6.3 Market Targeting

Question 1

What must a firm do after market segmentation is done?

Answer 1

Market segmentation reveals the firm’s market segment opportunities. The firm then has to evaluate the various segments and decide how many and which segments it can serve best.

Question 2

In evaluating different market segments, a firm must look at three factors. What are they?

Answer 2

• Segment size and growth
• Segment structural attractiveness
• Company objectives and resources

Question 3

Describe the considerations surrounding Segment size and growth.

Answer 3

A company wants to select segments that have the right size and growth characteristics.

But “right size and growth” is a relative matter.

The largest, fastest-growing segments are not always the most attractive for every company. Smaller companies may lack the skills and resources needed to serve larger segments. Or they may find these segments too competitive.

Such companies may target segments that are smaller and less attractive, in an absolute sense, but that are potentially more profitable for them.

Question 4

What are the structural factors that a firm should consider in order to determin the attractivness of ita segment?

Answer 4

• Competitors
• New entrants
• Substitute products
• Power of buyers
• Powerful suppliers

Question 5

What are the company objectives and resourses that should be considered when working with a market segment?

Answer 5

Even if a segment has the right size and growth and is structurally attractive, the company must consider its own objectives and resources.

Some attractive segments can be dismissed quickly because they do not mesh with the company’s long-run objectives.

Or the company may lack the skills and resources needed to succeed in an attractive segment.

Question 6

What must a company do after evaluating different segments?

Answer 6

After evaluating different segments, the company must decide which and how many segments it will target.

Question 7

Definition of Target market

Answer 7

Target market:

A set of buyers who share common needs or characteristics that a company decides to serve.

Question 8

What are the different market targeting levels?

Answer 8

Companies can target very broadly (undifferentiated marketing)

Very narrowly (micromarketing)

Somewhere in between (differentiated or concentrated marketing)

Question 9

Figure 6.2 Market-Targeting Strategies

Answer 9

Question 10

Definition of Undifferentiated (mass) marketing.

Answer 10

Undifferentiated (mass) marketing:

A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer.

Such a strategy focuses on what is common in the needs of consumers rather than on what is different. The company designs a product and a marketing program that will appeal to the largest number of buyers.

Question 11

Definition of Differentiated (segmented) marketing.

Answer 11

Differentiated (segmented) marketing:

A market-coverage strategy in which a firm targets several market segments and designs separate offers for each.

By offering product and marketing variations to segments, companies hope for higher sales and a stronger position within each market segment. Developing a stronger position within several segments creates more total sales than undifferentiated marketing across all segments.

Question 12

What are the additional costs associated with Differentiated marketing?

Answer 12

But differentiated marketing also increases the costs of doing business.

A firm usually finds it more expensive to develop and produce, say, 10 units of 10 different products than 100 units of a single product.

Developing separate marketing plans for separate segments requires extra marketing research, forecasting, sales analysis, promotion planning, and channel management.

And trying to reach different market segments with different advertising campaigns increases promotion costs.

Question 13

Definition of Concentrated (niche) marketing

Answer 13

Concentrated (niche) marketing:

A market-coverage strategy in which a firm goes after a large share of one or a few segments or niches.

Question 14

What are the positives of concentrated (niche) marketing?

Answer 14

Through concentrated marketing, the firm achieves a strong market position because of its greater knowledge of consumer needs in the niches it serves and the special reputation it acquires.

It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments.

It can also market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.

Question 15

Negatives of concentrated (niche) marketing.

Answer 15

it involves higher-than-normal risks.

Companies that rely on one or a few segments for all of their business will suffer greatly if the segment turns sour. Or larger competitors may decide to enter the same segment with greater resources.

Question 16

Definition of Micromarketing

Answer 16

Micromarketing:

Tailoring products and marketing programs to the needs and wants of specific individuals and local customer segments; it includes local marketing and individual marketing.

Question 17

Definition of Local marketing

Answer 17

Local marketing:

Tailoring brands and marketing to the needs and wants of local customer segments—cities, neighbourhoods, and even specific stores.

Question 18

Negatives of Local marketing

Answer 18

Local marketing has some drawbacks, however. It can drive up manufacturing and marketing costs by reducing the economies of scale. It can also create logistics problems as companies try to meet the varied requirements of different local markets.

Question 19

What are some of the questions we must ask when deciding on a market-targeting strategy?

Answer 19

Which strategy is best depends on the company’s resources. When the firm’s resources are limited, concentrated marketing makes the most sense.

The best strategy also depends on the degree of product variability.

Undifferentiated marketing is more suited for uniform products, such as grapefruit or steel.

Products that can vary in design, such as cameras and cars, are more suited to differentiation or concentration. The product’s life-cycle stage also must be considered.

When a firm introduces a new product, it may be practical to launch one version only, and undifferentiated marketing or concentrated marketing may make the most sense.

In the mature stage of the product life cycle, however, differentiated marketing often makes more sense.

Question 20

What is market variability?

Answer 20

Market variability. If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated marketing is appropriate.

Question 21

What are the considerations we should make about competitors marketing strategies?

Answer 21

Finally, competitors’ marketing strategies should be considered.

When competitors use differentiated or concentrated marketing, undifferentiated marketing can be suicidal.

Conversely, when competitors use undifferentiated marketing, a firm can gain an advantage by using differentiated or concentrated marketing, focusing on the needs of buyers in specific segments.

Question 22

Target marketing sometimes generates controversy and concern. What does the biggest issue usually involve?

Answer 22

The biggest issues usually involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful products.

Question 23

What are the organizations that controll the regulations surounding advertising to children?

Answer 23

In Canada, advertising to children is strictly controlled by several organizations, including:

Advertising Standards Canada, which publishes the Canadian Code of Advertising Standards.

The Canadian Association of Broadcasters, which has its own code for television advertising aimed at children.

Concerned Children’s Advertisers, an advocacy group dedicated to promoting media literacy, ethics, and responsibility in advertising to children.

Question 24

What is an ethical concern concerning internet and mobile marketing?

Answer 24

The internet and mobile marketing allow more precise targeting, letting the makers of questionable products or deceptive advertisers zero in on the most vulnerable audiences.

Unscrupulous marketers can now send tailor-made, deceptive messages by email directly to millions of unsuspecting consumers.

Today’s marketers are also using sophisticated analytical techniques to track consumers’ digital movements and to build amazingly detailed customer profiles containing highly personal information.

Such profiles can then be used to hypertarget individual consumers with personalized brand messages and offers. However, with such targeting, marketers often walk a fine line between serving customers better and stalking them:

Question 25

What does socially responsible marketing call for?

Answer 25

Socially responsible marketing calls for segmentation and targeting that serve not just the interests of the company but also the interests of those targeted.