Chapter 7 Segmenting and Targeting Markets

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Chapter 7 Segmenting and Targeting Markets
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The Importance of Market Segmentation

• Markets have a variety of product needs and
  preferences
• Marketers can better define customer needs
• Decision makers can define objectives and
  allocate resources more accurately

Competitive Advantage
3
Criteria for Segmentation
4
Bases for Segmentation
5
Geographic Segmentation

• Region of the country or world
• Market size
• Market density
• Climate

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Bases for Demographic Segmentation

• Age
• Gender
• Income
• Ethnic background
• Family Life Cycle

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Ethnic Background

• Largest ethnic markets are
• African-American
• Hispanic-American
• Asian-American
• Will comprise 1/3 of U.S. population by 2010 with
  buying power of a trillion dollars

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Family Life Cycle
Age
MaritalStatus
Children
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Bases for Psychographic Segmentation
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Lifestyle Segmentation

• How time is spent
• Beliefs
• Socioeconomic characteristics

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Geodemographic Segmentation
Segmenting potential customers into neighborhood
lifestyle categories. Combines geographic,
demographic, and lifestyle segmentation.
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Quartiles of County Residents of Asian Descent
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CLARTAS PRIZM 62 American
clusters Each cluster is a member of 15 social
groups arranged by urbanization density and
socio-economic standing.
County
City High
Low RURAL TOWN 2nd CITY
SUBURB URBAN
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CLARTAS PRIZM 62 American
clusters Each cluster is a member of 15 social
groups arranged by urbanization density and
socio-economic standing.
01 BLUE BLOOD ESTATES 05 KIDS
CUL-DE-SACS 07 MONEY BRAINS 09 AMERICAN
DREAMS 12 UPWARD BOUND 14 COUNTRY
SQUIRES 18 YOUNG INFLUENCIALS 28 BIG CITY
BLEND 31 LATINO AMERICA 40 MILITARY
QUARTERS 41 SHOTGUNS PICKUPS 62 HARD
SCRABBLE
To look up a ZIP code use http//www.velocity.clar
itas.com/YAWYL/Default.wjsp?SystemWL
For definitions of each cluster, see
http//www.qmsoft.com/solutions/prizm.htm
for complete descriptions
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VALS 2 Dimensions
Principle- oriented
Status- oriented
Action- oriented
Abundant Resources
Actualizers
Experi-encers
Achievers
Fulfillers
Believers
Strivers
Makers
Minimal Resources
Strugglers
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Benefit Segmentation
The process of grouping customers into market
segments according to the benefits they seek
from the product .
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Usage-Rate Segmentation
Dividing a market by the amount of product
bought or consumed.
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The 80/20 Principle
A principle holding that 20 percent of all
customers generate 80 percent of the demand.
80/20
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Steps in Segmenting a Market
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Strategies for SelectingTarget Markets
Concentrated Strategy
Undifferentiated Strategy
Multisegment Strategy
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Undifferentiated Targeting Strategy

• Advantages
• Potential savings on production and marketing
  costs
• Disadvantages
• Unimaginative product offerings
• Company more susceptible to competition

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Concentrated Targeting Strategy

• Advantages
• Concentration of resources
• Meets narrowly defined segment
• Small firms can compete
• Strong positioning
• Disadvantages
• Segments too small, or changing
• Large competitors may market to niche segment

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Multisegment Targeting Strategy

• Advantages
• Greater financial success
• Economies of scale
• Disadvantages
• High costs
• Cannibalization

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Costs of Multisegment Targeting
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Cannibalization
Situation that occurs when sales of a new product
cut into sales of a firms existing products.
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Positioning
Developing a specific marketing mix to influence
potential customers overall perception of a
brand, product line, or organization in general.
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Effective Positioning

• Assess the positions of competing products
• Determine the dimensions of these positions
• Choose an effective market position

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Perceptual Mapping--Levis
High Price
Vintage
Classic
Designer
Dockers Classics
Red TabBasics
Low Price
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Positioning Bases
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Repositioning
Changing consumers perceptions of a brand in
relation to competing brands.
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Guess Who Owns Theses Brands?What are the
segments that each is directed toward?
See http//www.gloss.com/interim_flash.html
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Product Positioning
High
PRICE
Low
Low
High
Richness
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Why Do Consumers Purchase Technology?
Primary Motivation Family
Career Entertainment Status
Neo- hearthminders
Mouse Potatoes Gadget Grabbers
Cyber-snobs X-techs
Fast Forwards Techno- strivers
Technology pessimists Technology optimists
Disposable Income Disposable Income Low
High Low High
Traditionalists
Handshakers
Media Junkies
Country Clubbers
Sidelined Citizens
Source Forrester Research, Inc.