Chp 8 Segmenting and Targeting Markets Market Segmentation and willingness to buy Market people or organizations with needs or wants and the ability 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 and identifiable segments or groups o Important because almost all markets include groups of people or organizations with different products needs and o Helps marketers define customer needs and wants more preferences precisely Better allocate resources by defining marketing objectives o Criteria for Successful Segmentation Substantiality segment must be large enough to warrant developing and maintaining a special marketing mix Identifiability and Measurability segments must be identifiable and their size measureable Accessibility must be able to reach members of targeted segments with customized marketing mixes Responsiveness markets can be segmented using any criteria that seem logical Bases for Segmenting Consumer Markets Segmentation bases variables characteristics of individuals groups or organizations to divide a total market into segments o Inappropriate segmentation strategy may lead to lost sales and missed profit opportunities o Identify bases that will produce substantial measureable and accessible segments that exhibit different response patterns to marketing mixes Examples Simple Age group Multiple Age gender education Commonly used geography demographics psychographics benefits sought usage rate Geographic Segmentation o Segmenting markets by region of a country or the world market size market density or climate Consumer goods companies take a regional approach because of competition Need to find new ways to generate sales because Computerized checkout stations give retailers 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 react more quickly to competition Demographic Segmentation o Segmenting markets by age gender income ethnic background and family life cycle Age segmentation Ex Newborns infants teens generation Y generation X baby boomers seniors Gender Segmentation each year o Women make up over 70 of purchases of consumer goods o Clothing cosmetics personal care items magazines gifts jewelry are all segmented by gender Income Segmentation o Income level influences consumers wants and determines their buying power Ethnic Segmentation o Increased numbers of ethnic minorities and increased buying power have changed the way films television advertisements and popular music portray America s diverse population Family Life Cycle o A series of stages determined by a combination of age marital status and the presence or absence of children Single adults are increasing in the majority Psychographic Segmentation o Market segmentation on the basis of the variables of Personality Motives Lifestyle Geodemographics Segmenting potential customers into neighborhood lifestyle categories Benefit segmentation o The process of grouping customers into market segments according to the benefits they seek from the product Groups based on needs and wants Usage Rate segmentation o Divides a market by the amount of product bought or consumed Former users potential users first time users light or irregular users medium users heavy users 80 20 principal 20 percent of all customers generate 80 percent of the demand Bases of Segmenting Business Markets Business market consists of producers resellers government and institutions Company Characteristics o Geographic location size type of company product use can all be important segmentation variables o Some markets tend to be regional because buyers prefer to purchase from local suppliers Benefit by being close to their markets o Segmenting by customer type allows business marketers to tailor their marketing mixes to the unique needs of particular types of organizations or industries o Organization s size may affect purchasing procedures the types and quantities of products it needs and its responses to different marketing mixes o How customers use a product may influence the amount they buy their buying criteria and their selection of vendors Buying Processes of how they buy o Segment customers and prospective customers on the basis Ranking key purchasing criteria such as price quality technical support and service Two purchasing profiles Satisficers contact familiar suppliers and place the order with the first one to satisfy product and delivery requirements Optimizers consider numerous suppliers both familiar and unfamiliar solicit bids and study all proposals carefully before selecting one Personal characteristics of the buyers themselves demographic decision style tolerance of risk confidence level job responsibilities influence their buying behavior and thus offer a viable basis for segmenting some business markets Steps in Segmenting a Market The purpose of market segmentation in both consumer and business markets is to identify marketing opportunities o Select a market or product category for study Market the firm already competes or a new one o Chose a basis or bases for segmenting the market Requires managerial insight creativity and market knowledge o Select segmentation descriptors Identify the specific segmentation variables to use o Profile and analyze segments Segments size expected growth purchase frequency current brand usage brand loyalty long term sales and profit potential o Select target markets o Design implement and maintain appropriate marketing mixes Product place promotion price Markets are dynamic so it is important that companies proactively monitor their segmentation strategies over time Customers and prospects are changing Strategies for Selecting Target Markets 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 market o Unlikely a single marketing mix will attract all segments of the Undifferentiated targeting o A marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix o Savings on production and marketing costs because only one items is produced achieves mass
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