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Lamb, Marketing 5CE, Chapter 6, Student Handout
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Lecture PowerPoint® slides to accompany
Canadian Adaptation prepared by Don Hill, Langara College
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Chapter 6: Segmenting and Targeting Markets
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Learning Outcomes
Describe the characteristics of markets and market segments
Explain the importance of market segmentation
LO1
LO2
Discuss criteria for successful market segmentation
Describe the bases commonly used to segment consumer markets
LO3
LO4
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Lamb, Marketing 5CE, Chapter 6, Student Handout
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Describe the bases for segmenting business markets
List the steps involved in segmenting markets
LO5
LO6
Learning Outcomes
Discuss alternative strategies for selecting target markets
Explain one-to-one marketing
Explain how and why firms implement positioning strategies and how product differentiation plays a role
LO7
LO9
LO8
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Market Segmentation
Describe the characteristics
LO1
Describe the characteristics of markets
and market segments.
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(1) people or organizations with
(2) needs or wants, and with
(3) the ability and
A Market Is...
(3) the ability and
(4) the willingness to buy.
A group of people that lacks any one of these characteristics is not a market.
LO16Copyright © 2012 Nelson Education Limited
Lamb, Marketing 5CE, Chapter 6, Student Handout
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Market SegmentationMarket- People or organizations with
needs or wants and the ability andwillingness to buy.
Market Segment- A subgroup of peopleor organizations sharing one or moreh t i ti th t th t hcharacteristics that cause them to have
similar product needs.
Market Segmentation- The process ofdividing a market into meaningful,
relatively similar, identifiable segmentsor groups.
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The Concept of Market Segmentation
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The Importance of Market Segmentation
LO2
Explain the importance of market segmentation.
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Lamb, Marketing 5CE, Chapter 6, Student Handout
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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.
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Review Learning OutcomeThe Importance of Market Segmentation
LO2
Marketsegmentation
More precise definition of customers needs and wants
More accurate marketing objectives
Improved resource allocation
Better marketing results
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Criteria for Successful Segmentation
Discuss criteria for
LO3
Discuss criteria for successful market
segmentation.
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Criteria for Segmentation
SubstantialitySegment must be large
enough to warrant a special marketing mix.
Identifiabilityand
Measurability
Segments must be identifiable and their size measurable. Measurability
AccessibilityMembers of targeted segments
must be reachable with marketing mix.
ResponsivenessUnless segment responds to a marketing mix differently, no separate treatment is needed.
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Review Learning OutcomeSuccessful Market Segmentation
LO3
Usefulsegment?
Substantial Identifiable and measurable Identifiable and measurable Accessible Responsive
Then, yes: Useful segmentation scheme
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Bases for Segmenting Consumer Markets
Describe the bases commonly used to
LO4
commonly used to segment
consumer markets.
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Lamb, Marketing 5CE, Chapter 6, Student Handout
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Bases for Segmenting Consumer Markets
Segmentation Bases - Characteristicsg
of individuals, groups, or organizations
used to divide a total market into
segments (variables).
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Bases for Segmentation
DemographicsDemographics
GeographyGeography
Usage RateUsage Rate
Benefits SoughtBenefits Sought
PsychographicsPsychographics
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Geographic Segmentation
• Region of the country or world
• Market size
• Market density
• Climate
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Benefits of Regional Segmentation
• New ways to generate sales in sluggish and competitive markets
• Scanner data allow assessment of best Scanner data allow assessment of best selling brands in region
• Regional brands appeal to local preferences
• Quicker reaction to competitionLO4
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Demographic Segmentation
AgeAge
GenderGender
IncomeIncome
Ethnic backgroundEthnic background
Family life cycleFamily life cycle
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Age Segmentation• According to the Census of Canada…
– Canadian population is 33.9 million
– 19 different age groups• Largest is baby boomers (born 1946 to 1964) at 9.5
million
h b f hild• Three subsets of children– Young children (9 and under)
– Tweens (10 to 14)
– Teens (15 to 19)
• Overall population is getting older– City of Toronto forecasts 17 % of the population
will be over 65 in the next 20 years
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Gender Segmentation
• Canadian gender breakdown is 49.6% men and 50.4% women
• In Canada, women purchase…, p– 68% of new cars
– 56% of new computers
– 51% of new electronics
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Income Segmentation
• Income – popular demographic variable for segmenting markets
• According to Statistics Canada, the average family expenditure was $ 71 300 (2007)family expenditure was $ 71,300 (2007)– Taxes 20.5%
– Shelter 19.9%
– Transportation 13.6%
– Food 10.4%
– Recreation 5.9%LO4
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Ethnic Segmentation
• Canada is a highly diverse country
• Language spoken in the home:– English 65.9%English 65.9%
– French 21.2%
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Age
Family Life Cycle
MaritalStatus Children
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Family Life Cycle
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Psychographic Segmentation
Psychographic Segmentation- MarketPsychographic Segmentation Market
segmentation on the basis of
personality, motives, lifestyles,
and demographics.
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Bases for Psychographic Segmentation
PersonalityPersonality
MotivesMotivesMotivesMotives
LifestylesLifestyles
GeodemographicsGeodemographics
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Personality Segmentation
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Lifestyle Segmentation
• How time is spent
• Importance of things around them
• Beliefs
• Socioeconomic characteristics
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Geodemographic Segmentation
Geodemographic Segmentation -
Segmenting potential customers intog g p
neighborhood lifestyle categories.
Combines geographic, demographic,
and lifestyle segmentation
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Benefit Segmentation
Benefit segmentation- The process of
i t i t k tgrouping customers into market
segments according to the benefits
they seek from the past.
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Benefit Segmentation
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Usage-Rate Segmentation
Usage-Rate Segmentation- Dividing a
market by the amount of product
bought or consumed.g
80/20 Principle- A principle holding
that 20 percent of all customers
generate 80 percent of the demand.
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Review Learning OutcomeBases for Segmenting Consumer Markets
LO4
Geography Demographics Psychographics Benefits Usage Rate
• Region• Market size
• Age• Gender
• Personality• Motives
• Benefitssought
• Former• Potential
• Marketdensity
• Climate
Gender• Income• Race/ethnicity• Family life
cycle
Motives• Lifestyle• Geodemo-
graphics
sought Potential• 1st time• Light or
irregular• Medium• Heavy
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Bases for Segmenting Business Markets
Describe the bases for segmenting
LO5
business markets.
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Bases for Segmenting Business Markets
ProducersProducers
ResellersResellers
CompanyCharacteristics
CompanyCharacteristics
BuyingProcesses
BuyingProcesses
GovernmentGovernment
InstitutionsInstitutions
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Bases for Segmenting Business Markets
Company Characteristics
Geographic location
T f Type of company
Company size
Volume of purchase
Product use
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Buyer Characteristics
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.
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Buyer Characteristics
Demographic characteristicsDemographic characteristics
Decision styleDecision style
Tolerance for riskTolerance for risk
Confidence levelConfidence level
Job responsibilitiesJob responsibilities
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Review Learning OutcomeSegmenting Business Markets
LO5
Company Characteristics
Producers Resellers
InstitutionsGovernments
Buying Process
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Steps in Segmenting a Market
LO6
List the steps involved in segmenting markets.
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Review Learning OutcomeSteps in Segmenting Markets
LO6
Select a market
for
Choosebases
for
Selectdescriptor
s
Profileand
analyze
Selecttarget
markets
Design,implement,
maintainstudy segmen-
tationsegments marketing
mix
1 53 42 6
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Strategies for Selecting Target Markets
Discuss alternative strategies
LO7
Discuss alternative strategies
for selecting target markets.
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A group of people or organizations for
which an organization designs, implements,
d i t i k ti
Strategies for Selecting Target Markets
and maintains a marketing
mix intended to meet the needs
of that group, resulting in mutually
satisfying exchanges.
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Lamb, Marketing 5CE, Chapter 6, Student Handout
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Strategies for Selecting Target Markets
ConcentratedStrategy
UndifferentiatedStrategy
MultisegmentStrategy
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Undifferentiated Targeting Strategy
A marketing approach that
views the market as one big
k t ith i di id lmarket with no individual
segments and thus requires
a single marketing mix.
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Undifferentiated Targeting StrategyAdvantage:
Potential savings on production and marketing costs
UndifferentiatedStrategy
Disadvantages:
Unimaginative product offerings
Company more susceptible to competition
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Concentrated Targeting Strategy
Concentrated Targeting Strategy –
A strategy used to select
one segment of a marketone segment of a market
for targeting efforts.
Niche – One segment of a market.
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Concentrated Targeting Strategy
Advantages: Concentration of resources Meets narrowly defined
segment Small firms can compete
ConcentratedStrategy
p Strong positioning
Disadvantages: Segments too small, or
changing Large competitors may
market to niche segmentLO7
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Multisegment Targeting Strategy
A strategy that chooses two or
more well-defined marketmore well-defined market
segments and develops a
distinct marketing mix for each.
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Multisegment Targeting Strategy
Advantages: Greater financial success Economies of scale
MultisegmentStrategy
Disadvantages: High costs Cannibalization
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Costs of Multisegment Targeting
Product design costs
Production costs
Promotion costs
Inventory costs
Marketing research costs
Management costs
Cannibalization
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Cannibalization
Situation that occurs when
sales of a new product cut into
a sales of a firm’s
existing products.
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Review Learning OutcomeAlternatives for Selecting Target Markets
LO7
Undifferentiated Multisegment Concentrated
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One-to-One Marketing
LO8
Explain one-to-one marketing.
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An individualized marketingmethod that utilizes customer
One-to-One Marketing
information to build long-term, personalized, and profitable
relationships with eachcustomer.
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One-to-One Marketing
One-to-OneMarketing is...
One-to-OneMarketing is...
IndividualizedIndividualized Cost ReductionCost Reduction
Has a Goal of…Has a Goal of…
Information-IntensiveInformation-Intensive
Long-TermLong-Term
IndividualizedIndividualized Cost ReductionCost Reduction
Customer LoyaltyCustomer Loyalty
Increased RevenueIncreased Revenue
PersonalizedPersonalized
Customer RetentionCustomer Retention
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One-to-One Marketing
1. One-size-fits all marketing no longer effective
2. Direct and personal marketing will grow to meet needs of busy consumers.
Trends
3. Consumers will be loyal to companies that have earned—and reinforced—their loyalty.
4. Mass-media approaches will decline as technology allows better customer tracking.
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Review Learning OutcomeOne-to-One Marketing
LO8
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Positioning
Explain how and why firms
LO9
implement positioning
strategies and how product
differentiation plays a role.
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Positioning
Developing a specific
marketing mix to influence
potential customers’ p
overall perception of a brand,
product line, or organization
in general.
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Positioning of Johnnie Walker Scotch Whiskies
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Effective Positioning
1. Assess the positions occupied by competing products
2 Determine the dimensions underlying 2. Determine the dimensions underlying these positions
3. Choose a market position where marketing efforts will have the greatest impact
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Product Differentiation
A positioning strategy that some companies use to
distinguish their products from those of their competitors.
Distinctions can be real or perceived.
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Perceptual Mapping
A means of displaying or graphing, in two or more
dimensions, the location of products, brands, or groups
of products in customers’ minds.
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Positioning Bases
AttributeAttribute
Price and QualityPrice and Quality
Use or ApplicationUse or ApplicationUse or ApplicationUse or Application
Product UserProduct User
Product ClassProduct Class
CompetitorCompetitor
EmotionEmotion
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Repositioning
Changing perceptions of aChanging perceptions of abrand in relation to competing brands.
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Review Learning OutcomePositioning and Product Differentiation
LO9
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