can concentrate on understanding the needs motives and satisfactions of that segment s members and on developing and maintaining a highly specialized marketing mix o Multi segment targeting strategy When a firm chooses to serve two or more well defined market segments and develops a distinct marketing mix for each Offers many benefits including greater sales volume higher profits larger market share and economies of scale in manufacturing and marketing May also involve greater product design production promotion inventory marketing research and management costs Cannibalization when sales of a new product cut into sales of a Customer relationship management CRM as a targeting tool firm s existing products o Personalization o Time savings Consumers want to be treated as the individuals they are with their own unique sets of needs and wants Positioning Due to the personal and targeted nature of CRM consumers spend less time making purchase decisions and more time doing the things that are important to them Consumers will be loyal only to those companies and brands that have earned their loyalty and reinforced it at every purchase
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