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Final Exam Notes Chapters 8-17

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Wilfrid Laurier University
Christopher Mariarz

MarketingChapter 8Segmentation Targeting and PositioningStep 1 Establish Overall Strategy or Objectives y First step in the planning process is to articulate the visionobjectives of the companys marketing strategy y The segmentation strategy must be consistent with and derived from the firms mission and objectives as well as its current situationo Strengths o Weakness o Opportunities o ThreatsStep 2 Profile Segments y Describe the different segments needs wants and characteristics which helps firms better understand the profile of the customers in each segment as well as the customer similarities within a segment and dissimilarities across segmentsy Geographic Segmentation o The grouping of consumers on the basis of where they liveo Country region province city rural urban climate o Continent North America Asia Pacific Europe Africa o Firms can provide the same basic goods and services to all segments even if they market globally or nationally y Demographic Segmentation o The grouping of consumers according to easily measured objective characteristics such as age gender income education family life cycle religion ethnic background etc o One demographic variable sex plays a very important role in how firms market products and servicesy Psychographic Segmentation o Used in segmentation o Delves into how consumers describe themselves o Allows people to describe themselves using those characteristics that help them choose how they occupy their time and what underlying psychographic reasons determine their choices o Components of psychographicsSelf value y Goals for life not just the goals one wants to accomplish in a day y A component of psychographics that refers to overriding desires that drive how a person lives hisher life y The values help determine the benefits the target market may be looking for from a productSelf Concept y The image a person has of himherself y Marketers can make use of this image through communications that show their product being used by groups of laughing people who are having a good time y Connection emerges between group fun and the product being shown and connotes a certain lifestyle Lifestylesy Refers to the way a person lives hisher life to achieve goals y Marketers have a builtin target group with similar interests and buying desires VALS y A psychographic tool developed by SRI Consulting Business Intelligence o Classifies consumers into 8 segmentsInnovatorsThinkersBelieversAchieversStriversExperiencersMakersSurvivorsy Behavioural Segmentation o Group of consumers based on the benefits they derive from products or services o Their usage rate their user status and their loyaltyo Dividing the market into segments whose needs and wants are best satisfied by the product benefits can be very powerfulBenefit Segmentation y The grouping of consumers on the basis of the benefits they derive from products or servicesLoyalty Segmentation y Strategy of investing in loyalty initiatives to retain the firms most profitable customersy Loyal customers are the most profitable in the long termy Using multiple segmentation methods o Segmenting by demographics and geographic is easy because information about who the customers are and where they are located is readily available but these characteristics dont help marketers determine their customer needs o Geodemographic SegmentationThe grouping of consumers on the basis of a combination of geographic demographic and lifestyle characteristics Particularly useful for retailers because customers typically patronize stores close to their neighbourhoody Retailers can use geodemographics to tailor each stores assortment to the preferences of the local community Step 3 Evaluate Segment Attractiveness y Marketers must determine whether the segment is worth pursuing using several descriptive criteriao Identifiable Firms must determine who is within their market to be able to design products or services to meet their needsEnsure that segments are distinct from one another because too much overlap between segments means that distinct marketing strategies arent necessary to meet segment members needs o ReachableThe best product or service cannot have any impact if the market cannot be reached through persuasive communications and product distributionThe consumer must know the productservice exists understand what it can do for himhr and recognize how to buy it o ResponsiveThe customers in the segmentation must react similarly and positively to the firms offering o Substantial and ProfitableOnce the firm has identified its potential target markets it needs tomeasure their size and growth potential If a market is too small or its buying power insignificant it wont generate sufficient profits or be able to support the marketing mix activitiesMarketers must also focus their assessments on the potential profitability of each segment both current and future y Segment profitabilitysegment sizeof people in segment y Multiply by segment adoption percentageof customers in the segment who are likely to adopt the product y Multiply by purchase behaviour purchase price Xof times the customer would buy the product or service during a given time period y Multiply by profit margin percentage selling pricevariable costsselling price y Minus fixed costs Step 4 Select Target Market y The key factor likely to affect this decision is the marketers ability to pursue such an opportunity or target segment y Segmentation Types o Undifferentiated Segmentation Strategy or Mass MarketingA marketing strategy a firm can use if the product or service is perceived to provide the same benefits to everyone with noneed to develop separate strategies for different groupsCan be effective for basic items like salt sugar greeting cards etc Common among small firms that offer products or services that consumers perceive to be indistinguishable such as neighbourhood bakeryo Differentiated Segmentation StrategyA strategy through which a firm targets several market segments with a different offering for each Firms embrace differentiated segmentation because it helps them obtain a bigger share of the market and increase the market for their products overallCan be expensive o Concentrated Segmentation Niche StrategyA marketing strategy of selecting a single primary target market and focusing all energies on providing a product to fit that markets needs
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