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Market Segmentation

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-firms aggregate "similar" consumer or business customers

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Firms divide: fat, skinny, super small

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-larger groups of potential customers into smaller groups of actual or potential B2B or B2C customers (going from fat to skinny) -more heterogeneous groups (different) into more homogeneous groups of potential or actual B2C or B2B customers (from skinny to super small) -Larger masses of potential or actual customers who are less alike into a smaller collections of potential or actual customers who are more alike (less alike to more alike)

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When you've divided market, you've created:

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segments

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Marketers should be most interested in?

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-the skinny group

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No marketer

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-can satisfy everyone's wants and needs, some can't afford it

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Marketers have to pick and choose their:

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-places and targets

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Chapter 9:

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-how marketers are going to succeed and make money, how they'll lose jobs if they do not do it well

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Segments or Market Segments

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-groups or collections of potential or actual customers

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Resemble each other in:

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-beliefs ; attitudes -incomes -educational levels or zip codes -life style prefs.

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Fact that people share things in common, they will:

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-respond similarly to market- accept or reject -why marketers do segmentation

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Marketers job:

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-must find people who share same attitudes

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Existence of these commonalities among consumers implies the membership of these segments will usually:

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-prefer or reject similar products, because the segment membership will be "turned-on" or "turned-off" by the same product features, attributes and benefits -respond more favorably or unfavorably to the same product values and/or promotional messages -react in similarly receptive or unreceptive ways to the same pricing strategies -prefer to shop/not shop through the same retailing channels

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Reference Mktg. Mix-

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product, promotion, price, place

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Almost all firms should engage in market segmentation. Smart mktg. managers and strategically-oriented firms understand:

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-they cannot successfully appeal to all customers or all segments at the same time using same mktg. mix strategies -they should be choosy about consumers organizations with whom they seek to develop lasting relationships with. some aren't worth cost, some aren't worth pain -no such thing as mass marketing exists

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fishing/segmentation/targeting/positioning

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-don't just fish where fish are, fish where they're more likely to eat bait -you shouldn't just fish where fish are, instead fish precisely where specific types of fish (segmenting and targeting) are more likely to bite on bait that your firm will or could offer. p. 230

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Targeting

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involves evaluating each of the various segments that the firm has identified and then deciding based on evaluations, which segments to pursue.

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Goal as Marketer

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-to position that value as being unique and uniquely desirable

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when you position successfully

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you differentiated successfully

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a position is a

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mental image that customers develop and hold in their minds about brands, products

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customer perspective

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-how we define brand based on most important attributes -more or less desirable place that brand occupies in our minds: positioning -degree to which brand impresses

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two perspectives of marketing positioning

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1. customer perspective 2. marketer perspective

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Ford, Dodge

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Successfully positioned their brands in our minds

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marketer's perspective

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art of implanting their products unique benefits and differences i.e. brand's differentiating value, in collective minds of targeted customers

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if marketers don't position their brand for consumers, consumers do it for them

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needs to be marketers to consumers

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Firm's primary positioning goal:

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-is to differentiate a brand by building unique bundles of benefits that differentially and favorably appeal to a substantial portion of customers who make up targeted segment

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Mass marketing

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the opposite of market segmenting, when you pursue mass marketing approach: view: one world- one market, one marketing mix

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commodity

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-product- grains, oil, steel -difficult to differentiate -efforts to earn differentiation come down to pricing game

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Whenever possible, marketers should avoid

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-attemps to differentiate brands based on pricing -lowest price everybody loses

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In such cases firms may decide to construct a single target marketing strategy that targets entire mass market

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undifferentiated marketing strategy market-aggregation

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When the product "category" is new to the world (when cars were new) Henry Ford said

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-you can have any color you want as long as its black -cars were new so it was fine

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You should segment when you can, can also differentiate. p. 236

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1. if you do pursue a mass market, and treat it as one large market, it may be so large that your firm can enjoy economies of scale 2. the more you focus on a thing, the better you get at doing it 3.

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economies of scale

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-the more you make of something, the less expensive it becomes to make it -communicating about it, distributing it -the more you focus on a thing, the better you get at doing it

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biggest drawback of mass marketing

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-one size fits all solutions generally do not work in our world -mass marketing approach leads to commodities that almost draws competing firms into price war; both lose- customers win

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segmentation-segments

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segments can be regarded, treated as large identifiable groups split out from the mass market. groups: homogeneous with-in: similar to each other heterogenerous without- one segment differs notably from another segment-know them by differences

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know product differentiation p. 236

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-can create brand preferences and reduce the degree to which consumers use price as a major criterion for choosing between brands

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Given that similarities do exist in segments, dissimilarity between consumers in each segment- Macro

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-age -gender -status -ways to segment but still have tons of differences, broad not sliced

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Micro Segments- niche

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-groups under 30, age, college-educated, smoking, (because of smoking sliced off half of us, 20%), divided it 5 times, sliced down to a niche -narrow segment -target nicotine patches to people to stop smoking, e-vape, nicotine gum

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Niche

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-smaller -attract fewer competitors by focusing on firm's limiting market resources -differential advantage cannot be matched by competitors -serious play by marketers -brand that targets itself at niche market segments: copenhagen- dipping, supplements: mass-gainer

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Bases for Segmenting consumer markets bottom of page 238- know

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-The ability to effectively segment larger product-markets into smaller segments requires that firms find ways to combine consumers into smaller groups based on certain key characteristics that those consumers share in common. -The fact that they share these characteristics implies the members of each segment will generally respond similarly to the marketing mix that the firm tailors and delivers to that segment

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One segment can easily be distinguished from other segments because:

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-these other segments share key characteristics that distinguish them from the first segment

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Before Firms can effectively create market segments they must determine the:

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consumer characteristics or variables that will best "discriminate" or distinguish or separate one segment from another

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The characteristics used to define market segments must somehow be correlated with

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the different needs and wants of those segments

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Why bother targeting and promoting either fashion to the wrong segment? (T-Swift)

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Not only would marketing effort be doomed to failure, it would burn away scarce resources

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Bases for segmentation:

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-educated -gender -age -professional -lifestyle preference- AIO interest opinions

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Why bother targeting and promoting either fashion to the wrong segment?

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Marketing effort would fail. -don't market t-swift shirts to led zeppelin fans

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Geographic segmentation- Snow shovels & trucks

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-needs differ based on region and state location -trucks more likely in south -snow shovels likely in north -bikes more likely in cali with bike lanes what you market where

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demography

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-demographic based segmentation -when one or more demographic traits employed to subdivide a market -similar needs, wants, preferences -foods -demographic data: easy to use, get, obtain -works so well bc it works well with other variables -lifestyles AIOs -know how to market or not market effectively

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Geographic segments established by dividing larger geographic markets using existing (two types of boundaries)

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political boundaries (voting precincts) or population boundaries (city lines)

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Typical demographic characteristics used by marketers to create market segments include:

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-age -gender -income -race -ethnicity -marital status -family size -stage of the family life cycle

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Republican Party

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If they do not figure out how to appeal to hispanics and get message across effectively, they will never win another race. Need to change their ways.

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Segments based on age

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-based on age target at them

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Segments based on gender differences

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-products aimed at female hand- smaller than male

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Based on income differences

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-buy us bc we are expensive rolex, perfume, you can afford it and others can't -positional thing -elevates you socially -exclusive income levels

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Segments based on family life cycle stage

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-as kids come, life styles change and diapers are bought, market changes

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lifestyle and personality traits

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psychographic categories speak to who we are, what we want.

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Beer Industry employs AIO surveys to characterize life styles of beer drinkers. Uncovered series of distinct "life-style" segments consisting of:

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-impulsive drinkers -drinkers exhibiting highly masculine points of view -consumers who drink socially to have fun -fitness oriented

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Outcome of beer survey:

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-specific brands of beer that featured different sets of benefits in their advertising would appeal differently to these alternative beer-drinking segments

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consumer behavior based segments- things happening

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usage rate usage occasion grand loyalty thing

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Psychographic Information provides:

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-a rich set of descriptors that can be used to complement and enrich other segmentation schemes

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Harley Davidson characterizes their buyers in terms of demographics ; psychographics.

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-typical owner today not bad-ass biker but rather the typical owner conflates the brand with lifestyle expressions of freedom and independence -redesigned to support this image -image that appeals to segments larger -exude lifestyle atmosphere

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Several consumption-related behaviors are employed to segment consumer markets that come to mind first such as:

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-product usage rates -product usage occasion -brand loyalty status

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Segments based on product usage rates typically divide consumers of a given product into:

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non- light- moderate- heavy-users

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Marketers often target consumers characterized as heavy users

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-heavy users (heavy half) account for bulk of the sales for given product -Mcdonalds frequent visitors to get Big Mac

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The "heavy half" comprised of a relatively small portion of consumers, "80-20" principle. This means:

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-80% of Big Mac sales are accounted for by only 20% of consumers who purchase the product

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Share same benefits and similar problems Problems customers might share:

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-how well informed or poorly informed they are -based on whether customers have basis which problem can be solved -reasonable to segment markets based on media preferences

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Bastrik Execcutioner- new show replacing Sons of Anarchy

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-has had a lot of advertising about motorcycles and motorcycle brands -likely to follow- segmenting and targeting accordingly

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How does a firm know when it has created effective segments?

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-homogeneuos w/in themselves -heterogeneous within given segments -is it large enough or will it grow quickly

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Segments must be measured-

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-if you can't measure, can't define -must be profitable

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Has my firm developed an effective segment?

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-acesibility: can you firm effectively reach the segment in terms of getting product there (distribution, mktg. mix)

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***4th Criteria: Actionable How to know whether the segment is a good one or a not-so-good one

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-Is the segment that you've identified likely to respond favorably & differently to marketing mix values that you can create for the segment or already have in place

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***Market Targeting

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-entails decisions about which market segments among those identified during the segmentation process the firm will pursue -need to pick and choose spots through targeting

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4 basic targeting approaches #1 Undifferentiated Targeting

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1. Undifferentiated Targeting- assumes no viable differences exist among market segments or meaningful segments do not exist; if competing products are homogeneous, mass marketing makes sense; if this approach works, firm can create desirable *economies of scale *one generic marketing program for all segments combined

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Economies of scale

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-if a firm has achieved this it will benefit from: produce & promote more product for less money

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#2 Differentiated Targeting

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*multiple programs for a number of diff. segments -firm goes after 3-5 diff. segments -each segment being targeted- firm develops uniquely desirable marketing mix -designed to deliver value that should appeal to people in segment -Applebees: lower priced fare and offers healthier fare for those who want to lose weight or want to avoid overweight -3 descrete segments & mktg. mixes of consumers that delivers unique value

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**#3 Concentrated or Focused marketing approach

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-to pursue one segment with very highly refined mktg. mix that delivers narrow range of values *focused mktg. program for a single segment -smokers: niche strategy: doing concentrated targeting but narrowing targeted range even further

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#4 Customized Targeting.Mktg.

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*Treat each customer as unique with a dedicated mktg. mix -B2B -1 customer -Fort-Woth based Lockheed-Martin: customize everything customer buys- US Armed Services & to allies- good example -Ritz Carlton example of B2C

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Market Positioning- brand positioning

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-essential for effective mktg. 1. well-conceived positioning strategy can earn a substantial customer following 2. insulate the firm from competition 3. enhance the firm's profit picture by permitting the firm to raise overall prices (mercedes, apple-eximplary firms who have segmented, targeted, positioned well- created ; delivererd value in mktg. mix)

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No brand or company can thrive for long unless

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-they've established desirable positions in minds of segments they're targeting -when firm has positioned successfully, also created perception

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determinent

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1. difference between your brand and other brands 2. difference important to customers as they make their decisions ex: Southwest lets bags fly free- determinent

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Lifestyle based positioning

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-firms attempt to develop associations between the brand and some desirable lifestyle -firms seek to establish or exploit relationships that already exist between the desirable lifestyle and targeted consumer's ideal or actual self-concept -positioned based on lifestyle motif -shows fear evoking situation and lifestyle we want to avoid -positively and negatively -truth ads, diet pills, alcohol -drive or wear right brand so they will fit in -top-of-mind awareness

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Price and Value-Based Positioning

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-based on lower price but equivalent value -Wal-Mart -Kia -great value -price positioning: establishing a low price image for the brand, low price is brand's key differentiating factor -Value Positioning: deliver higher value, you pay higher price, but you're worth it too, drives loyalty, drives away competitors: Nike, Whole Foods, Apple, Mercedes

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Perceptual mapping

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-offeres a useful tool for ascertaining a brand's positioning relative to its competitors

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Majority Fallacy

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-Marketers sometimes mistakenly assume the heavy half is the most profitable segment to target -false assumption that the heavy half always offers the greatest profit potential

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Marketers may be better served by:

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-targeting smaller niche opps. to which they can direct finely tuned marketing programs that provide differential value-based advantages against competitors' related offerings

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When creating market segments based on product usage occasion:

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the emphasis is on identifying different consumption situations or purchase occasions under which the product is consumed

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Each segment represents a different usage occasion. Each segment is targeted through:

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different pricing and promotional strategies. Frequent-fryer programs are geared to business travelers to encourage airline loyalty

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Markets for more mundane food products can be segmented by usage occasion

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-orange juice has traditionally been promoted as a breakfast drink -orange juice is positioned as "not just a breakfast drink."

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Brand Loyal

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-firms can learn a lot when segmenting consumers by the degree to which they're brand loyal -defined based solely on consumers' patterns of repeat purchase behavior -defined in terms of the proportion of total purchases within a given product category defatted to the most frequently purchased brand -repeat purchase patterns may reflect only a spurious loyalty with little attitudinal attachment to the brand

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Loyal consumers easily swayed

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-to switch to other brands via better prices, coupons, point-of-sale visibility and other incentives

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TOP OF 246: Brand loyalty has steadily declined among consumers. Underlying factors include:

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1. continuing

MKTG Chapter 9- Segmentation, Marketing, Positioning – Flashcards

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