10 25 2011 Markets Composed of people or organizations Have wants and needs that can be satisfied by particular product categories Have the ability to buy the products they seek Willing to exchange their resources usually money or credit for desired products 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 process of dividing a market into meaningful relatively similar Purpose is to enable the marketer to tailor marketing mixes to meet the needs of one and identifiable segments or groups or more specific segments Importance of Market Segmentation Nearly all markets include groups of people or organizations with a variety of product Helps marketers define customer needs and wants more precisely Helps decision makers to more accurately define marketing objectives and better needs and preferences allocate resources Reasons marketers segment markets Segmentation enables marketers to identify groups of customers with similar needs and to analyze the characteristics and buying behavior of these groups Provides marketers with information to help them design marketing mixes specifically matched with the characteristics and desires of one or more segments Consistent with the marketing concept of satisfying customer wants and needs while meeting the organization s objectives Four basic criteria for Segmentation Substantiality segment must be large enough to warrant a special marketing mix Identifiability and measurability segments must be identifiable and their size measurable Accessibility members of targeted segments must be reachable with marketing mix Responsiveness unless segment responds to a marketing mix differently no separate treatment is needed SEGMENTATION BASES variables characteristics of individuals groups or organizations Identify bases that will produce substantial measurable and accessible segments that exhibit different response patterns to marketing mixes Single variable segmentation age less precise but simpler and easier to use Multiple variable segmentation age gender harder to use usable secondary data is less likely to be available as number of bases increases size decreases Bases for Segmentation Geographic Demographic Psychographic Benefits Sought Usage Rate GEOGRAPHIC SEGMENTATION by region market size market density climate Benefits of regional segmentation o New ways to generate sales in sluggish competitive markets o Data allows assessment of best selling brands in region o Regional brands appeal to local preferences o Quicker reaction to competition DEMOGRAPHIC SEGMENTATION age gender income ethnic family life cycle Age adults o Tweens tech savvy social consumers clothing similar to teens and young o Gen Y new and trendy change minds quickly covet status brands spend most money on clothing entertainment food aware of brands and marketing strategies peer to peer marketing unboxing hauls o Gen X disloyal to brands and skeptical of bug business desire an experience not just a product o Baby boomers spend big money on goods and services travel electronics automobiles not brand loyal very diverse Gender Ethnic Income determines buying power o Largest ethnic markets Hispanic African Asian Americans o Companies must make products geared toward specific ethnic groups as they continue to expand Family Life Cycle a series of stages determined by a combination of age marital status and presence or absence of children PSYCHOGRAPHIC SEGMENTATION basis of personality motives lifestyle and Geodemographics segmenting potential customers into neighborhood lifestyle geodemographics categories BENEFIT SEGMENTATION process of grouping customers into market segments according to the benefits they seek from the product USAGE RATE SEGMENTATION divides a market by the amount of product bought consumed Focus on heavy users Segments of Business Markets 80 20 principle 20 percent of all customers generate 80 of the demand Producers Resellers Government Institutions Bases for Segmenting Business Markets Company Characteristics location type of company company size product use o Allows business marketers to tailor their marketing mixes to the unique needs of particular types of organizations or industries Buying Processes o Rank purchasing criteria price quality technical support service o Satisficers contact familiar suppliers and place the order with the first one to satisfy product and delivery requirements o Optimizers consider numerous suppliers solicit bids and study all proposals before selecting one Purpose of market segmentation in consumer and business markets is to identify marketing opportunities Steps in Segmenting Markets 1 Select a market or product category for study 2 Choose a basis or bases for segmenting the market 3 Select segmentation descriptors 4 Profile and analyze segments 5 Select target markets 6 Design implement and maintain appropriate marketing mixes 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 Strategies for Selecting Target Markets UNDIFFERENTIATED TARGETING STRATEGY o Marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix o Assume that individual customers have similar needs that can be met with a common marketing mix o Advantage potential savings on product and marketing costs o Disadvantages unimaginative product offerings more susceptible to CONCENTRATED TARGETING STRATEGY o Strategy used to select one segment of a market niche for targeting competition marketing efforts o Advantage concentration on understanding needs motives satisfactions of that segment develop highly specialized marketing mix small firms can o Disadvantages segment is too small or changing large competitors may compete strong positioning market to niche segment o Violates don t put all of your eggs in one basket MULTISEGMENT TARGETING STRATEGY o Strategy that chooses two or more well defined market segments and develops a distinct marketing mix for each o Advantages greater sales volume higher profits largest market share economies of scale o Disadvantages greater product design production promotion inventory research costs cannibalization occurs when sales
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