CHAP 8 SEGMENTING AND TARGETING MARKETS Flashcards
Characteristics of markets and market segments
The term “market” means different things to different people. We are all familiar with the supermarket, stock market, labor market, fish market, and flea market. All these types of markets share several characteristics. First, they are composed of people (consumer markets) or organizations (business markets). Second, these people or organizations have wants and needs that can be satisfied by particular product categories. Third, they have the ability to buy the products they seek. Fourth, they are willing to exchange their resources, usually money or credit, for desired products. In sum, a market is (1) people or organizations with (2) needs or wants and with (3) the ability and (4) the willingness to buy.
Market segmentation
The process of dividing a market into meaningful, relatively similar, and identifiable segments, or groups, is called market segmentation. . Market segmentation helps marketers define consumer needs and wants more precisely. Because market segments differ in size and potential, segmentation helps decision makers to more accurately define marketing objectives and better allocate resources.
Criteria for successful market segmentation
To be useful, a segmentation scheme depends on four basic criteria: (1) Substantiality: A segment must be large enough to warrant developing and maintaining a special marketing mix. (2) Identifiability and measurability: Segments must be identifiable and their size measurable. (3) Accessibility: The firm must be able to reach members of targeted segments with customized marketing mixes. (4) Responsiveness: Markets can be segmented using any criteria that seem logical.
Characteristics commonly used to segment consumer markets
Marketers use segmentation bases, or variables, which are characteristics of individuals, groups, or organizations, to divide a total market into segments. Consumer goods marketers commonly use one or more of the following characteristics to segment markets: geography, demographics, psychographics, benefits sought, and usage rate. Geographic segmentation refers to segmenting markets by the region of a country or the world, market size, market density, or climate. Demographic segmentation is based on age, gender, income level, ethnicity, and family life cycle characteristics. Psychographic segmentation includes personality, motives, lifestyles, and geodemographic characteristics. Benefit segmentation is the process of grouping customers into market segments according to the benefits they seek from the product. Finally, usage-rate segmentation divides a market by the amount of product purchased or consumed.
Characteristics for segmenting business markets
The business market consists of four broad segments: producers, resellers, government, and institutions. Company characteristics, such as geographic location, type of company, company size, and product use, can be important segmentation variables.
Steps involved in segmenting markets
The purpose of market segmentation, in both consumer and business markets, is to identify marketing opportunities. Six steps are involved when segmenting markets: (1) selecting a market or product category for study, (2) choosing a basis or bases for segmenting the market, (3) selecting segmentation descriptors, (4) profiling and analyzing segments, (5) selecting markets, and (6) designing, implementing, and maintaining appropriate marketing mixes.
Alternative strategies for selecting target markets
Marketers select target markets using three different strategies: undifferentiated targeting, concentrated targeting, and multi-segment targeting. A firm using an undifferentiated targeting strategy essentially adopts a mass-market philosophy, viewing the market as one big market with no individual segments. With a concentrated targeting strategy, a firm selects a market niche (one segment of a market) for targeting its marketing efforts. A firm that chooses to serve two or more well-defined market segments and develops a distinct marketing mix for each has a multi-segment targeting strategy. Another potential cost of multi-segment targeting is cannibalization, which occurs when sales of a new product cut into sales of a firm’s existing products.
CRM as a targeting tool
CRM entails tracking interactions with customers to optimize customer satisfaction and long-term company profits. Companies that successfully implement CRM tend to customize the goods and services offered to their customers based on data generated through interactions between carefully defined groups of customers and the company. CRM can also allow marketers to target customers with extremely relevant offerings. There are at least four trends that will lead to the continuing growth of CRM: personalization, time savings, loyalty, and technology. Although mass marketing will probably continue to be used, the advantage of CRM cannot be ignored
Positioning strategies
Marketers segment their markets and then choose which segment, or segments, to target with their marketing mix. A product’s positioning is a process that influences potential customers’ overall perception of a brand, a product line, or an organization in general. Position is the place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings. One positioning strategy that many firms use to distinguish their products from competitors is based on product differentiation. The distinctions between products can be either real or perceived. Products may be positioned on the basis of attribute, price and quality, use or application, product user, product class, competitor, or consumer emotion.
