Aggregating prospective buyers into groups that:
- Have common needs
- Will respond similarly to a marketing action
Marketing Segmentation
Relatively homogeneous groups of perspective buyers that result from the market segmentation process.
Market Segments
When a firm uses different marketing mix activities, such as product features and advertising, to help consumers perceive the product as being different and better than competing products.
Product Differentiation
Marketing Segmentation and Action
1. Identify Market Needs
2. Link Needs to Actions
3. Execute Marketing Program Actions
Identify Market Needs
Benefits in terms of:
- Product Features
- Expense
- Quality
- Savings in Time and Convenience
Link Needs to Actions
Take steps to segments and target markets.
Steps to Segment and Target Markets
1. Group potential buyers into segments
2. Group Products to be sold into categories
3. Develop a market-product grid and estimate size of markets
4. Select target markets
5. Take marketing actions to reach target markets
Execute Marketing Program Actions
A marketing mix in terms of:
- Product
- Price
- Promotion
- Place
Foundation of Effective Market Segmentation
1. Forming meaningful groupings
2. Developing specific marketing mix actions
Segmentation Strategies
1. One product and multiple market segments
2. Multiple products and multiple market segments
3. Segments of one: Mass customization
When an organization produces only a single product or service and attempts to sell it to two or more market segmentsOne product and multiple market segments. (Movies, Magazines, Books, Etc.)
One product and multiple market segments
Ford's different lines of cars, SUVs, and trucks are each targeted at a different type of customer.
Multiple products and multiple market segments
Manufacturing a product only when there is an order from a customer.
Segments of one: Mass customization
Segment Criteria
1. Simplicity and cost-effectiveness of assigning potential buyers to segments
2. Potential for increased profit
3. Similarity of needs of potential buyers within a segment
4. Difference of needs of buyers among segments
5. Potential of a marketing action
Ways to Segment Consumer Markets
1. Geographic
2. Demographic
3. Psychographic
4. Behavioral
Segmenting a market based on lifestyle of consumers.
Psychographic Segmentation
Segmenting a market based on what product features are important to different customers and their usage rates.
Behavioral Segmentation
The quantity consumed or patronage (stor visits) during a specific period.
Usage Rates
80 percent of a firm's sales are obtained from 20 percent of its customers
80/20 Rule
A framework to relate the market segments of potential buyers to products offered or potential marketing actions by an organization.
Market-Product Grid
Criteria for Selecting Target Market
- Market size
- Expected growth
- Competitive position
- Cost of reaching the segment
- Compatibility with the organization's resources and objectives
Opportunity for efficiency in terms of market segments (horizontal on grid).
Market Synergies
Opportunity for efficiency in R&D and production (Vertical on grid).
Product Synergies
The place a product occupies in consumers' minds on important attributes relative to competitive products.
Product Positioning
Two Approaches to Product Positioning
1. Head-to-Head Positioning
2. Differentiation Positioning
Competing directly with competitors on similar product attributes in the same target market (e.g., Avis and Hertz)
Head-to-Head Positioning
Locating a brand in a less-competitive, smaller marker niche (e.g., McDonald's McLean burger avoided direct competition with Wendy's and Burger King.)
Differentiation Positioning
A means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how consumers see competing products or brands and then take marketing action.
Perceptual Map
Three Types of Data to Obtain Consumer Perceptions of a Product or Brand
1. Identification of the important attributes for a product class
2. Judgements of existing products or brands with respect to these attributes
3. Rating of an "ideal" product's or brand's attributes
The maximum total sales of a product by all firms to a segment during a specified time period under environmental conditions and marketing efforts of the firms.
Market Potential or Industry Potential