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Ch 8 segmentation
- 1. Segmentation, Targeting, and Positioning Chapter 8
- 2. Chapter Objectives 1. Identify the steps in the target marketing process. 2. Understand the need for market segmentation and the approaches available to do it. 3. Explain how marketers evaluate segments and choose a targeting strategy. 4. Understand how marketers develop and implement a positioning strategy. 5. Explain how marketers increase long-term success and profits by practicing customer relationship management.
- 3. Why is it important??
- 4. Are we candy lovers all alike?
- 5. What makes us different?
- 6. Personal preference segments Behavioral Segments Lifestyle segments Cultural segments Demographic segments These do!!
- 8. Breaking the market into smaller parts segment 1 segment 2 segment 3
- 9. A segment: is a set of the market who share meaningful similarities. People who like chocolate and peanut butter. Kids like “fun” candy Adults prefer “mature” indulgence People who like to eat candy at the movies. Cultures with different taste preferences People who are health conscious, or diabetic (lifestyle/psychographi c)
- 10. Segmentation Variable: some characteristic that divides the total market into homogenous (similar) groups - each group having distinct needs or preferences. Prefer chocolate and peanut butter. (or candy with “filling”) Like to “play” with their food & enjoy novelty Need less messy candy, in a sealable container. Like flavors that are common in their culture Need lower calorie or no sugar
- 11. Ingredient preference segments Behavioral Segments Demographic segments Might we fit into multiple segments? Lifestyle segments Cultural segments
- 12. Of course. But this is why we TARGET MARKET!
- 15. ✓ Are the people in the segment similar to each other, but different from other groups (age, gender, ethnicity, psychographics, behaviors, etc.)? ✓ Can we measure the segment: how large is it? What it is worth in $$? ✓ Is it worth using? Can it be profitable if the strategy is carried out? ✓ Can we reach the segment? Will they hear us, listen to us, respond to us? Are they willing to? ✓ Can we actually meet their needs? Do we have the right expertise? Target marketing checklist
- 16. Targeting Strategies Undifferentiated Differentiated Concentrated Customized Segmenting and targeting is minimal. Appeals to a wide variety of customers. Easy to reach promotional economies of scale Develops one or more products for several customer groups with different product needs. Offering one or more products to a single segment Tailoring products and services to each customer
- 17. Target Marketing Strategy Identify, describe differences Evaluate and specify attractive segments Choose targeting strategy Use the marketing mix to create competitive advantage in consumers’ minds
- 18. Positioning
- 19. Positioning: a marketing strategy that influences how a specific market segment perceives a good/service in comparison to competitors. Sugar-free candy often tastes bad and leaves a bad aftertaste because of sugar alcohols or synthetic sugar substitutes
- 20. What two main evaluative criteria do you think this segment is using to make their purchase decision?? Good Taste No Sugar Bad Taste High Sugar Perceptu al map
- 21. Communicating the Position to the segment
- 22. The company does not ALWAYS create the position....
- 23. Steps in positioning 1. Analyze the competition - what are their positions/competitive advantages? 2. Offer a product/service with competitive advantage (fill an open spot on some kind of evaluative matrix) 3. Create and finalize the marketing mix - match the selected segment with the appropriate messages/distribution/product/pricing 4. Evaluate - maybe reposition
- 24. Lay of the land What will customers care about? Who do you compete with in this space? Are there open positions? Healthy Unhealthy Casual/Quick Upscale
- 25. CRM & Mass Customization Firms are moving to one-one marketing, allowing customers to make their own products. Caters to each customers unique needs and wants. Tailoring value propositions!! Thriving via Internet technologies & social media touch-points.
- 26. STARBUCKS
- 27. Re-Cap 1. Segment your market 2. Choose a target & targeting stragety 3. Position your product/brand
Editor's Notes
- NutriSystem experienced tremendous growth selling 28-day weight loss programs in 2005. The 28 day program provides dieters with all their breakfasts, lunches, dinners, and desserts. The program is designed to place people on a reduced-calorie program and is low on the Glycemic index—meaning customers could eat “good carbs” while on the program. By extending NutriSystem’s media presence beyond an e-commerce only strategy into more traditional media such as direct response television, infomercials, and magazine advertising NutriSystem was able to significantly increase its customer count. The majority of its $212,000,000 sales were to women aged 35–55. Sales to men accounted for 13 percent of revenues. When faced with growth prospects for 2006, NutriSystem’s management was concerned that the company couldn’t sustain its triple digit growth rate if the company focused all its marketing activities towards its core group of female customers. NutriSystem’s research shows that some of the same drivers that pushed women to go on the program resonated with men. These motivators included vanity, energy, and health concerns. Because these drivers were an intrinsic part of the product’s core promise, Tom felt there was a chance the company could grow by targeting male dieters in addition to its core female segment—although chances for success were by no means certain, given the historical resistance of men to diet programs. Also, if the company did enter this market it wasn’t clear what the best strategy would be to speak to potential male customers. Tom considered three options: 1. Dip a toe into the male market by using testimonials from actual men who had tried the program, and broadcast these spots on cable television stations. 2. Stick with what works; don’t enter the men’s market. 3. Develop a men’s program and launch it with a big splash on national television. http://www.nutrisystem.com/index.jsp
- target marketing strategy: Select and enter a market Understanding people’s needs is an even more complex task today because technological and cultural advances in modern society have created a condition of market fragmentation. This condition occurs when people’s diverse interests and backgrounds divide them into numerous different groups with distinct needs and wants. Because of this diversity, the same good or service will not appeal to everyone. Marketers must balance the efficiency of mass marketing, serving the same items to everyone, with the effectiveness of offering each individual exactly what they want.
- Segment Consumer Markets A total market can be sliced into smaller pieces in a number of ways, including demographic, psychological, and behavioral differences. Demographics are measurable characteristics such as gender and age, family structure, income and social class, race and ethnicity, and geography. Segment by Demographics Demographics are vital to identify the best potential customers for a good or service. Consumers of different age groups have different needs and wants. A focus on such segments is called generational marketing. Age Children are considered between the ages of 4 and 12. This group has a say in family-related purchases of more than $130 billion a year. Teens are between the ages of 12 and 17. This is an attractive market segment, spends an average of $3,000 per year and as a group is growing nearly twice as fast as the general population. Much of their money goes toward “feel-good” products such as cosmetics, posters, and fast food. Generation Y includes those consumers born between the years 1977 and 1994. They also are known as the baby “boomlet.” Generation Y is made up of the 71 million children of the baby boomers. They are the first generation to grow up online and are more ethnically diverse than earlier generations. Generation Y is an attractive market for a host of consumer products because of their size (approximately 26 percent of the population) and because of their free spending nature. As a group they spend about $200 billion annually. Marketers have had to use creative methods to reach this group as they resist reading and turn off the TV regularly. Generation X is the group of consumers born between 1965 and 1976, consisting of 46 million Americans. They are also known as slackers or busters and have a cynical attitude toward marketing. However, one study revealed that this group has mellowed with age and is responsible for 70 percent of new start-up business in the United States. Seven out of ten regularly save some portion of their income. The slacker name may be fading. Baby boomers are consumers born between 1946 and 1964. Baby boomers never age and invest a ton of money, time, and energy to maintain their youthful image. Because there are so many of them, baby boomers are clogging the upward mobility pipeline in employment. Americans, 65 and older are 35 million in number. This is a 12 percent increase in this age segment since 1990. This group is enjoying leisure time and continued good health. More and more marketers are offering products that have strong appeal to active lifestyle seniors. Gender Starting with diapers, segmenting by sex occurs at a very early age. Many products appeal to men or women either because of the nature of the product or because the marketer chose to appeal to one sex or the other. In some cases, manufacturers develop parallel products to appeal to each sex. Metrosexual describes a man who is heterosexual, sensitive, educated, and an urban dweller who is in touch with his feminine side. Family Life Cycle Because family needs and expenditures change over time, one way to segment consumers is to consider the stage of the family life cycle they occupy. Consumers in different life cycle segments are unlikely to need the same products, or at least they may not need these things in the same quantities. As family’s age and move into new life stages, different product categories ascend and descend in importance. Income and Social Class The distribution of wealth is of great interest to marketers because it determines which groups have the greatest buying power. Marketers, obviously, are often more interested in high-income consumers. In the past, it was popular for marketers to consider social class segments, such as upper class, lower class, and the like. However, many consumers buy not according to where they may fall in the schema but rather according to the image they wish to portray. Ethnicity A consumer’s national origin is often a strong indicator of his preferences for specific magazines or TV shows, foods, apparel, and choice of leisure activities. Marketers need to be aware of these differences and sensitivities. Given the United States increasingly ethnically diverse culture, cultural/religious issues must be addressed. Place of Residence Recognizing that people’s preferences often vary depending on where they live, many marketers tailor their offerings to appeal to different regions. Segment by Psychographics Psychographic data are useful to understand differences among consumers who may be statistically similar to one another but whose needs and wants vary. Web-based services such as GeoCities http://geocities.yahoo.com allow people to sort themselves into lifestyle communities based on shared interests. Psychographics segments market in terms of shared attitudes, interests, and opinions as well as lifestyles. Segment by Behavior Behavioral segmentation slices consumers on the basis of how they act toward, feel about, or use a product. One way to segment based on behavior is to divide the market into users and nonusers of a product. In addition, users can be segmented into heavy, moderate, and light users. Many marketers abide by a rule of thumb called the 80/20 rule: 20 percent of purchasers account for 80 percent of the product’s sales. This means that it often makes more sense to focus on the smaller number of people who are really into a product rather than on the larger number who are just casual users.
- Step 1: Segmentation Segmentation is the process of dividing a larger market into smaller pieces based on one or more meaningful, shared characteristic. Segmentation is often necessary in both consumer and industrial markets. In each case, the marketer must decide on one or more useful segmentation variables, that is, dimensions that divide the total market into fairly homogenous groups, each with different needs and preferences.
- Segment Consumer Markets A total market can be sliced into smaller pieces in a number of ways, including demographic, psychological, and behavioral differences. Demographics are measurable characteristics such as gender and age, family structure, income and social class, race and ethnicity, and geography.
- Segment Consumer Markets A total market can be sliced into smaller pieces in a number of ways, including demographic, psychological, and behavioral differences. Demographics are measurable characteristics such as gender and age, family structure, income and social class, race and ethnicity, and geography. Segment by Demographics Demographics are vital to identify the best potential customers for a good or service. Consumers of different age groups have different needs and wants. A focus on such segments is called generational marketing. Age Children are considered between the ages of 4 and 12. This group has a say in family-related purchases of more than $130 billion a year. Teens are between the ages of 12 and 17. This is an attractive market segment, spends an average of $3,000 per year and as a group is growing nearly twice as fast as the general population. Much of their money goes toward “feel-good” products such as cosmetics, posters, and fast food. Generation Y includes those consumers born between the years 1977 and 1994. They also are known as the baby “boomlet.” Generation Y is made up of the 71 million children of the baby boomers. They are the first generation to grow up online and are more ethnically diverse than earlier generations. Generation Y is an attractive market for a host of consumer products because of their size (approximately 26 percent of the population) and because of their free spending nature. As a group they spend about $200 billion annually. Marketers have had to use creative methods to reach this group as they resist reading and turn off the TV regularly. Generation X is the group of consumers born between 1965 and 1976, consisting of 46 million Americans. They are also known as slackers or busters and have a cynical attitude toward marketing. However, one study revealed that this group has mellowed with age and is responsible for 70 percent of new start-up business in the United States. Seven out of ten regularly save some portion of their income. The slacker name may be fading. Baby boomers are consumers born between 1946 and 1964. Baby boomers never age and invest a ton of money, time, and energy to maintain their youthful image. Because there are so many of them, baby boomers are clogging the upward mobility pipeline in employment. Americans, 65 and older are 35 million in number. This is a 12 percent increase in this age segment since 1990. This group is enjoying leisure time and continued good health. More and more marketers are offering products that have strong appeal to active lifestyle seniors. Gender Starting with diapers, segmenting by sex occurs at a very early age. Many products appeal to men or women either because of the nature of the product or because the marketer chose to appeal to one sex or the other. In some cases, manufacturers develop parallel products to appeal to each sex. Metrosexual describes a man who is heterosexual, sensitive, educated, and an urban dweller who is in touch with his feminine side. Family Life Cycle Because family needs and expenditures change over time, one way to segment consumers is to consider the stage of the family life cycle they occupy. Consumers in different life cycle segments are unlikely to need the same products, or at least they may not need these things in the same quantities. As family’s age and move into new life stages, different product categories ascend and descend in importance. Income and Social Class The distribution of wealth is of great interest to marketers because it determines which groups have the greatest buying power. Marketers, obviously, are often more interested in high-income consumers. In the past, it was popular for marketers to consider social class segments, such as upper class, lower class, and the like. However, many consumers buy not according to where they may fall in the schema but rather according to the image they wish to portray. Ethnicity A consumer’s national origin is often a strong indicator of his preferences for specific magazines or TV shows, foods, apparel, and choice of leisure activities. Marketers need to be aware of these differences and sensitivities. Given the United States increasingly ethnically diverse culture, cultural/religious issues must be addressed. Place of Residence Recognizing that people’s preferences often vary depending on where they live, many marketers tailor their offerings to appeal to different regions. Segment by Psychographics Psychographic data are useful to understand differences among consumers who may be statistically similar to one another but whose needs and wants vary. Web-based services such as GeoCities http://geocities.yahoo.com allow people to sort themselves into lifestyle communities based on shared interests. Psychographics segments market in terms of shared attitudes, interests, and opinions as well as lifestyles. Segment by Behavior Behavioral segmentation slices consumers on the basis of how they act toward, feel about, or use a product. One way to segment based on behavior is to divide the market into users and nonusers of a product. In addition, users can be segmented into heavy, moderate, and light users. Many marketers abide by a rule of thumb called the 80/20 rule: 20 percent of purchasers account for 80 percent of the product’s sales. This means that it often makes more sense to focus on the smaller number of people who are really into a product rather than on the larger number who are just casual users.
- Marketers select a target marketing strategy in which they divide the total market into different segments based on customer characteristics, select one or more segments, and develop products to meet the needs of those specific segments. Step 2: Targeting In targeting, the marketers evaluate the attractiveness of each potential segment and decide which of these groups they will invest resources against to try to turn them into customers. The customer group or groups selected are the firm’s target market. Develop Segment Profiles A segment profile is a profile or description of a “typical” customer in that segment. A segment profile might include customer demographics, location, lifestyle information, and a description of how frequently the customer buys the product.
- the criteria used for determining whether a segment may be a good candidate for targeting. Just because a marketer identifies a segment does not necessarily mean that it’s a useful one to target. A viable target segment should satisfy the following requirements: • Are members of the segment similar to each other in their product needs and wants and, at the same time, different from consumers in other segments? • Can marketers measure the segment? • Is the segment large enough to be profitable now and in the future? • Can marketing communications reach the segment? • Can the marketer adequately serve the needs of the segment?
- Choose a Targeting Strategy A basic targeting decision is how finely tuned the target should be. Undifferentiated Marketing An undifferentiated targeting strategy is one that appeals to a wide-spectrum of people. If successful, this type of operation can be very efficient, especially because production, research, and promotion costs benefit from economies of scale—it’s cheaper to develop one product or one advertising campaign than to choose several targets and create separate products or messages for each. The company must be willing to bet that people have similar needs or differences among them that are trivial. Differentiated Marketing A company that chooses a differentiated targeting strategy develops one or more products for each of several customer groups with different product needs. A differentiated strategy is called for when consumers are choosing among brands that are well known in which each has a distinctive image in the marketplace and in which it’s possible to identify one or more segments that have distinct needs for different types of products. Differentiated marketing can also involve connecting ones products with different segments by communicating differently to appeal to those segments. Concentrated Marketing When a firm focuses its efforts on offering one or more products to a single segment, it is using a concentrated targeting strategy. A concentrated strategy is often useful for smaller firms that do not have the resources or the desire to be all things to all people. Customized Marketing Ideally, marketers should be able to define segments so precisely that they can offer products and services that exactly meet the unique needs of each individual or firm. A custom marketing strategy is common in industrial contexts in which a manufacturer often works with one or a few large clients and develops products and services that only these clients will use. In most cases this level of segmentation is neither practical nor possible when mass-produced products are sold. However, advances in computer technology, coupled with the new emphasis on building solid relationships with customers, have focused managers’ attention on devising a new way to tailor specific products and the messages about them to individual customers. Mass customization is the modification of a basic good or service to meet the needs of an individual.