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Segmentation

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• Identifying and serving homogeneous groups of consumers • Segments = naturally existing groups of consumers with similar needs/wants and responses

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STP

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step 1: establish overall strategy or objectives step 2: segmentation methods step 3: evaluate segment attractiveness step 4: select target market step 5: develop positioning strategy

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The segmentation, Targeting, and Positioning Process

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-Strategy or objectives (Seg) -Segmentation methods (Seg) -Evaluate segment attractiveness (Tar) -Select target market (Tar) -Identify and develop positioning strategy (Pos)

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Seg Step 1: Strategy or objectives

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Step 1: Derived from mission statement and current state (SWOT analysis)

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Seg step 2: Segmentation methods

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Step 2: -Geographic -Demographic -Psychographic -Benefits -Behavioral

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Geographic segmentation

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The grouping of consumers on the basis of where they live Continent: North America, Asia, Europe, Africa Within U.S.: Pacific, mountain, central, south, mid Atlantic, northeast

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Demographic segmentation

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The grouping of consumers according to easily measured, objective characteristics such as age, gender, income, and education. Most common segmentation strategy. Only start here, not end here.

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Psychographic segmentation

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delves into how consumers describe themselves; allows people to describe themselves using those characteristics that help them choose how they occupy their time (behavior) and what underlying psychological reason determine those choices. (Self-values, self-concept, lifestyles)

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Self-values

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Goals for life, not just the goals one wants to accomplish in a day; a component of psychographics that refers to overriding desires that drive how a person lives his or her life.

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Self-concept

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The image a person has of him or herself; a component of psychographics.

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lifestyles

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A component of psychographics; refers to the way a person lives his or her life to achieve goals.

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Value and Lifestyle Survey (VALS)

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A commonly used psychographic segmentation scheme A psychographic tool developed by SRI Consulting Business Intelligence; classifies consumers into eight segments: Innovators, thinkers, believers, achievers, strivers, experiencers, makers, or survivors.

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Benefit segmentation

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The grouping of consumers on the basis of the benefits they derive from products or services. • Different customers are seeking different benefits from same product category -Universities -Banks -Restaurants

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Behavioral segmentation

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A segmentation method that divides customers into groups based on HOW they use the product or service. ex. occasion and loyalty.

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Occasion segmentation

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A type of behavioral segmentation based on when a product or service is purchased or consumed.

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Loyalty segmentation

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Strategy of investing in loyalty initiatives to retain the firm's most profitable customers.

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Geodemographic segmentation

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The grouping of consumers on the basis of a combination of geographic, demographic, and lifestyle characteristics.

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Step 3: Evaluate segment attractiveness (5 things)

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-Identifiable -Substantial -Reachable -Responsive -Profitable

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Identifiable

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• Who is in that market? • Are the segments unique? • Does each segment require a unique marketing mix?

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Substantial

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• Too small and it is insignificant • Too big and it might need it's own store

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Reachable

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-can the know the product exists? -Understand what it can do? -Recognize how to buy?

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Responsive

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Customers must -Move toward the firms products/services -Be willing to accept the firm's value proposition

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Profitable

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Can create profit both in the present and the future. They need to keep in mind the market growth, market competitiveness, and market access.

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Step 4: Select Target Market

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• How many segments • Which specific segments

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Target market

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the segment your firm chooses to serve.

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Undifferentiated targeting strategy

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Mass marketing, Firm assumes all consumers are the same, relative to the product category. A marketing strategy a firm can use if the product or service is perceived to provide the same benefits to everyone, with no need to develop separate strategies for different groups.

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Differentiated targeting strategy

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A strategy which a firm targets several market segments with a different offering for each • Multisegment/differentiated Targeting

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Cannibalization

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• New product cuts into sales of old product • Aim at new segment, hit old segment

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Concentrated targeting strategy

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A marketing strategy of selecting a single, primary target market and focusing all energies on providing a product to fit that market's needs.

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micromarketing

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one-to-one marketing An extreme form of segmentation that tailors a product or service to suit an individual customer's wants or needs (custom shoes)

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cookies

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Computer program, installed on hard drives, that provides identifying information.

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Step 5: Develop Positioning Strategy

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market positioning involves a process of defining the marketing mix variables so that target customers have a clear, distinctive, desirable understanding of that the product does or represents in comparison with competing products

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Value proposition

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The unique value that a product or service provides to its customers and how it is better than and different from those of competitors. • Target customers must have clear understanding of your competitive advantage • Unique points of difference • Value ≠ price • Value = what you get for what you give

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Value

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Reflects the relationship of benefits to costs, or what the consumer gets for what he or she gives

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Symbols

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• Distinguishes from competition ex. Nike, Tony the tiger

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Competition

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• Position their products or services against an entire product/ service classification or a particular firm

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Perceptual map

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Displays, in two or more dimensions, the position of products or brands in the consumer's mind

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ideal points

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The position at which a particular market segment's ideal product would lie on a perceptual map.

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Marketers often create a special marketing mix for loyalty segments because these segments are

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generally profitable

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Ronaldo wants to develop an Internet auction-based business and is working through the STP process. After establishing his objectives, describing potential market segments, and evaluating the attractiveness of each segment, Ronaldo now has to

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After setting objectives, forming segments, and evaluating segment attractiveness, the next step of the STP process is to select one or more target markets. The correct answer is: select a target market.

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We often see advertisements touting a product as being made with natural ingredients, or being long-lasting. Marketers using these types of promotions are positioning their products based primarily on

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product attributes

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Psychographics is the segmentation method that delves into how consumers

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Psychographics is related to the way we describe ourselves—our self-concept, values, and lifestyle. The correct answer is: describe themselves.

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Karen has identified four potential market segments for her Rent-A-Chef home meal catering service. The next step is to

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evaluate the attractiveness of each segment.

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Kim's Kayak Tours initially identified active retirees living in the retirement community nearby as one of its target markets. Kim then tailored her service and marketing message to the interests and schedules of that audience. Kim initially used __________ segmentation and then used __________ segmentation.

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geodemographic; lifestyle

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In the Circles for a Successful Value Proposition framework, the value proposition is represented by

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the intersection between customer needs/wants and the firm's product's benefits.

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VALS is the most widely used __________ segmentation tool.

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psychographic

Marketing Ch 9: Segmentation and Target Marketing – Flashcards

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