Chapter 5(Market Segmentation, Targeting, and Positioning)

Leader: De Roxas, Angelie S.Members: Ramilo, John Gil O.

Magbuhos, Jojie Martinez, Jho-ann

MARKETSegmentation, Targeting,And Positioning

De Roxas, Angelie S.BSBA F&MA IV-B

MarketGroup of people with sufficient purchasing

power, authority and willingness to buy.

Target MarketSpecific group of people a firm believes is

most likely to buy its goods and services.

Types of Products• Consumer Products

Products bought by ultimate consumers for personal use.

• Business ProductsGoods and services

purchased for use either directly or indirectly in the production of other goods and services for resale.

Market SegmentationDivision of the total market into smaller,

relatively homogenous groups.

Criteria for effective segmentation Segment must have measurable purchasing power and

size. Marketers must find a way to promote and serve the

market. Marketers must identify segments large enough for profit

potential. Firm must target a number of segments that match its

marketing capabilities.

Segmenting Consumer MarketsGeographic, Demographic, Psychographic,

and Product-related segmentation

Geographic SegmentationDivides the over-all market into homogenous

groups according to population locations.

• Core Based Statistical Area (CBSA)Collective term for metropolitan and micropolitan statistical areas.

• Metropolitan Statistical Area (MSA)Free standing urban area with a population in the urban

center of at least 50,000 and a total MSA population of 100,000 or more.

• Micropolitan Statistical AreaArea with at least one town of 10,000 to 49,999 with

proportionally few of its residents commuting to outside the area.• Consolidated Metropolitan Statistical Area (CMSA)

Urban area that includes two or more PMSAs.• Primary Metropolitan Statistical Area (PMSA)

Urbanized county or set or counties with social and economic ties nearby areas.

Ten Most Populous Cities in the Philippines

City Population

Quezon City The capital of the Philippines from 1948 to 1976. Has close to three million people

Manila The current capital of the Philippines. Very densely populated with close to two million people

CaloocanLocated north of Manila. Has close to 1.5 million people

Davao City Located on the island of Mindanao. Has close to 1.4 million people.

Cebu City The first capital of the country. Located on a large island in the Visayas"The Queen City of the South“. Has close to a million people

Zamboanga City Located on the island of Mindanao. Has close to 800,000 people

Antipolo Located on the hills east of Manila . Has close to 700,00 people

Pasig Now part of Metropolitan Manila area. Has close to 650,000 people

Taguig On the western shores of Laguna de Bay. Has close to 620,000 people

Valenzuela Has close to 580,000 people. Northern part of Metropolitan Manila area

• Geographic Information Systems (GISs)Software packages that assemble, store,

manipulate and display data by their location.

Demographic SegmentationDivision of an over-all market into

homogenous groups based on variables such as gender, age, income, occupation, education, sexual orientation household

size, and stage in the family life cycle;also called socioeconomic segmentation.

Segmenting by Gender

Segmenting by Age

School Age Children

Tweens and Teens

X

Generation X

The group born between 1968 and 1979,now generally in their early 30’s to early 40’s.

Baby Boomers

Those born between 1946 and 1964.

Seniors

End

Marketing

Ramilo, John Gil O.BSBA F&MA IV-B

COHORT EFFECT: VIDEO GAME GENERATIONCohort effect is the tendency of members of a generation to be

influenced and bound together events occurring during their key formative years. These events help define the core values of the age group and eventually shape consumer preferences and behavior.

For seniors, the events would be the great depression, World War II, and Korea because many were in this age bracket at that time. Later groups were influenced by the Cold War, Vietnam mar and other wars.

The current cohort may be the most integrated to date. Marketers have called this group Generation Y, Generation Next, and Echo Boomers. Some called it the 9-11 Generation.

Years passed and there came the development of Video Games. And they called it Video Game Generation.

Members of this cohort are highly visual and are generally comfortable with all forms of technology. They gravitate to activities that provide constant entertainment and immediate gratification.

The significance of cohort effect for marketers lies in understanding the general characteristics of the Video Game Generation as it corresponds to its life-defining events. The social and economic influences this generation experiences help form members long term beliefs and goals in life.

Segmenting by Ethnic Groups Three largest ethnic group in U.S:

Hispanics (Latin Americans)African AmericansAsian Americans

Hispanics

Currently the largest racial/ethnic minority group in the United States. They have a rising rate of buying power which is estimated to $1 trillion.

African Americans

Like Hispanics, they are also one of the largest ethnic group in U.S.This group now has an estimated $1.08 trillion in buying power.

Asian Americans

They make up smaller segment than either African Americans or Hispanics. They serve as an attractive target for marketers because they have the fastest-growing income.

Three largest ethnic group in the Philippines

Tagalog

VisayanIlocano

Native Americans

Another important minority group is native Americans, whose current population numbers over 5 million or 1.7% of the total U.S population. Aside from their growing population growth, Native American Business are growing. In the recent year almost 237,000 non- farm Native American firms are operated in U.S , with $34.4 billion in receipts.

People of Mixed Race

U.S residents completing census forms now have the option of identifying themselves as belonging to more than one racial category. According to their census. About 9million U.S residents classify themselves this way and marketers need to be aware of this change.

Forward –thinking marketers should keep tabs on this group, identifying their needs and preferences.

Segmenting by Family Lifecycle Stages

Family Lifecycle is the process of family formation and dissolution. As people move from one life stage to another, they become potential consumers for different types of goods and services.

Families typically spend the most during the years their children are growing- on everything including housing, clothing, braces, and college. They often look to obtain value wherever they can.

Marketers can create customer loyalty within this group by giving them the best possible value.

Once children are on their own – or at least off to college – married couples enter the “ empty nest” stage. Empty nesters may have the disposable incomes necessary to purchase premium products once college tuitions and mortgages are paid off. They may treat themselves to luxurious things that they cannot do or buy before because of priorities.

Segmenting by Household Type

Today, Households embody a wade range of diversity. They include:

- Households with married couple and their children- Households blended through divorce or loss of spouse and remarriage- Those headed by single parent- Same-sex parents- Couples without children- Groups of friends- Single-person households

Segmenting by Income and Expenditure Patterns

Engel’s LawOver a century ago, Ernst Engel, a German Statistician, published

to what became known as Engel’s law. According to him, as household income increases,

• A smaller percentage of expenditures goes for food

• The percentage spent on housing, household operations, and clothing remain constant

• The percentage spent on their items (such as recreation and education) increases

Demographic Segmentation Abroad

Marketers often face a difficult task in obtaining the data necessary for demographic segmentation abroad. Many countries do not schedule census programs. Similarly, family lifecycle data are difficult to apply in global demographic segmentation efforts.

End

dividing a population into groups that have similar psychological characteristics, and lifestyles.

Psychographic Segmentation:

Magbuhos, Jojie BSBA F&MA IV-B

AIO statements Items on lifestyle surveys that describe various activities, interest, and respondents’

opinions.

VALS- Values and LifeStyles

VALS segmentation system that divides consumers into eight psychographic categories:

InnovatorsThinkersAchievers ExperiencersBelieversStriversMakersSurvivors

Thinkers —mature, satisfied, comfortable, well informed Achievers —goal oriented, conservative, predictable, stable Experiencers —young, enthusiastic, seek variety and excitement Believers —conservative, conventional, moral codes, in organizationsStrivers —trendy, fun loving, seek approval, job vs. career Makers —practical, self sufficient, suspicious of large institutions Survivors —few resources, concerned with safety, low motivation

Principle-motivated consumers Achievement-motivated consumersAction-motivated consumers

Primary Motivators divide consumers into three groups :

Psychographic Segmentation of Global

Markets

StriversDevoutsAltruistsIntimates

Fun seekersCreatives

Using Psychographic Segmentation

Psychographic segmentation is a good supplement to

segmentation by demographic or geographic variables

Product-Related Segmentation

Division of a population into homogeneous groups based on their relationships to a product

Segmenting based on the benefits people seek when they buy a productSegmenting based on usage rates for a product; orSegmenting according to consumers brand loyalty toward a product

Segmented by Benefits Sought

This approach focuses on attributes people seek and benefits they expect to receive from a good or service

Segmented By Usage Rates

Marketers may also segment a total market by grouping people according to the amounts of a product they buy and use.

80/20 principle

Generally accepted rule that 80 percent of a product’s revenues come from 20 percent of its customers.

Praedo’s Law

Segmented by Brand Loyalty

A third product-related segmentation methods groups

consumers according to the strength of the brand loyalty they feel toward a product.

End

THE MARKET SEGMENTATION

PROCESS

Martinez, Jho-annBSBA F&MA IV-B

Market-driven methodSegments are defined by asking

customers for the attributes important to them.

Management -driven methodsSegments are predefined by

managers based on their observation of the behavioural and demographic characteristics of likely users.

FOUR STAGE PROCESS

1. Develop a relevant profile for each segment

• The process must identify the characteristics that both explain the similarities among customers within each segment and account for differences among each segment.

The task at this stage is to develop a profile of the typical customer in each segment such as:

1.information about lifestyle patterns2.attitude toward product attributes

and brands3.product use habits4.geographic locations5.and demographic characteristics

2. Forecast market potential

• In the second stage market segmentation and market opportunity analysis combine to produce a forecast of market potential within each segment. Market potential sets the upper limit on the demand competing firms can expect from a segment.

For example, In deciding whether to market a new product to teens,

electronics firms need to determine the demand for it and the disposable

income of that group.

This step should define a preliminary go or no-go decision from management because the total sales potential I each segment must justify resources devoted to further analysis.

3. Forecast probable market share

• Competitor’s positions in targeted segments must be analyzed, and a specific marketing strategy must be designed to reach these segments.

A firm determine the expected level of resources it must commit, that is, to tap the potential demand in each segment.

4. Select specific market segments

• At this point in the analysis, market weighs more than monetary costs and benefits; they also consider many difficult-to-measure but critical organizational and environmental factors

STRATEGIES FOR REACHING TARGET MARKETS

FOUR BASIC STRATEGIES FOR ACHIEVING

CONSUMER SATISFACTION

• Undifferentiated marketing• Differentiated marketing• Concentrated marketing• micromarketing

1. Undifferentiated marketing

• Strategy that focuses on producing a single product and marketing it to all customers; also called mass marketing

• More common in the past than it is today.

2. Differentiated marketing

• Strategy that focuses on producing several products and pricing, promoting, and distributing them with different marketing mixes designed to satisfy smaller segments.

• A company can produce more sales by following a differentiated marketing than a differentiated marketing would generate.

Differentiated marketing also raises costs.

• Production costs usually rise because additional product and variations require shorter production runs and increased set up times.

• Inventory costs rise because more products require added storage space and increased efforts for record keeping.

• Promotional costs also rise because each segment demands a unique promotional mix.

3. Concentrated marketing (niche

marketing)• Focusing marketing efforts on

satisfying a single market segment.

• This approach can appeal to a small firm lacking the financial resources of its competitors and to a company offering a highly specialized goods and services.

4. Micromarketing

• Targeting potential customers at very narrow, basic levels, such as by zip code, specific occupation or lifestyle—possibly even individuals themselves.

• But micromarketing like niche marketing, can become too much of a good thing if companies spend too much time, efforts and marketing dollars to unearth a market too small and specialized to be profitable. In addition micromarketing may cause a company to lose sight of other , larger markets.

 

SELECTING AND EXECUTING A STRATEGY

Basic determinants of a market-specific strategy:

• Company resources• Product homogeneity• Stage in the product life cycle• Competitor’s strategies

• Placing a product at a certain point or location within a market in the minds of prospective buyers

Positioning

Positioning map

• Tool that help marketers place products in a market by graphically illustrating consumer’s perceptions of competing products within an industry.

Repositioning

• Changing the position of a product within the minds of prospective buyers relative to the positions of competing products.

END