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York University
Administrative Studies
ADMS 2200
Li Lee

Part 3 Designing a Customer-Driven Marketing Strategy and Marketing Mix CHAPTER 7 SEGMENTATION, TARGETING, AND POSITIONING PREVIEWING THE CONCEPTS – CHAPTER OBJECTIVES 1. define the four major steps in designing a customer-driven marketing strategy: market segmentation, market targeting, differentiation, and positioning 2. list and discuss the major bases for segmenting consumer and business markets 3. explain how companies identify attractive market segments and choose a market targeting strategy 4. discuss how companies differentiate and position their products for maximum competitive advantage JUST THE BASICS CHAPTER OVERVIEW This chapter looks further into key customer-driven marketing strategy decisions—how to divide up markets into meaningful customer groups (segmentation), choose which customer groups to serve (targeting), create market offerings that best serve targeted customers (differentiation), and positioning the offerings in the minds of consumers (positioning). Then, the chapters that follow explore the tactical marketing tools—the Four Ps—by which marketers bring these strategies to life. ANNOTATED CHAPTER NOTES/OUTLINE INTRODUCTION Biotherm Homme: Targeting a New Market Segment Male grooming is a booming market. The category has seen 25 to 30 percent growth per year, reaching $2.7 billion in Canada in 2009. Founded in France in 1985, Biotherm Homme is the pioneer and world-leading men’s skin-care brand, known for breaking barriers and eliminating taboos while standing by men and helping them feel comfortable about taking care of their skin to look and feel better. The Biotherm Homme brand strives to develop close relationships with men by communicating an in-depth understanding of their skin, and challenging men—in a friendly manner—to change their habits without challenging who they are. Today, Biotherm Homme products are available in over 70 countries, and include fulllines of: • cleansers • moisturizers • anti-aging creams • eye creams Part 3 Designing a Customer-Driven Marketing Strategy and Marketing Mix Though Biotherm Homme was a pioneering brand in men’s skin care, nearly every major cosmetics brand has since entered the market: • Unilever Canada recently launched a new line of products called Dove Men + Care. • Nivea for Men offers a website called The Groom Room. At Biotherm Homme, the future of men’s skin care is high-precision, high-tech instruments and formulations, dedicated to making men look good with minimum time wasted in front of the mirror. Figure 7.1 shows the four major steps in designing a customer-driven marketing strategy. Market segmentation involves dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviours that might require separate marketing strategies or mixes. Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter. Differentiation involves actually differentiating the firm’s market offering to create superior customer value. Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. MARKET SEGMENTATION Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs. Segmenting Consumer Markets Table 7.1 outlines the major variables that might be used in segmenting consumer markets. Geographic Segmentation Geographic segmentation calls for dividing the market into different geographical units such as global regions, countries, regions within a country, provinces, cities, or even neighbourhoods. Demographic Segmentation Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Chapter 7: Segmentation, Targeting, and Positioning Demographic factors are the most popular bases for segmenting customer groups. Age and Life-Cycle Stage is offering different products or using different marketing approaches for different age and life-cycle groups. Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines. Household Income (HHI) segmentation has long been used by the marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel. Ethnic or Cultural Group Statistics Canada compiles census data about Canadians, and makes it available to marketers. It’s fairly easy to identify markets in Canada with high numbers of Chinese-speaking consumers, and place your advertising accordingly. Quebec is a large market segment of its own, defined by geography, but more importantly by ethnicity and language. Psychographic Segmentation Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality characteristics. Marketers use personality variables to segment markets. Behavioural Segmentation Behavioural segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product. Occasion segmentation is grouping buyers according to occasions when they get the idea to buy, actuallymake their purchase, or use the purchased item. Benefit segmentation is grouping buyers according to the different benefits that they seek from the product. User Status is segmenting markets into nonusers, ex-users, potential users, first-time users, and regular users of a product. Usage Rate is grouping markets into light, medium, and heavy product users. Part 3 Designing a Customer-Driven Marketing Strategy and Marketing Mix Loyalty Status is dividing buyers into groups according to their degree of loyalty. Using Multiple Segmentation Bases Marketers rarely limit their segmentation analysis to only one or a few variables. PRIZM NE (one of the leading segmentation systems) classifies households based on a host of demographic factors. Segmenting Business Markets Consumer and business marketers use many of the same variables to segment their markets. Business marketers also use some additional variables, such as customer operating characteristics, purchasing approaches, situational factors, and personal characteristics. Many marketers believe that buying behaviour and benefits provide the best basis for segmenting business markets. Segmenting International Markets Companies can segment international markets using one or a combination of several variables. • Geographic factors: Nations close to one another will have many common traits and behaviours. • Economic factors: Countries may be grouped by population income levels or by their overall level of economic development. • Political and legal factors: Type and stability of government, receptivity to foreign firms, monetary regulations, and the amount of bureaucracy. • Cultural factors: Grouping markets according to common languages, religions, values and attitudes, customs, and behavioural patterns. Intermarket segmentation is segmenting of consumers who have similar needs and buying behaviour even though they are located in different countries. Requirements for Effective Segmentation To be useful, market segments must be: • Measurable: The size, purchasing power, and profiles of the segments can be measured. • Accessible: The market segments can be effectivelyreached and served. • Substantial: The market segments are large or profitable enough to serve. • Differentiable: The segments are conceptually distinguishable and res
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