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Chapter 8

MGT252 - Chapter 8 Notes.doc

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Matthew Osborne

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Chapter 8 • 8.1 • Target marketing • Identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each. • Creating value for targeted customers 1. Market segmentation Dividing a market into smaller groups with distinct needs, characteristics or • behaviors that might require separate marketing strategies or mixes 2. Market targeting • The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter 3. Differentiation • Actually differentiating the market offering to create superior customer value 4. Positioning • Arranging for a market offering to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers. • 8.2 • Geographic segmentation • Dividing a market into diff. geographical units such as nations, regions, provinces, countries, cities or neighborhoods. • Localizing products, advertising, promotion and sales efforts to fit the needs of ind. regions, cities and neighborhoods. • Demographic segmentation • Dividing the market into groups such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation and nationality. • Most popular segmenting method • Easiest to measure, but very simplistic • Identifying the target segment involves developing a detailed profile of its members - across many diff. demographic characteristics DemographicSegmentation Age and life-cycle stage • Dividing a market into diff. age and life-cycle groups • Be careful to guard against stereotypes • Age is often a poor indicator of a person’s lifecycle, health, work, family status, needs and buying power. • Employ positive images and appeals Gender • Dividing a market into diff. groups based on gender DemographicSegmentation Income • Dividing a market into diff. income groups • Some companies target affluent consumers with luxury goods and convenient services. • Others target low / middle-income groups. • Psychographic segmentation • Dividing a market into diff. groups based on social class, lifestyle or personality characteristics. Behavioral segmentation • • Dividing a market into groups based on consumer knowledge, attitudes, uses or responses to a product BehavioralSegmentation Occasions Dividing the market into groups according to occasions when buyers get the idea to buy, actually • make their purchase or use the purchased item • Help firms increase product usage; increase demand for nonholiday occasions • E.g. Coca-Cola’s “Good Morning” campaign, Christmas, Valentine’s Day Benefits sought • Dividing the market into groups according to the diff. benefits that consumers seek from the product User status • Segmented into nonusers, ex-users, potential users, first-time users and regular users of a product. • Marketers want to reinforce and retain regular users, attract targeted nonusers, and reinvigorate relationships with ex-users. • Potential users can be changed to heavy users Usage rate • Segmented into light, medium and heavy product users • Heavy users are small in % of the market, but high % of total consumption Loyalty status • Consumers can be loyal to brands, stores and companies • Can be divided into groups according to their degree of loyalty • Completely loyal: 1 brand --> pinpoint target market & develop marketing appeals • Somewhat loyal: 2-3 brands --> detect which brands are most competitive with its own • No loyalty: want something diff. every time or buy whatever’s on sale. --> marketing weaknesses Using multiple segmentation bases • To identify smaller, better-defined target groups. Segmenting business markets • Business marketers use many of the same variables to segment their markets Also use some additional variables • • customer operating characteristics • purchasing approaches • situational factors • personal characteristics Companies set up separate systems for dealing with larger or multiple-location • customers. • Within a given target industry and customer size, the company can segment by purchase approaches and criteria. Buying behavior and benefits provide the best basis for segmenting business markets. • Segmenting international markets • Can be segmented by geographic, economic, political and cultural factors. Intermarket / cross-market segmentation • • Forming segments of consumers who have similar needs and buying behavior even though they are located in diff. countries. Requirements for effective segmentation 1. Measurable • The size, purchasing power and profiles of the segments can be measured. 2. Accessible Market segments can be effectively reached and served (distribution, adverts) • 3. Substantial • Market segments are large or profitable enough to serve • Profitability sustainable over time A segment should be the largest possible homogenous group worth pursuing with • a tailored marketing program. 4. Differentiable • Segments respond differently to diff. marketing mix elements and programs. 5. Actionable • Effective programs can be developed (marketing mix). • 8.3 Evaluating market segments • 1. Segment size and growth 2. Segment structural attractiveness 3. Company objectives and resources Target market • • A set of buyers sharing common needs or characteristics that the company decides to serve. 1. Undifferentiated / mass marketing Ignore market segment diff. and go after the whole market with one offer. • • Uncommon today • Focus on what is common in the needs of consumers rather than on what is different. • Designs a product and a marketing program that will appeal to the largest no. of buyers. Trouble competing with more-focused firms that do a better job of satisfying • the needs of specific segments and niches. 2. Differentiated / segmented marketing • A firm decides to target several market segments and designs separate offers for each. • For higher sales and stronger position within each market segment Creates more total sales than mass marketing across all segments • • Increases the costs of doing business • Developing separate marketing plans for the separate segments requires extra marketing research, forecasting, sales analysis, promotion planning and channel management. • Increases promotion costs • E.g. Gap (Banana Rep., Gap, Old Navy) 3. Concentrated / niche marketing A firm goes after a large share of one or a few submarkets • • Strong market position due to its greater knowledge of customer needs in the niches it serves and the special reputation it acquires. • Effective by improving its products, prices and programs Efficient by targeting its g+s, channels and communication programs toward • consumers that it can serve best and most profitably. • Attract few competitors, as it’s unimportant / overlooked by larger competitors Start as nichers --> broader competitors
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