Chapter 9 Segmentation And Target Marketing Segmentation Identifying and serving homogenous groups of consumers Segments naturally existing groups of consumers with similar needs wants and responses Target market the segment you firm chooses to serve Segmentation Process has 3 parts Step 1 Establish Overall Strategy or Objectives Derived from mission and current state o Strength weaknesses opportunities and threat SWOT Step 2 Segmentation Methods or Segmentation Variables o Use particular method or combination of methods to segment the market o Develops descriptions of the different segments Helps firms better understand the customer profiles in each Geographic Segmentation segment o Organizes customers into groups on the basis of where they live o A market could be grouped by country region or area within a region o Most useful for companies whose products satisfy need that vary by region Demographic Segmentation o Groups consumers according to easily measured objective characteristic such as age gender income and education o Most common segmentation strategy Psychographic Segmentation o Delves into how consumers actually describe themselves o Studies how people self select as it were based on the characteristics of how they choose to occupy their time o Self value day o Self concept o Lifestyle Goals for life not just the goals one wants to accomplish in a Overriding desires that drive how a person lives his or her life Image people ideally have of themselves Values and Lifestyle Survey o A commonly used psychographic segmentation scheme VALS survey Vertical dimension indicates level of resources including income education health energy level and degree of innovativeness Horizontal dimension shows the segments primary psychological motivation for buying o Group of consumers on the basis of the benefits they derived from o Different customers are seeking different benefits from same product Benefit Segmentation products or services category Universities Banks Restaurants Behavioral Segmentation Divides customers into groups on the basis of how they use the product or service o Occasion Based on when a product or service is purchased or consumed o Loyalty Long known that it pays to retain loyal customers Occasion segmentation Special or Everyday Loyalty Usage segmentation Combination o Geodemographic Segmentation A combination of geographic demographic and lifestyle characteristics to classify consumers PRIZM potential rating index by zip market Can identify 66 Geodemographic segments or neighborhoods Particularly useful for retailers because customers typically patronize stores close to their neighborhood Step 3 Evaluate Segment Attractiveness identifiable reachable substantial Segment Attractiveness profitable responsive Segment Attractivenesssubstantialreachableresponsiveprofitableidentifiable Who is in that market Are the segments unique Does each segment require a unique marketing mix Identifiable Substantial Too small and its is insignificant won t generate sufficient profit Too big and it might need it s own store Reachable Can you reach consumers so they Know the product exists Responsive Understand what it can do Recognize how to buy Move toward the firms products services Be willing to accept the firm s value proposition Profitable o Key factor Market growth Market competitiveness Market access Step 4 Selecting a Target Market How many segments Which specific segments Segmentation Strategy how many Know the product existsUnderstand what it can doRecognize how to buy Undifferentiate d or mass marketing Targeting Strategy Concentrated Differentiated Micromarketing or one on one Undifferentiated or Mass Marketing Firm assumes all consumers are the same relative to the product category Differential Target Strategy Firms selects more than one segment for its target markets Multisegment differentiated Targeting Helps obtain a bigger share of the market and increase the market for their product overall Cannibalization New product cuts into sales of old product Aim at new segment hit old segment Concentrated Targeting Strategy Firm select 1 segment as its target market Concentrated niche marketing Focuses all its emerges on providing a product to fit that market s needs Benefits from using a concentrated strategy allows them to employ their limited resources more efficiently Micromarketing Firms treat individuals or very small groups as targets One to one marketing or micromarketing o Advantage increase loyalty o Custom makes Step 5 Developing Positioning Strategy Positioning Methods o Using 4 P s develop value proposition Target method Offering name or brand Product service category or concept Unique point of difference benefits o Value Targeting StrategyDifferentiatedConcentrated Micromarketing or one on oneUndifferentiated or mass marketing A popular positioning method because the relationship of price to quality is among the most important considerations for consumers when they make a purchase decision Target customers must have clear understanding of your competitive Value Proposition advantage Unique points of difference Value price Value what you get for what you give Positioning Using Perceptual Mapping Perceptual Map o Displays in two or more dimensions for illustrative purposes o Step 1 determine consumers perceptions and evaluation of the product or service in relation to competitors o Step 2 identify the market s ideal points and size o Step 3 identify competitor s positions o Step 4 determine consumer preference o Step 5 select the position o Step 6 Monitor the position strategy