chapter 7

Criteria for Successful Segmentation (7.3)

Substantiality:

  • Definition: The segment must be big enough to be worth targeting.

  • Details: This doesn't always mean having a lot of customers. For example, companies that sell custom homes or big computer systems often create marketing plans for each customer. But usually, a segment needs many customers to make it worthwhile.

Identifiability and Measurability:

  • Definition: Segments must be easy to identify and measure.

  • Details: Information about the number of people in different areas or age groups is often easy to find. This helps marketers know how big each segment is.

Accessibility:

  • Definition: The company must be able to reach the segment with its marketing efforts.

  • Details: Some segments are harder to reach, like senior citizens with disabilities, people who don't speak English, or those who can't read. Marketers need to ensure they can effectively reach these groups.

Responsiveness:

  • Definition: Each segment should respond differently to a marketing mix.

  • Details: If all customers react the same way to a product, there's no need to treat them as different segments. For example, if everyone cares about price the same way, there's no need to offer different price levels for different groups.


List the steps involved in segmenting markets (7.4)


Select a market or product category for study

  • Define the overall market or product category to be studied. Example: Company competes in a current market or explores a new one.

Choose a basis or bases for segmenting the market

  • Requires insight, creativity, and knowledge. Example: Use demographics, geography, or behavior.

Select segmentation descriptors

  • Identify specific segmentation variables. Example: Heavy users, light users, or nonusers.

Profile and analyze segments

  • Include sizes, growth, purchase frequency, brand loyalty. Example: Create a target persona.

Select target markets

  • Outcome of segmentation. Example: Decide which segments to focus on for marketing efforts.

Design, implement, and maintain appropriate marketing mixes

  • Develop product, place, promotion, and pricing strategies. Example: Tailor the marketing mix to target markets.



What is the first step in market segmentation?

  • Select a market or product category for study.

Why is choosing a basis for segmenting the market important?

  • It requires managerial insight, creativity, and knowledge to ensure segments meet the criteria.

What are segmentation descriptors?

  • Specific variables used to segment the market, like heavy users or light users.

What should be included in the profile and analysis of segments?

  • Sizes, growth, purchase frequency, brand loyalty, and target personas.

What is the outcome of the segmentation process?

  • Selecting target markets.

What does the marketing mix include?

  • Product, place, promotion, and pricing strategies.



7.6 Explain how and why companies implement positioning strategies and how product differentiation plays a role


Positioning: How customers see a brand, product line, or company compared to others. Example: Coca-Cola's different cola drinks for different preferences.


Importance of Positioning: Shapes customer perceptions and influences buying decisions. Example: BMW's association with luxury homes in Canada.


Strategic Positioning: Knowing what customers care about, analyzing competitors, and finding a unique market spot.


Differentiation: Making products seem different (real or perceived). Example: Brand names, packaging, color, smell, special ingredients.


Similarity: Making products seem similar to others. Example: Artificial sweeteners marketed as tasting like sugar.



What is positioning in marketing?

  • How customers see a brand, product line, or company compared to others.

Why is positioning important?

  • It shapes customer perceptions and influences buying decisions.

What are strategic positioning elements?

  • Knowing what customers care about, analyzing competitors, finding a unique market spot.

What is product differentiation?

  • Making products seem different (real or perceived) through brand names, packaging, color, smell, special ingredients.

What is the role of similarity in positioning?

  • Making products seem similar to others to help customers feel comfortable switching to them.



"Mastering Market Positioning"


Once upon a time, a soft drink company wanted to launch a new product. They knew that positioning was crucial because it shapes how customers see their brand compared to others. They looked at how Coca-Cola offers Diet Coke for calorie-conscious customers and Coca-Cola Zero for those who want a stronger taste but zero calories.


The company realized that good positioning means understanding what customers care about. They studied their market and noticed that people value unique flavors. They also saw what their competitors were doing and found an opportunity to stand out by offering a drink with natural sweeteners.


For their strategy, they focused on product differentiation. They used special packaging and advertised the health benefits of their natural ingredients to make their product seem special and worth buying. They also considered similarity tactics, making sure their drink tasted as sweet and refreshing as the leading brand, so customers would feel comfortable switching.


Chapter 7 Questions


7-1

Describe the characteristics of markets, market segments, and the importance of market segmentation.

  • A market is composed of people or organizations with needs and wants that have both the ability and the willingness to make purchases. A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.


  • Before the 1960s, few businesses targeted specific market segments. Today, segmentation is a crucial marketing strategy for nearly all successful organizations. Market segmentation enables marketers to tailor marketing mixes to meet the needs of particular population segments. Segmentation helps marketers identify consumer needs and preferences, areas of declining demand, and new marketing opportunities.


7-2

Describe the bases commonly used to segment consumer and business markets.

  • Five bases are commonly used for segmenting consumer markets. Geographic segmentation is based on region of a country or the world, market size, market density, or climate. Demographic segmentation is based on age, gender, income, ethnic background, occupation and family life-cycle. Psychographic segmentation is market segmentation based on personality, motives, lifestyles, and geodemographic categories. Benefits sought is a type of segmentation that groups customers according to the benefits they seek in a product. Finally, usage segmentation divides a market by the amount of product purchased or consumed. To enhance the outcome, database-driven analytics are often used.


  • Business markets can be segmented on two general bases. First, businesses segment markets on the basis of company characteristics, such as customers’ geographic location, type of company, company size, and product use. Second, companies may segment customers on the basis of the buying processes those customers use.


 

7-3

Discuss criteria for successful market segmentation.

  • Successful market segmentation depends on four basic criteria: (1) a market segment must be substantial enough to warrant developing and maintaining a marketing mix; (2) a market segment must be identifiable and measurable; (3) members of a market segment must be accessible to marketing efforts; and (4) a market segment must respond to particular marketing efforts in a way that distinguishes it from other segments.


 

 

7-4

List the steps involved in segmenting markets.

  • 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 target markets; and (6) designing, implementing, and maintaining appropriate marketing mixes.


7-5

Discuss alternative strategies for selecting target markets.

  • Marketers select target markets by using four different strategies: undifferentiated targeting, concentrated targeting, multisegment targeting, and one-to-one targeting. An undifferentiated targeting strategy assumes that all members of a market have similar needs that can be met by using a single marketing mix. A concentrated targeting strategy focuses all marketing efforts on a single market segment. Multisegment targeting is a strategy that chooses two or more well-defined segments and develops a distinct marketing mixes for each. One-to-one marketing is an individualized marketing method that uses data generated through interaction between carefully defined groups of customers and the company to build long-term, personalized, and profitable relationships with each customer. Successful one-to-one marketing comes from understanding customers and collaborating with them, rather than using them as targets for generic messages. Database technology makes it possible for companies to interact with customers on a personal, one-to-one basis.


7-6

Explain how and why companies implement positioning strategies and how product differentiation plays a role.

  • Positioning is the process that is used to influence potential consumer overall perceptions of a brand, product line, or organization in relation to competitors. The term position refers to the place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings. To establish a unique position, many companies use product differentiation, emphasizing the real or perceived differences between competing offerings. Products may be differentiated on the basis of attribute, price and quality, use or application, product user, product class, or competitor.