marketing chapter 9

  1. market segmentation
    involves aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marketing action
  2. market segments
    • relatively homogeneous groups of prospective buyers that result from the market segmentation process
    • (consists of people who are relatively similar to each other in terms of consumption behavior)
  3. product differentiation
    marketing strategy involving a firm using different marketing mix activities; such as product features and advertising, to help consumers perceive the product as being different and better than competing products
  4. Segmentation: Linking Needs to Actions
    • Steps to segment and target markets is link between the various buyers' needs and the organization's marketing program
    • Lead to tangible marketing actions that can increase sales and profitability

    • (1) forms meaningful groupings (similar needs and benefits sought in purchase)
    • (2) develops specific marketing mix actions (product, price, promotion, place)
  5. When and how to segment markets
    • when: when expenses are less than the potentially increased sales from segmentation
    • segmentation strategies:
    • (1) one product and multiple market segments
    • (2) multiple products and multiple market segments
    • (3) "segments of one"; mass customization
  6. One product and multiple market segments
    • Produce a single product or service and attempt to sell it to two or more market segments
    • Avoids extra costs of developing and producing additional versions of product
    • Incremental costs to take product into new market segments: separate promotional campaign or new channel of distribution
  7. Multiple products and multiple market segments
    • effective if it meets customers' needs better, doesn't reduce quality or increase price, and adds to company's sales revenues and profits
    • *Two tier marketing strategy: "Tiffany/Wal-Mart strategy"; offer different variations of the same basic offering to high-end and low-end segments
  8. Segments of one: mass customization
    • tailoring goods or services to the tastes of individual customers on a high-volume scale
    • customer has unique needs and wants, desires special TLC

    next step beyond build-to-order (BTO) - manufacturing a product only when there is an order from a customer (ie: Dell) (customers do not have an unlimited number of features they can choose from)
  9. Segmentation trade-off: synergies versus cannibalization
    • organizational synergy: increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently
    • "increased customer value": more products, improved quality on existing products, lower prices, easier access to products through improved distribution, etc.; customers better off as a result
    • cannibalization: when new products or new chain is simply stealing customers and sales from the older, existing products
  10. Steps in segmenting and targeting markets
    • Identify Market Needs
    • Link needs to actions. The steps:
    • 1. Group potential buyers into segments
    • 2. Group products to be sold into categories
    • 3. Develop a market-product grid an estimate size of markets
    • 4. Select target markets
    • 5. Take marketing actions to reach target markets
    • Execute Marketing Program Actions
  11. 1. Group potential buyers into segments
    • * would segmentation be worth doing?
    • * is it possible?
  12. criteria to use in forming the segments
    • 1. simplicity and cost-effectiveness of assigning potential buyers to segments (identify characteristics of potential buyers in a market and then cost-effectively assign them to a segment)
    • 2. potential for increased profit (maximizes opportunity for future profit and return on investment; potential for serving clients more effectively)
    • 3. similarity of needs of potential buyers within a segment (leads to common marketing actions, ie: product features sought or advertising media used)
    • 4. difference of needs of buyers among segments (if increased sales don't offset extra costs, combine segments that don't differ much and reduce number of marketing actions)
    • 5. potential of a marketing action to reach a segment (simple but effective marketing action)
  13. Ways to segment consumer markets
    • geographic segmentation ( based on where prospective customers live or work; region, city size)
    • demographic segmentation (based on some objective physical [gender, race], measurable [age, income], or other classification attribute [birth era, occupation] of prospective customers)
    • psychographic segmentation (based on some subjective mental or emotional attributes [personality], aspirations [lifestyle], or needs of prospective customers
    • behavioral segmentation (based on observable actions or attitudes by prospective customers; where they buy, benefits they seek, how frequently they buy, why they buy [product features])
  14. usage rate
    • quantity consumed or patronage (store visits) during a specific period
    • (part of behavioral segmentation)
  15. 80/20 rule
    • concept that suggests 80% of a firm's sales are obtained from 20% of its customers
    • suggests a small fraction of customers provides a large fraction of firm's sales
  16. variables to use in forming segments
    • geographic variables (city or zip code)
    • demographic variables (gender, age, year in school, college major)
    • psychographic variables (personality or needs)

    • Think about
    • (1) whether needs of all these segments are different
    • (2) how various advertising media can be used to reach these groups effectively
  17. ways to segment organizational markets
    • geographic segmentation (global region or country, statistical area, density)
    • demographic segmentation (NAICS code, NAICS sector, number of employees, annual sales)
    • behavioral segmentation (number of locations, kind, where used, application, purchase location, who buys, type of buy)
  18. 2. Group Products to be sold into Categories
    • individual products
    • groupings of products (grouped in way so buyers can relate to them)
    • (ie: department stores and supermarkets)
  19. 3. Develop a Market-Product grid and Estimate the Size of Markets
    • Forming a market-product grid
    • identifying and labeling the markets and product groupings

    • Estimating market sizes
    • may be simple guesstimates (don't have time or money to conduct formal marketing research)
  20. market-product grid
    framework to relate the market segments of potential buyers to products offered or potential marketing actions by an organization

    each cell in grid can show the estimated market size of a given product sold to a specific market segment
  21. 4. Select Target Markets
    • too narrow a set of segments - may fail to reach volume of sales and profits it needs
    • too broad a set of segments - ma spread marketing efforts so thin that extra expense exceeds increased sales and profits
  22. criteria to use in selecting the target segments
    • market size (important factor in deciding whether market's worth going after)
    • expected growth
    • competitive position (is there a lot of competition in the segment now or is there likely to be in the future? less competition = more attractive segment)
    • cost of reaching the segment (do not waste money trying to advertise to inaccessible segment)
    • compatibility with the organization's objectives and resources
  23. 5. Take Marketing Actions to Reach Target Markets
    • Immediate segmentation strategy
    • Future strategies
    • - what headquarters is doing
    • - what competitors are doing
    • - what might be changing in area served
    • Ever-changing segmentation strategy
    • (Apple example: Steve Jobs' "Apple Product matrix"; offer different products to meet the needs of different market segments)
  24. marketing synergies
    • opportunity for efficiency in terms of a market segment
    • often comes at expense of product synergy because a single customer segment will likely require a variety of products, each of which will have to be designed and manufactures
    • saves money on marketing, spends more in production
  25. product synergies
    • opportunity for efficiency in research and development (R&D) and production
    • if product synergies emphasized, marketing will have to address concerns of a wide variety of consumers, which costs more time and money
  26. product positioning
    refers to the place a product occupies in consumers' minds on important attributes relative to competitive products
  27. product repositioning
    changing the place a product occupies in a consumer's mind relative to competitive products
  28. head-to-head positioning
    • involves competing directly with competitors on similar product attributes in the same target market
    • (ie: Dollar rental car competes directly with Avis and Hertz)
  29. differentiation positioning
    • involves seeking a less-competitive, smaller market niche in which to locate a brand
    • (can also be used within product lines to minimize the cannibalization of brand's sales or market shares)
  30. positioning statement
    • succinct written statement where marketing managers state their positioning ideas for product or brand
    • used internally within marketing department
    • used externally such as R&D engineers or advertising agencies
  31. 4 steps to determine positioning in minds of customers
    • 1. identify the important attributes for a product or brand class
    • 2. discover how target customers rate competing products or brands with respect to these attributes
    • 3. discover where the company's product or brand is on these attributes in the minds of potential customers
    • 4. reposition the company's product or brand in the minds of potential customers
  32. perceptual map
    means of displaying or graphing in two-dimensions the location of products or brands in the minds of consumers to enable a manger to see how consumers perceive competing products or brands, as well as its own product or brand
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marketing chapter 9