Mkt Mgt # Chap10

Chapter # 10

Identifying market segments and selecting Targeting markets

Definitions of Segmentation and Targeting Market Segmentation : Dividing a market into distinct groups of buyers on the basis of needs, characteristics, or behavior who might require separate products or marketing mixes. Market Targeting : The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

Levels of market segmentation The starting point is mass marketing – seller engage in mass mass production, mass distribution and mass promotion of one product for all buyer. Example: Model T- Ford (black), Coke in a 6.5 ounce bottle • Lower cost, lower price or higher margin (Benefit) • Mass marketing is dying Thus many companies are turning to micro marketing at one of the four levels: segments, niches, local areas and individual’

Levels of market segmentation A. Segment marketing: A market segment consists of a group of customers who share similar set of wants. Segment vs. sector – Advantages: • Fine- tuned product and service • Appropriate price • Best distribution and communication channel • Clear picture of its competitors A flexible market offering consists of two parts : (Anderson and Narus ) • A naked solution • Discretionary option

Levels of market segmentation B. Niche marketing: a more narrowly defined segment seeking a distinctive mix of benefit. Marketer usually identify niches by dividing a segment into subsegment. A niche is attractive if – • customer in the niche have a distinct set of needs • they will pay premium to the firm • do not attract other competitors • has size, profit and growth potential

Levels of market segmentation C. Local Marketing : Tailoring marketing programs to the needs and wants of local customer groups (trading area, neighborhood.) Example: local news- paper, Unilever, Citibank • increases manufacturing and marketing cost (disadv) D. Individual marketing:Tailoring products and marketing programs to suit the taste of individual customers - also labeled “segments of one” “customized Marketing” and “one-to-one marketing”

Requirements for Effective Segmentation Measurable Accessible Substantial Differential Actionable

• Size, purchasing power,

profiles of segments can be measured. • Segments must be effectively

reached and served.

• Segments must be large or profitable enough to serve. • Segments must respond differently to different marketing mix elements & actions. • Must be able to attract and

serve the segments.

Bases for segmenting consumer marketing Geographic segmentation

Country, country region, city ete

Demographic segmentation

Age, gender, income, occupation, education, religion

Psychographic segmentation Lifestyle, and personality

Behavioral segmentation

Occasions, benefits, user state, user rate, loyalty status, readiness stage, attitude toward product.

Geographic segmentation SEGMENTATION BASE

SELECTED SEGMENTATION VARIABLES Southwest, Mountain States, pacific, Region southern, northern City or metro Size Major metropolitan areas, small cities, towns Density of area

Urban, suburban, exurban, rural

Climate

Temperate, hot, humid, rainy

Demographic segmentation Age Family size Family life cycle Gender Income

Under 6, 6-11,12-19, 20-34, 35-49, 50-64, 65+ 1-2, 3-4, 5-6, 7+ Bachelorhood, Honeymooners Parenthood, Post-parenthood & Dissolution Male, female Under $10,000; $10,000-$15,000; $15,000$20,000; $20,000-$30,000; $30,000-$50,000; $50,000-100,000;100,00 and over

Demographic segmentation (cont.) Occupation

Professional and technical, farmer, military, retired, students and unemployed

Education

Some high school, high school graduate, some college, college graduate, postgraduate

Religion

Muslim, Hindu, catholic, protestant etc.

Race

White, black, Asian etc.

Nationality

Bangladeshi, Indian, British, American, etc.

Lower- lower, Upper-lower, middle, upperSocial class middle, lower- upper, upper- upper

Psychographic segmentation

Life style

Culture -oriented, sport-oriented, outdoororiented

personality

Compulsive, ambitious

gregarious,

authoritarian,

Behavioral segmentation Occasions

Regular occasion, special occasion

Benefit

Quality, service, economy, speed

User status Usage rate

Non-user, ex-user, potential user, first time user, regular user Light user, medium, heavy user

Loyalty status

None, medium, strong, absolute

Readiness stage Unaware, aware, informed, interested, desirous, intending to buy Attitude towards Positive, indifference, negative, hostile product

Bases for Segmenting Business Markets Demographics

Industry, Company size and Location

Operating Variable Technology, User-nonuser status, Customer capabilities

Purchasing Approaches Purchasing-function organization, power structure, Nature of existing relationships, General purchase policies,Purchasing criteria

Situational Factors Urgency, Specific application, Size of order

Personal Characteristics

Buyer-seller similarities, Attitude towards risk, Loyalty

Market Targeting Target market: A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve. Evaluating Market Segments  Segment Size and Growth: Analyze sales, growth rates and expected profitability.  Segment Structural Attractiveness: Consider effects of Competitors, Availability of Substitute Products and, the Power of Buyers & Suppliers.  Company Objectives and Resources: Company skills & resources relative to the segment(s). Look for Competitive Advantages.

Market Targeting (cont.) Company can consider the following five patterns of target market selection. Single - segment concentration Selective specialization Product specialization Market specialization Full market coverage

Single - segment concentration M1 P1 P2 P3

M2 M3  A market coverage strategy in which a firm goes after a large share of one segment or niches.

 Especially appealing when company resources are limited.  It generally serve the area that may be unimportant to or overlooked by large company.  It is highly profitable and involves higher than normal risks.  Porsche – sports car market, Volkswagen – small car market

Selective specialization M1

M2 M3

P1 P2 P3 • The firm selects a number of segments • Each one is attractive • Their may be little or no synergy among the segments • Advantage of diversifying the firm’s risk • Example – A television attracting both young and old customers

Product specialization M1

M2 M3

P1 P2 P3 • A firm produces certain product that is selling to several segment • Example – Microscope manufacturer who sells to universities, Govt. and commercial laboratories.

Market specialization M1

M2 M3

P1 P2 P3 • The firm concentrates on serving many needs of a particular customer group. • Example – a firm sells an assortment an assortments of product only to university laboratories

Full market coverage M1 P1 P2 P3

M2 M3

• The firm attempts to serve all customer groups with all the products they needs • Only very large firm such as IBM, General Motors and Coca- cola can under take the full market coverage.

• A large firm can cover a whole market in two broad ways A. Undifferentiated Marketing B. Differentiated Marketing

A. Undifferentiated Marketing  A market coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer.  It focuses on what is common in needs of consumer rather that what is different  It relies on mass distribution and mass advertising.  Decreases the total cost and as a result company can set lower price  As a result it can easily attract the price sensitive customer.

B. Differentiated Marketing  A market coverage strategy in which a firm decides to target several market segments and designs separate offer for each.  Companies hopes for higher sales and a stronger position within each market segment.  It increases costs of doing business. The following costs are • Product modification cost • Manufacturing cost • Administrative cost • Inventory cost • Promotion cost So company should cautious about over segmentation.