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Chapter 7

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Queen's University
COMM 131
Jacob Brower

Marketing Chapter 7: Segmenting, Targeting, and Positioning January 17, 2012 - Companies must identify the parts of the market it can serve best and most profitably - Aim to design customer-driven marketing strategies that build the right relationships with the right customers Steps to a Customer-Driven Marketing Strategy 1. Market Segmentation 2. Market Targeting 3. Market Differentiation 4. Market Positioning Market Segmentation - Segmentation: Dividing a market into distinct groups with distinct needs, characteristics, or behaviours that require separate marketing strategies and mixes. Segmenting Consumer Markets 1. Geographic Segmentation - Dividing a market into different geographical units (global regions, countries, provinces, cities, type of region, etc.) - Pay attention to geographical differences in needs and wants - ie. Coca-Cola made four ready-to-drink canned coffee for the Japanese market, each targeted at a specific region - Small businesses (hair salons, dentist offices) focus on local regions - Destination-type businesses (restaurants, sports facilities) focus on larger regions 2. Demographic Segmentation - Dividing the market into segments based on variables such as age, gender, family size, life cycle, income, education, ethnic group, generation, etc. - Most popular way to segment - Demographics are easy to measure Age and Lifecycle Segmentation - Consumer needs and wants change with age - Some companies target groups in the same life-cycle stage - ie. Disney Cruise Lines targets families with children Gender Segmentation - Used in clothing, cosmetics, toiletries, magazines, etc. - Neglected gender segments offer new opportunities in markets - ie. Harley Davidson – motorcycles for women Household Income (HHI) - Total income for the family, whether one or both parents work - Used for vehicles, clothing, cosmetics, financial services, travel, etc. - ie. Four Seasons Hotel, No Frills, Dollerama Ethnic or Culture Group - Segmenting based on race, ethnicity, and language - ie. Hyundai’s French-only advertising campaign for Quebec 3. Psychographic Segmentation - Dividing a market into different segments based on social class, lifestyle, or personality characteristics - Marketers can use personality variables to segment (ie. Royal Caribbean Cruises target high-energy couples and families with their various activities) 4. Behavioural Segmentation - Dividing a market into segments based on consumer knowledge, attitudes, uses, or responses to a product Occasions - Buyers can be grouped according to occasions when they get the idea to buy, actually make the purchase, or use the purchased item - Helps firms to build up product usage - ie. Most people drink orange juice in the morning – companies try to get people to drink it all the time Benefits Sought - Groups buyers according to the benefits they seek from a product - Requires finding major benefits of a product, the kind of people who look for each benefit, and major brands that deliver it - ie. Active wear purchasers buy either based on function, style, performance, durability, etc. User Status - Segmented into light, medium, and heavy product users - Heavy users are a small percentage of market, but large percentage of total consumption Loyalty Status - Segmented based on degree of consumer loyalty - Completely loyal users buy one brand all the time - Somewhat loyal users are loyal to a few brands of a given product, or favor one brand while sometimes buying others - Studying less-loyal buyers shows a company their competition Using Multiple Segmentation Bases - Marketers rarely limit their segmentation to only one variable - Using multiple segmentation bases identifies smaller, better-defined target groups - ie. Targeting 18-year-old males in various life cycles (university students, new careerists, young marrieds) - PRIZM NE (leading segmentation system) classifies households based on various demographic factors, then names each segment - LGBT Market: Lesbian, Gay, Bisexual, Transgender Segmenting Business Markets - Segmented based on geographics, demographics, benefits sought, user status, usage rate, loyalty status, operating characteristics, purchasing approaches, situational factors, and personal characteristics - ie. American express targets businesses in three segments – merchants, corporations, and small businesses - Different marketing techniques for each segment - Companies may target both consumer and business markets - Buying behaviour and benefits provide the best basis for segmenting business markets Segmenting International Markets - Different countries vary in their economic, cultural, and political makeup - International markets must be segmented based on buying needs and behaviours Geographic Location - Group countries into regions (Western Europe, Pacific Rim, Middle East) - Assumes nations close to one another will have common traits (not always the case) - ie. North America includes Mexico though it is usually ignored when marketers decide to target North America Economic Factors - Grouped by population income levels or overall level of economic development - Economic structure of a country shapes its product and service needs - ie. BRIC countries are fast growing, developing economies with rapidly increasing buying power Political and Legal Factors - Type and stability of government, receptivity to foreign firms, monetary regulations, amount of bureaucracy, etc. Cultural Factors - Languages, religions, values and attitudes, customs, behavioral patterns Intermarket Segmentation - Forming segments of consumers who have similar needs and buying behaviour even though they are located in different countries - ie. Lexus’ “Global Elite” segment targets the world’s well-to-do - ie. IKEA targets the global middle class Requirements for Effective Segmentation 1. Measurable: Size, purchasing power, and profiles of a segment can be measured 2. Accessible: Market segments can be effectively reached and served 3. Substantial: Market segments are large or profitable enough to serve 4. Differentiable: Segments are distinguishable and respond differently to different marketing-mix elements and programs 5. Actionable: Effective programs can be designed for attracting and serving segments Market Targeting Evaluating Market Segments 1. Segment size and growth - Companies will be interested in segments with the right size and growth - Largest, fastest-growing segments are not always the most attractive - Small companies may lack the skills and resources needed to serve larg
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