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Chapter 8

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University of Toronto Scarborough
Management (MGM)
Tarun Dewan

To create value for customers: 1) Select customers to serve – segmentation and targeting 2) Decide on a value proposition – differentiation and positioning Segmentation: dividing a market into smaller groups with distinct needs or characteristics that might require separate marketing mixes Targeting: evaluating each market segment’s attractiveness and selecting one or more segments Differentiation: differentiating the market offering to create superior customer value Positioning: arranging a market offering to occupy a clear and desirable place relative to competing products in the minds of consumers Market Segmentation Geographic: world region or country (asia), country region, city size, density (urban, rural) and climate Demographic: Age, gender, family size, income, occupation, religion, education Psychographic: social class, lifestyle or personality characteristics Behavioral: consumer knowledge, attitudes, uses or responses to a product. Marketers believe these variables are the best starting point for building segments. Buyers can also be grouped on occasion segmentation (when they get the idea to buy, actually make the purchase or use the item). Eg: mother’s day promotions in stores. Benefit segmentation divides the market based on the main benefits that consumers seek from the product. Eg: M&M store focuses on the idea working mother can still produce a good meal Companies often use multiple segmentation bases to identify smaller and better defined target groups. Intermarket segmentation (cross-market): forming segments of customer who have similar needs and buying behavior even though they are in different countries. Coke wants to relate to world teens and so they got this by using what teens like the most – music – it is the official sponsor of American idol Effective Segmentation -Market segments must be:  Measurable – size and purchasing power can be measured (you have to be able to use data  Accessible – segments can be reached and served. If a product is focused for single men and women then these members should shop at particular malls or it is difficult to react out just to them – be able to get to those people  Substantial – segments are large and profitable to serve; segment should be the largest homogeneous group. It would not make sense for a manufacturer to develop cars for those only abouve 7ft. – should be a big enough deal and won’t be good if only a few care about the good  Differentiable – segments are differentiable and respond different to various marketing mix. Married woman and single women cannot respond the same to a sale on perfume, this is not separate segments  Actionable – effective programs can be designed for attracting and serving the segments – able to serve the customers and get them interested Targeting When evaluating market segments affirm must look at: 1) Segment size & growth 2) Structural attractiveness: segment is less attractive if it has many competitors or many substitute goods. Power of buyers also affects segmentation because strong power means buyers will force prices down and this will cause fewer profits for the sellers. Powerful suppliers have the power to control price and quantity 3) Company objectiveness and resources: the company lack the resources needed to succeed in an attractive segment. Selecting target market segments Undifferentiated marketing (mass marketing): this is targeting broadly. A firm ignores market segment differences and targets the whole market with one offer. Mass marketing focuses on what is common in the needs of consumers. Disadvantage: cannot satisfy all customers, cannot compete with more focused firms that satisfy specific needs Differentiated marketing (segmented marketing): a firm decides to target several market segments and designs separate offers for each. For eg: P&G offers 10 different laundry detergents that compete with each other. Doing so increases the total profit the company will earn as opposed to the profit of having one type and it improves the position However, this increases the cost of production. Concentrated marketing (niche marketing): coverage strategy in which a firm goes after a large share of one or a few segments or niches. Allows to achieve a strong market position because of its greater knowledge of consumer needs. It can market effectively (fine tu
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