MKTG 101 CHAPTER 8 STP

Market

people or organizations

with needs or wants and

the ability and willingness to buy

Market segment

a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs

Market segementation

process of dividing a market into meaningful relatively similar and identifiable segments or groups

Purpose of market segmentation

tailor marketing mixes to meet the needs of specific segements

benefits of market segmentation

deeper understanding of customer needs and wants

more accurate definition of marketing objectives

better allocation of resources

Clear market segments

Automotive = market

segments= luxury cars, economy cars, electric vehicles

AIRS stands for

accessibility, identifiability and measurability, responsiveness, and substantiality

A in AIRS

Accessibility: Ability to reach segment members with marketing efforts

I in AIRS

identifiability and measurability: Ability to identify and measure segment size

R in AIRS

Responsiveness: Segment responds differently to marketing mix than other segments

S in AIRS

Substantiality: Segment must be large enough to be commercially viable

Five common bases for consumer market segmentation:

geographic, demographic, psychographic, behavioral, and benefit

Geographic base consumer market segmentation

Region, market size, market density, climate

Demographic base consumer market segmentation

Age, gender, income, ethnicity, household life cycle

Psychographic base consumer market segmentation

Personality, motives, lifestyles, geodemographics (combo of location and demographics)

Behavioral base consumer market segmentation

Usage rate, benefits sought, brand loyalty

Benefit base consumer market segmentation

Grouping based on desired product benefits

Two general bases for business market segmentation

company characteristics and buying processes

company characteristics for business market segmentation

Geographic location, company type, size, product use

buying process for business market segmentation

Purchasing criteria, strategies (e.g., satisficers vs. optimizers)

Six-step process for market segmentation (CBD-PSM)

Category, Basis, Descriptors, Profile, Select, Mixes

C in CBD PSM

Select a market or product Category for study

B in CBD PSM

Choose Basis or bases for segmenting the market

D in CBD PSM

Select segmentation Descriptors

P in CBD PSM

Profile and analyze segments

S in CBD PSM

Select target markets

M in CBD PSM

Design, implement, and maintain appropriate marketing Mixes

Targeting

process of evaluating and selecting one or more segments identified during the segmentation phase to focus marketing efforts on.

What does targeting involve?

determining which segment(s) are most attractive and align

best with the organization’s objectives, resources, and capabilities

Target Market

group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.

three main targting strategies

undifferentiated , concentrated, multi segment

Undifferentiated Targeting Strategy

for the mass, not really targeting; all same message

Concentrated Targeting Strategy

niche, messages specific to a group of people

Multi-segment Targeting Strategy

different mix for each segment, mature organizations; serve each segment well

when undifferentiated make sense

product satisfies a basic need that is common,

homogenous customer preferences,

commodities or standardized products

limited resources for marketing

when undifferentiated doesn’t make sense

in highly competitive markets,

when customer needs/preferences vary significantly

luxury or specialized products

when concentrated makes sense

small companies w limited resources

entering new markets

niche products/service

strong competitive advantage

when concentrated doesnt make sense

segment is too small to be profitable

all eggs in one basket 

larger competitors that target same niche

when multi segment makes sense

substantial resources,

varying customer needs,

maximize market share/profitability

effectively customize offerings for diff segments

when multi segment doesnt make sense

lacks resources to serve multiple segments

customization costs outweigh benefits

lead to brand confusion or dilution

CHOP when choosing a targeting strategy

Company resources, homogeneity, objectives, product life cycle stage

C in targeting strategy

Company Resources: Smaller companies may lean towards concentrated targeting, while larger ones can consider multi-segment approaches

H in targeting strategy

The more homogeneous the product, the more suitable undifferentiated targeting becomes.

If the market has similar needs and preferences, undifferentiated targeting may be appropriate.

O in targeting strategy

Companies may need to adopt a similar strategy to competitors or differentiate themselves strategically

P in targeting strategy

Product Life Cycle Stage: New products might start with concentrated targeting and expand to multi-segment as they mature.

When choosing which segment(s) to target, companies should consider (PROFITS):

Profitability, Resources alignment, objectives fit, future growth, intensity of competition, tactical advantage, and size of the segment

P in PROFITS

Profitability: Consider the potential return on investment for each segment.

R in PROFITS

Resources alignment: The chosen segment should be serviceable with the company's available resources

O in PROFITS

Objectives fit: The segment should align with the company's goals and strategic direction.

F in PROFITS

Future growth: Assess the segment's growth potential. Larger, growing segments are generally more attractive.

I in PROFITS

Intensity of competition: Evaluate the competitive landscape within each segment, including the bargaining power of buyers and suppliers, and the threat of substitutes.

T in PROFITS

Tactical advantage: Select segments where the company can leverage its unique strengths and maintain a sustainable competitive advantage

S in PROFITS

Size of the segment: Consider the current size of the segment in addition to its growth potential

CRM as targeting tool

Customer Relationship Management (CRM) helps customize offerings based on customer data

Benefits of CRM

Personalization

Time savings for consumers

Enhanced customer loyalty

Effective use of technology for customer tracking

positioning statement formula

for (target market), (brand) is the (product category) that (benefit offered)