Download - Segmentation and Targeting Professor Chip Besio Cox School of Business Southern Methodist University
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Segmentation and TargetingSegmentation and TargetingSegmentation and TargetingSegmentation and Targeting
Professor Chip BesioCox School of BusinessSouthern Methodist University
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What Are Markets?What Are Markets?Aggregates of people,
With the ability to buy,
The willingness to buy,
The authority to buy.
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Two Types of MarketsTwo Types of Markets
Consumer Markets – Individuals or households who benefit directly
by consumption, rather than to make a profit or to achieve Industrial Markets
Business Markets – Companies or organizations who purchase for
resale, use in production, or use in operations, including both profit-oriented and not-for-profit organizations.
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What Is Market What Is Market Segmentation?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
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
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Segmentation DilemmaSegmentation Dilemma
MASS MARKETING Economies of Scale
CUSTOMIZATIONEveryone Wants
Something Different
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Market segmentation—linking market needs to an organization’s marketing program
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Segmentation CriteriaSegmentation Criteria
I. Customer Characteristics
II. Benefits Sought
III. Customer Behaviors
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Customer CharacteristicsCustomer CharacteristicsDEMOGRAPHICSDEMOGRAPHICS
Consumer Markets:– Gender– Age– Income– Dual income family
Industrial Markets:– NAICS code– Size of company
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Customer Characteristics Customer Characteristics PSYCHOGRAPHICSPSYCHOGRAPHICS
Consumer Markets:– Environmentally-conscious– Value and lifestyles
VALS (1978); VALS 2 (1989) Distinct patterns based on attitudes and values
Business Markets:– Corporate culture– Purchasing orientation
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Customer Characteristics Customer Characteristics GEOGRAPHYGEOGRAPHY
Regional SegmentationZip Clustering
– Distinct marketing strategies created for similar types of neighborhoods stretched across the nation
– Examples include PRIZM, Market Metrics
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Segmentation variables and breakdowns for U.S. consumer markets
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Benefit SegmentationBenefit SegmentationWHAT BENEFIT DO YOU WANT?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)
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Behavior Segmentation Behavior Segmentation USAGE BEHAVIORSUSAGE 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
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Patronage of fast-food restaurants by adults 18 years and older: Simmons Market Research Bureau NCS/NHCS Spring 2008 Adult Full-Year Choices System Crosstabulation Report
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Comparison of various kinds of users and nonusers for Wendy’s, Burger King, and McDonald’s fast-food restaurants
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What Is “Targeting” a Market What Is “Targeting” a Market Segment?Segment?
“You can’t be all things to all people”
Therefore, companies typically focus on one or more segments and orient their marketing activities to those (potential) customers
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Which Are the “Good” Which Are the “Good” Segments to Target?Segments to Target?
The most attractive market segments are:Large Growing
and have:High purchase volumeHigh marginsHigh customer value
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Which Are the “Good” Which Are the “Good” Segments to Target?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 Company’s current positioning
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Targeting Dilemma - Segment Targeting Dilemma - Segment AttractivenessAttractiveness
SEGMENT VALUE SEGMENT VALUE More OpportunityMore Opportunity
COMPETITIONMore Companies
Compete for Valuable Segments
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Which Are the “Good” Which Are the “Good” Segments to Target?Segments to Target?
Additional considerations for targeting:Customers are addressable - you can
reach themThe company is capable of building a
marketing program to target them
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TargetingTargeting
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)
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The five key steps in segmenting and targeting markets link market needs of customers to the organization’s marketing program
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Market-product grid showing how different Reebok shoes reach segments of customers with different needs
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Benefits (+) and drawbacks (-) of a firm’s market-product strategies