kerinmarketing9

AFTER READING THIS CHAPTER

YOU SHOULD BE ABLE TO:

•Explain what market segmentation is, when to use it, and the five steps involved in segmentation.

•

•Recognize the different factors used to segment consumer and organizational markets.

•Understand the significance of heavy, medium, and light users and nonusers in targeting a market.

•

•Develop a market-product grid to use in segmenting and targeting a market.

•Interpret a cross-tabulation to analyze market segments.

•

•Understand how marketing managers position products in a market.

IDENTIFYING MARKET SEGMENTS AND TARGETS

SNEAKERS MARKETING WARS: HEELYS, AIR PUMPS, AND 3 BILLION TRILLION CHOICES

•Finding the Segments

•Competitive Trends

WHY SEGMENT MARKETS?

•What Market Segmentation Means

§Market segments
§Product differentiation

•Segmentation: Linking Needs to Action

Market Segmentation

Aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action.

The groups that result from the process of market segmentation; these groups ideally

(1) have common needs and
(2) will respond similarly to a marketing action.

Product Differentiation

A strategy with two different but related meanings. Its broadest meaning involves a firm’s using different marketing mix activities to help consumers perceive the product as being different and better than competing products. Its narrower meaning involves a firm’s selling two or more products with different features targeted to different market segments.

FIGURE 9-1 Market segmentation links market need to an organization’s marketing program

WHY SEGMENT MARKETS?

•What Market Segmentation Means
(cont)

•How Reebok’s Segmentation Strategy Developed

FIGURE 9-2 Market-product grid showing how different Reebok shoes reach segments of customers . . .

WHY SEGMENT MARKETS?

•What Market Segmentation Means
(cont)

•Using Market-Product Grids

Market-Product Grid

Framework to relate the segment of a market to products offered or potential marketing actions by the firm.

WHY SEGMENT MARKETS?

•When to Segment Markets

•One Product and Multiple Market Segments

•Multiple Products and Multiple Market Segments

•Segments of One: Mass Customization

•The Segmentation Trade Off: CRM versus synergies

The increased customer value achieved through performing organizational functions more efficiently.

1. Market segmentation involves aggregating prospective buyers into groups that have two key characteristics. What are they?

A: The groups should (1) have common needs and (2) respond similarly to a marketing action of a firm.

2. What is product differentiation?

A: The two related meanings are a firm’s (1) using different marketing mix activities to help consumers perceive the product as being different and better than competing products and (2) selling two or more products with different features targeted to different market segments.

3. The process of segmenting and targeting markets is a bridge between what two marketing activities?

A: Between (1) identifying market needs and (2) taking marketing actions.

STEPS IN SEGMENTING
AND TARGETING MARKETS

FIGURE 9-3 The process of segmenting and targeting markets involves five key steps

STEPS IN SEGMENTING
AND TARGETING MARKETS

•Form Prospective Buyers into Segments

•Criteria to Use in Forming the Segments

§Potential for increased profit and ROI
§Similarity of needs of potential buyers in a segment
§Difference of needs of buyers among segments
§Feasibility of a marketing action reaching segment
§Simplicity and cost of assigning buyers to markets

•Ways to Segment Consumer Markets

FIGURE 9-4 Segmentation variables and breakdowns for U.S. consumer markets

STEPS IN SEGMENTING
AND TARGETING MARKETS

•Ways to Segment Consumer Markets
(cont)

§Usage rate
§80/20 rule

Quantity consumed or patronage—store visits—during a specific period, varies significantly among different customer groups.

A concept that suggests 80 percent of a firm’s sales are obtained from 20 percent of its customers.

FIGURE 9-5 Patronage of fast-food restaurants by adults 18 and over . . .

FIGURE 9-6 Comparison of various kinds of users and nonusers for . . . restaurants

STEPS IN SEGMENTING
AND TARGETING MARKETS

•Ways to Segment Organizational Markets

FIGURE 9-7 Segmentation variables and breakdowns for U.S. organizational markets

STEPS IN SEGMENTING
AND TARGETING MARKETS

•Form Products to Be Sold into Groups
•Develop a Market-Product Grid and Estimate Size of Markets

FIGURE 9-8 Selecting a target market for your fast-food restaurant next to an urban university . . .

STEPS IN SEGMENTING
AND TARGETING MARKETS

•Select Target Markets

•Criteria to Use in Picking the Target Segments

§Market size
§Expected growth
§Competitive position
§Cost of reaching the segment
§Compatibility with objectives and resources

•Choose the Segments

STEPS IN SEGMENTING
AND TARGETING MARKETS

•Take Marketing Actions to Reach Target Markets

•Your Wendy’s Segmentation Strategy

FIGURE 9-9 Advertising actions to reach specific student segments

STEPS IN SEGMENTING
AND TARGETING MARKETS

•Take Marketing Actions to Reach
Target Markets (cont)
•Apple’s Ever-Changing Segmentation Strategy

1. What are some of the variables used to segment consumer markets?

A: As shown in FIGURE 9-4, variables used include geography (region or city size), demographics (age, gender), benefits sought, and usage rate.

2. What are some criteria used to decide which markets to choose for targets?

A: They include market size, expected growth, competitive position, cost of reaching the segments, and compatibility with the organization’s objectives and resources.

3. Why is usage rate important in segmentation studies?

A: Because the heavier a potential customer’s usage rate of a product, the more important that potential customer’s purchases are to a seller.

ANALYZING MARKET SEGMENTS USING CROSS-TABULATIONS

•Developing Cross-Tabulations

•Pairing the Questions
•Forming Cross-Tabulations

Cross-Tabulations

Method of presenting an relating data having two or more variables to analyze and discover relationships in the data.

FIGURE 9-10 Two forms of a cross-tabulation relating age of head of household to fast-food . . . patronage

ANALYZING MARKET SEGMENTS USING CROSS-TABULATIONS

•Interpreting Cross-Tabulations
•Value of Cross-Tabulations

POSITIONING THE PRODUCT

•Two Approaches to Product Positioning

§Head-to-head positioning
§Differentiation positioning

Product Positioning

The place an offering occupies in consumers’ minds on important attributes relative to competitive offerings.

POSITIONING THE PRODUCT

•Product Positioning Using Perceptual Maps

§Evaluations of important attributes for a
product class
§Judgments of existing brands with the
important attributes
§Ratings of an ideal brand’s attributes

•GM’s Positioning Nightmare

•Repositioning Chocolate Milk for Adults

A means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers.

Changing the place a product occupies in a consumer’ mind relative to competitive products.

FIGURE 9-11 The challenge: Try to position General Motors and chocolate milk

FIGURE 9-12 The strategy for repositioning
chocolate milk to reach adults

1. What is cross-tabulation?

A: Cross tabulation is a method of presenting and relating data having two or more variables.

2. What are some advantages of cross-tabulations?

A: Advantages include ease of direct interpretation of the data, a useful way to communicate data to management, flexibility in summarizing data from various sources, and easy generation by personal computers.

3. Why do marketers use perceptual maps in product positioning decisions?

A: Marketers use perceptual maps to obtain a graphic presentation of how their product is perceived by consumer relative to competitors’ products.

Chapter 9 - Summary

Market segmentation is aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action.
A straightforward approach to segmenting, targeting, and reaching a market involves five steps: (a) form prospective buyers into segments by characteristics such as their needs, (b) form products to be sold into groups, (c) develop a market-product grid and estimate size of markets, (d) select target markets, and (e) take marketing actions to reach the target markets.
Marketing variables are often used to represent customer needs in the market segmentation process. For consumer markets, typical customer variables are region, metropolitan statistical area, age, income, benefits sought, and usage rate. For industrialmarkets,comparablevariablesaregeographical location, size of firm, and North American Industry Classification (NAICS) code.
Usage rate is an important factor in a market segmentation study. Users are often divided into heavy, medium, and light users.
Nonusers are often divided into prospects and nonprospects. Nonusers of a firm's brand may be important because they are prospects-users of some other brand in the product class that may be convinced to change brands.
Criteria used (a) to segment markets and (b) to choose target segments are related but different. The former includes potential to increase profits, similarity of needs of buyers within a segment, difference of needs among segments, and feasibility of a resulting marketing action. The latter includes market size, expected growth, the competitive position of the firm's offering in the segment, and the cost of reaching the segment.
A market-product grid is a useful way to display what products can be directed at which market segments, but the grid must lead to marketing actions for the segmentation process to be worthwhile.
Cross-tabulations are widely used today in market segmentation studies to identify needs of various customer segments and the actions to reach them.
A company can position a product head-to-head against the competition or seek a differentiated position. A concern with positioning is often to avoid cannibalization of the existing product line. In positioning, a firm often uses consumer judgments in the form of perceptual maps to locate its product relative to competing ones.

Chapter 9

Marketing: Identifying Market Segments and Targets