Chapter 7
Chapter 7
Most companies have moved away from mass marketing toward target marketing: identifying market segments, selecting
one or more of them and developing productsand marketing programs tailored to each.4 steps in designing a customer-
driven marketing strategy:
1. MARKETING SEGMENTATION – dividing market into smaller segmentswith distinct needs, characteristics orbehavior
that might require
separatemarketing strategies or mixes. (reach more efficiently and effectively with products and services that match their
unique needs).
a) Geographic segmentation: dividing market into differentgeographical units: nations,states, regions, countries, cities or
neighborhoods.
b) Demographic segmentation: dividing market into segments basedon variables: age, gender, familysize, family life cycle,
income, occupation,education, religion, race, generation andnationality.
Age and life-cycle segmentation: dividing market into different age andlife-cycle groups.
Gender segmentation: dividing market into segmentsbased on gender (used in clothing, cosmetics, toiletries and
magazines)
Income segmentation: dividing market into different incomesegments (marketers of products and services such as
automobiles, clothing, cosmetics, financial services and travel have long used income segmentation)
c) Psychographic segmentation: dividing market into different segmentsbased on social class, lifestyle orpersonality
characteristics.
d) Behavioral segmentation: divides buyers into segments based on their knowledge, attitudes, uses or responses to a
product.
Occasion segemntation: buyers grouped according to occasions when they get idea to buy, make their purchase or use
purchased item.
Benefits sought/segmentation:finding benefits people look for in a product class, kinds of people and brands that deliver
each benefit.
User Status: nonusers, ex-users, potential users, first-time users and regular users of a product.
Usage Rate:markets segmented into light, medium and heavy (small % of the market, but high % of total
consumption)product users.
Loyalty Status:consumers can be loyal to brands, stores and companies, buyers divided into groups according to degree of
loyalty.
REQUIREMENTS FOR EFFECTIVE SEGMENTATION (TO BE USEFUL, MARKET SEGMENTS MUST BE):
Measurable:size, purchasing power and profiles of segments can be measured. Certain segmentation variables are difficult
to measure.
Accessible:market segments can be effectively reached and served.
Substantial: segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program.
Differentiable:segments are conceptually distinguishable and respond differently to different marketing mix elements and
programs.
Actionable:effective programs can be designed for attracting and serving the segments.
USING MULTIPLE SEGMENTATION BASES: marketers rarely limit their segmentation analysis to only one or a few variables
only. They often use multiple segmentation bases in an effort to identify smaller, better-defined target groups. One of
leading segmentation systems isPRIZM system by Nielsen (classifies every American household based on host of
demographic factors, behavioral and lifestyle factors).Segmenting Business Markets: consumer and business marketers use
many same variables to segment their markets. Business buyers can be segmented geographically, demographically
(industry, company size) or by benefits sought, usage rate,user and loyalty status and use some additional variables:
customer operating and personal characteristics, purchasing approachesandsituational factors.
Segmenting International Markets: few companies have either resources orwill to operate in all, or even most, countries.
Most international firms focus on a smaller set. Different countries, even those that are close together, can vary greatly in
their economic, cultural and political makeup. Intermarket/cross-market segmentation– form segments of consumers who
have similar needs and buying behaviors even though they are located in different countries.
2. MARKET TARGETING– process of evaluating each marketsegment’s attractiveness and selectingone or more segments to
enter.
Target market – consists of a set of buyers who share common needs or characteristics that the company decides to serve.
a) EVALUATING MARKET SEGMENTS– firm must look at 3 factors:
1. Segment size and growth – right size and growth is a relative matter
2. Segment structural attractiveness– structural factors affect long run segment attractiveness. Segment is less attractive if
it already contains many strong and agressive competitors. Existence of many actual or potential substitute products may
limit prices and profits that can be earned. Relative power of buyers will try to force prices down, demand more services
and set competitors against one another. May be less attractive if contains suppliers who can control prices or reduce
quantity/quality.
3. Company objectives and resources
b) SELECTING TARGET MARKET SEGMENTS
1. Undifferentiated/mass marketing – firm might
decide to ignore market segment differences and
target whole market with one offer. Such strategy
focuses on what is common in needs of consumers rather than on what is different. Company designs a product and a
marketing program that will appeal to the largest number of buyers.
2. Differentiated/segmented marketing –firm decides to target several market segments and designs separate offers for
each.
3. Concentrated/niche marketing –instead of going after a small share of a large market, a firm goes after a large share of
one or a few smaller segments or niches. It can market more effectively by fine-tuning its products, prices and programs
to the needs of carefully defined segments. It can market more efficiently, targeting its products or services, channels and
communications programs toward only consumers that it can serve best and most profitably.
4. Micromarketing marketing – practice of tailoring products and marketing programs to suit tastes of specific individuals
and locations. Rather than seeing customer in every individual, micromarketers see the individual in every customer.
Micromarketing includes:
a) Local marketing – involves tailoring brands and promotions to the needs and wants of local customer groups—cities,
neighborhoods, and even specific stores.
b) Individual marketing— (in extreme) tailoring products and marketing programs to the needs and preferences of
individual customers. It has also been labeled one-to-one marketing, mass customization, and markets-of-one
marketing
c) CHOOSING TARGETING STRATEGY – factors: company's resources, degree of product variability, product's life cycle,
market variability and competitors marketing strategies.
d) SOCIALLY RESPONSIBLE TARGET MARKETING
3. DIFFERENTIATION –differentiating the market offering tocreate superior customer value (value proposition)
4. POSITIONING –arranging for a market offering to occupya clear, distinctive and desirable placerelative to competing
products in theminds of target consumers.Product’s position –way productis defined by consumers on important
attributes—the place the product occupies in consumers’ minds relative to competing products.
Positioning maps – in planning their differentiation and positioning strategies, marketers often prepareperceptual
positioning maps that show consumer perceptions of their brands versus competing products on important buying
dimensions.