Lamb, Marketing 5CE, Chapter 6, Student...

Lamb, Marketing 5CE, Chapter 6, Student Handout

Copyright ©2012 Nelson Education Limited. All rights reserved. 1

Lecture PowerPoint® slides to accompany

Canadian Adaptation prepared by Don Hill, Langara College

1Copyright © 2012 Nelson Education Limited

Chapter 6: Segmenting and Targeting Markets


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




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


Market Segmentation

Describe the characteristics

LO1

Describe the characteristics of markets

and market segments.


(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



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.


The Concept of Market Segmentation


The Importance of Market Segmentation

LO2

Explain the importance of market segmentation.




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.


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


Criteria for Successful Segmentation

Discuss criteria for

LO3

Discuss criteria for successful market

segmentation.




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.


Review Learning OutcomeSuccessful Market Segmentation

LO3

Usefulsegment?

Substantial Identifiable and measurable Identifiable and measurable Accessible Responsive

Then, yes: Useful segmentation scheme


Bases for Segmenting Consumer Markets

Describe the bases commonly used to

LO4

commonly used to segment

consumer markets.




Bases for Segmenting Consumer Markets

Segmentation Bases - Characteristicsg

of individuals, groups, or organizations

used to divide a total market into

segments (variables).


Bases for Segmentation

DemographicsDemographics

GeographyGeography

Usage RateUsage Rate

Benefits SoughtBenefits Sought

PsychographicsPsychographics


Geographic Segmentation

• Region of the country or world

• Market size

• Market density

• Climate




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


Demographic Segmentation

AgeAge

GenderGender

IncomeIncome

Ethnic backgroundEthnic background

Family life cycleFamily life cycle


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




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


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


Ethnic Segmentation

• Canada is a highly diverse country

• Language spoken in the home:– English 65.9%English 65.9%

– French 21.2%




Age

Family Life Cycle

MaritalStatus Children


Family Life Cycle


Psychographic Segmentation

Psychographic Segmentation- MarketPsychographic Segmentation Market

segmentation on the basis of

personality, motives, lifestyles,

and demographics.




Bases for Psychographic Segmentation

PersonalityPersonality

MotivesMotivesMotivesMotives

LifestylesLifestyles

GeodemographicsGeodemographics


Personality Segmentation


Lifestyle Segmentation

• How time is spent

• Importance of things around them

• Beliefs

• Socioeconomic characteristics




Geodemographic Segmentation

Geodemographic Segmentation -

Segmenting potential customers intog g p

neighborhood lifestyle categories.

Combines geographic, demographic,

and lifestyle segmentation


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.


Benefit Segmentation




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.


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


Bases for Segmenting Business Markets

Describe the bases for segmenting

LO5

business markets.





ProducersProducers

ResellersResellers

CompanyCharacteristics

CompanyCharacteristics

BuyingProcesses

BuyingProcesses

GovernmentGovernment

InstitutionsInstitutions



Company Characteristics

Geographic location

T f Type of company

Company size

Volume of purchase

Product use


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.




Buyer Characteristics

Demographic characteristicsDemographic characteristics

Decision styleDecision style

Tolerance for riskTolerance for risk

Confidence levelConfidence level

Job responsibilitiesJob responsibilities


Review Learning OutcomeSegmenting Business Markets

LO5

Company Characteristics

Producers Resellers

InstitutionsGovernments

Buying Process


Steps in Segmenting a Market

LO6

List the steps involved in segmenting markets.




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


Strategies for Selecting Target Markets

Discuss alternative strategies

LO7

Discuss alternative strategies

for selecting target markets.


A group of people or organizations for

which an organization designs, implements,

d i t i k ti


and maintains a marketing

mix intended to meet the needs

of that group, resulting in mutually

satisfying exchanges.





ConcentratedStrategy

UndifferentiatedStrategy

MultisegmentStrategy


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.


Undifferentiated Targeting StrategyAdvantage:

Potential savings on production and marketing costs

UndifferentiatedStrategy

Disadvantages:

Unimaginative product offerings

Company more susceptible to competition




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.


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


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.




Multisegment Targeting Strategy

Advantages: Greater financial success Economies of scale

MultisegmentStrategy

Disadvantages: High costs Cannibalization


Costs of Multisegment Targeting

Product design costs

Production costs

Promotion costs

Inventory costs

Marketing research costs

Management costs

Cannibalization


Cannibalization

Situation that occurs when

sales of a new product cut into

a sales of a firm’s

existing products.




Review Learning OutcomeAlternatives for Selecting Target Markets

LO7

Undifferentiated Multisegment Concentrated


One-to-One Marketing

LO8

Explain one-to-one marketing.


An individualized marketingmethod that utilizes customer


information to build long-term, personalized, and profitable

relationships with eachcustomer.





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



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.


Review Learning OutcomeOne-to-One Marketing

LO8




Positioning

Explain how and why firms

LO9

implement positioning

strategies and how product

differentiation plays a role.


Positioning

Developing a specific

marketing mix to influence

potential customers’ p

overall perception of a brand,

product line, or organization

in general.


Positioning of Johnnie Walker Scotch Whiskies




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


Product Differentiation

A positioning strategy that some companies use to

distinguish their products from those of their competitors.

Distinctions can be real or perceived.


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.




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


Repositioning

Changing perceptions of aChanging perceptions of abrand in relation to competing brands.


Review Learning OutcomePositioning and Product Differentiation

LO9


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