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Segmentation and Targeting

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... The five key steps in segmenting and targeting markets link market needs of customers to the organization s marketing program Market-product grid showing ... – PowerPoint PPT presentation

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Title: Segmentation and Targeting


1
Segmentation and Targeting
  • Professor Chip Besio
  • Cox School of Business
  • Southern Methodist University

2
What Are Markets?
  • Aggregates of people,
  • With the ability to buy,
  • The willingness to buy,
  • The authority to buy.

3
Two Types of Markets
  • Consumer Markets
  • Individuals or households who benefit directly by
    consumption, rather than to make a profit or to
    achieve Industrial Markets
  • Industrial Markets
  • Companies or organizations who purchase for
    resale, use in production, or use in operations,
    including both profit-oriented and not-for-profit
    organizations.

4
What Is Market Segmentation?
  • Market segmentation is the subdividing of a
    market into distinct subsets, where any subset
    may conceivably be selected as a marketing target
    to be reached with a distinct marketing mix

5
Segmentation Dilemma
MASS MARKETING Economies of Scale
CUSTOMIZATION Everyone Wants Something Different
6
Market segmentationlinking market needs to an
organizations marketing program
7
Segmentation Criteria
  • I. Customer Characteristics
  • II. Benefits Sought
  • III. Customer Behaviors

8
Customer Characteristics DEMOGRAPHICS
  • Consumer Markets
  • Gender
  • Age
  • Income
  • Dual income family
  • Industrial Markets
  • NAIC code
  • Size of company

9
Customer Characteristics PSYCHOGRAPHICS
  • Consumer Markets
  • Environmentally-conscious
  • Value and lifestyles
  • VALS (1978) VALS 2 (1989)
  • Distinct patterns based on attitudes and values
  • Industrial Markets
  • Corporate culture
  • Purchasing orientation

10
Customer Characteristics GEOGRAPHY
  • Regional Segmentation
  • Zip Clustering
  • Distinct marketing strategies created for similar
    types of neighborhoods stretched across the
    nation
  • Examples include PRIZM, Market Metrics

11
Segmentation variables and breakdowns for U.S.
consumer markets
12
Benefit Segmentation WHAT BENEFIT DO YOU WANT?
  • Rationale - The benefits people are seeking in
    consuming a given product are the true reasons
    for the existence of segments
  • Example - Toothpaste
  • Cavity prevention (e.g., Crest)
  • Fresh breath (e.g., Aquafresh)
  • White teeth (e.g., Rembrandt)

13
Behavior Segmentation USAGE BEHAVIORS
  • Volume of usage
  • Heavy users, moderate users, light users and
    nonusers
  • 80/20 rule
  • Brand usage
  • Increase usage among users
  • Get users of competing brand to switch
  • Get nonusers to start
  • Usage occasion

14
Patronage of fast-food restaurants by adults 18
years and older Simmons Market Research Bureau
NCS/NHCS Spring 2004 Adult Full-Year Choices
System Crosstabulation Report
15
Comparison of various kinds of users and nonusers
for Wendys, Burger King, and McDonalds
fast-food restaurants
16
What Is Targeting a Market Segment?
  • You cant be all things to all people
  • Therefore, companies typically focus on one or
    more segments and orient their marketing
    activities to those (potential) customers

17
Which Are the Good Segments to Target?
  • The most attractive market segments are
  • Large
  • Growing
  • and have
  • High purchase volume
  • High margins
  • High customer value

18
Which Are the Good Segments to Target?
  • However, the most attractive segments are
    frequently already well-served and so are highly
    competitive
  • so you must also consider
  • Number and strength of competitors
  • Ease of entry into the segment
  • Companys current positioning

19
Targeting Dilemma - Segment Attractiveness
SEGMENT VALUE More Opportunity
COMPETITION More Companies Compete for Valuable
Segments
20
Which Are the Good Segments to Target?
  • Additional considerations for targeting
  • Customers are addressable - you can reach them
  • The company is capable of building a marketing
    program to target them

21
Targeting
  • Examples of successful targeting
  • Wal-Mart - Value-conscious shoppers that do not
    want to worry about short-term sales
  • Lexus - People with high disposable income who
    value reliability and service, as well as
    prestige and luxury
  • Cray - Price insensitive computer users that
    require maximum computing power
  • Dupont - Less price-sensitive innovators in the
    use of plastics (skim pricing)

22
The five key steps in segmenting and targeting
markets link market needs of customers to the
organizations marketing program
23
Market-product grid showing how different Reebok
shoes reach segments of customers with different
needs
24
Benefits () and drawbacks (-) of a firms
market-product strategies
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