UMD BMGT 350 - Chapter 8: Segmenting and Targeting Markets

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Chapter 8: Segmenting and Targeting Markets-Market: people or organizations with needs or wants and with the ability and the 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, relativelysimilar, and identifiable segments or groups 8-2: The Importance of Market Segmentation- Helps marketers define customer needs and wants more precisely - Helps marketers define objective and better allocate resources- Few firms practiced market segmentation until the 1960s8-3: Criteria for Successful 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 specificallymatched 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 - A successful segmentation scheme must product segments that meet 4 basic criteria o 1) Substantiality: segment must be large enough to maintain a special marketing mix; need potential customers o 2) Identifiability and measurabilityo 3) Accessibility: the firm must be able to reach members of targeted segments with customized marketing mixeso 4) Responsiveness8-4: Bases for Segmenting Consumer Markets - Segmentation bases/variables: characteristics of individuals, groups or organizations - Segment markets based on geography, demographics, psychographics, benefits sought, usage rate - Geographic segmentation: segmenting markets by region of a country or the world, market size, market density, or climate - Consumer goods companies take a regional approach to marketing for 4 reasonso Many firms need ot find new ways to generate sales bc of sluggish andintensely competitive marketso Computerized checkout stations with scanners give retailers an accurate assessment of which brands sell best in their regions o Many packaged goods manufacturers are introducing new regional brands intended to appeal to local preferenceso A more regional approach allows consumer goods companies to react more quickly to competition - Demographic segmentation: segmenting markets by age, gender, income, ethnic background and family life cycle o Children account for and influence a great deal of consumptiono Generation X: disloyal to brands, skeptical of big business, desire an experience not just a producto Baby boomers: want attention and service when they shopo Family life cycle (FLC): a series of stages determined by a combination of age, martial status, and the presence or absence of children- Demographics provide the skeleton but psychographics add meat to the bones - Psychographic segmentation: segmenting markets on the basis of personality, motives, lifestyles, and geodemographics o Geodemographic segmentation: segmenting potential customers into neighborhood lifestyle categories >> combines geographic, demographic, lifestyle segmentations o Young digerati: tech savvy, affluent, live in trendy condos, read the economist, annual income of 88,000- Benefit segmentation: the process of grouping customers into market segments according to the benefits they seek from the product; based on needs/wants not on age/gender- Usage rate segmentation: dividing a market by the amount of product bought or consumed - 80/20 principle: a principle holding that 20% of all customers generate 80% of the demand 8-5: Bases for Segmenting Business Markets- Company characteristics such as geographic location, type of company, company size, and product use can be important segmentation variables- Satisficers: business customers who place an order with the first familiar supplier to satisfy product and delivery requirements- Optimizers: business customers who consider numerous suppliers both familiar and unfamiliar, solicit bids and study all proposals carefully before selecting one 8-6: Steps in Segmenting A Market - Select a market or product category for study- Choose a basis or bases for segmenting the market- Select segmentation descriptors- Profile and analyze segments- Select target markets- Design, implement, and maintain appropriate marketing mixes8-7: Strategies for Selecting Target Markets- Target market: a group of people or organizations for which an organizationdesigns, implements, and maintains a marketing mix intended to meet the needs of that group resulting in mutually satisfying exchanges - Undifferentiated targeting strategy: a marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mixo Model T car, the first firm in an industry, sugar/flouro Advantages: potential savings on production/marketing costo Disadvantages: unimaginative product offerings, company more susceptible to competition - Concentrated targeting strategy: a strategy used to select one segment of a market for targeting marketing effortso Niche: one segment of a marketo Advantages: concentration of resources, can better meet the needs of a narrowly defined segment, allows some small firms to better compete with larger firms, strong positioning o Disadvantages: segments too small or changing, large competitors may more effectively market to niche segment - Multi-segment targeting strategy: a strategy that chooses 2 or more well defined market segments and develops a distinct marketing mix for each o P&Go Advantages: greater financial success, economies of scale in producing/marketingo Disadvantages: high costs, cannibalization Cannibalization: a situation that occurs when sales of a new product cut into sales of a firm’s existing products 8-8: CRM As A Targeting Tool- CRM entails tracking interactions with customers to optimize customer satisfaction and long term company profits - Personalization- Time savings- Loyalty - Technology 8-9: Positioning - Positioning: developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general- Position: 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,


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UMD BMGT 350 - Chapter 8: Segmenting and Targeting Markets

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