MKTG 504 MARKET SEGMENTATIO

1
MKTG 504 - MARKET SEGMENTATION

• Breaking the Market into Bits
• Dr. Dennis Pitta
• University of Baltimore

2
MARKET

• An aggregate of people who, as individuals or as
  organizations, have needs for products in a
  product class and who have the ability,
  willingness, and authority to purchase such
  products.

3
The Basics - the Market

• People with needs,
• who have money (or something of value), and
• a willingness to trade that value to satisfy
  those needs

4
Types of Markets

• Consumer Market (made up of ultimate consumers)
• Industrial Market (made up of producer firms)
• Intermediate Market (wholesalers and retailers)
• Government Market (federal, state, county, or
  local agencies)
• Institutional Market (non-profit organizations)

5
Marketings Main Task

• SATISFYING WANTS AND NEEDS
• ..........mostly wants....

6
Needs and Wants Defined

• NEED Something that is lacking that is
  necessary for physical, psychological or social
  well-being.
• WANT Something that is lacking that is desirable
  or useful.

7
Examples of Needs

• Food
• Clothing
• Shelter
• Warmth
• Safety
• Belonging
• Knowledge

8
Examples of Wants

• Food LOBSTER
• Clothing TOMMY HILFIGER - FUBU
• Shelter CONDO IN ST. BARTS
• Warmth HOT TUB
• Safety .357 MAGNUM
• Belonging RAVENS BOOSTER CLUB
• Knowledge UB TOWSON MBA

9
Marketing Lesson 1

• WANTS DEMAND

10
Why do Wants Demand?

• _______________________
• _______________________
• _______________________
• _______________________

11
Why People Buy Products

• FEATURES
• ADVANTAGES
• BENEFITS
• WANTS SATISFIED!

12
Market Aggregation

• The total market is not divided into segments.
• Examples
• Pabst Blue Ribbon Beer
• Miller High Life Beer
• Coke (a few years back)
• Salt

13
Market Aggregation Advantages

• Lower Production and Marketing Costs

14
Market Aggregation Disadvantages

• Vulnerability to Segmented Products

15
Market Segment

• A group of individuals, groups, or organizations
  that share one or more characteristics which make
  them have relatively similar product needs.

16
Examples of Three Market Segments
17
Market Segmentation

• A marketing strategy in which a large,
  heterogeneous market is broken down into small,
  more homogeneous segments, and a separate
  marketing program is developed for each segment.

18
Market Segmentation Advantages

• Better match between market wants and product
  benefits.

19
Market Segmentation Disadvantages

• Higher Marketing Costs
• Higher Production Costs

20
Suppose you want to develop and additional
segment?
21
Balance is essential in developing another
segment.

• There must be a net advantage over the additional
  costs of serving a new segment with a new product.

22
Problems with Developing New Segments

• Cannibalism
• New Competition

23
Criteria for Good Segments

• Identifiable
• Reachable
• Significant
• Responsive
• Stable

24
Identifiable

• Can you identify the want ..out there?

25
Reachable

• Can you contact the segment (efficiently)
• .using radio
• ..TV
• newspaper
• mail
• directly (in a meeting)
• the Internet
• the telephone

26
Responsive

• Do they respond to your message?

27
Significant

• Is the segment large enough or rich enough to
  justify serving them?

28
Stable

• Will they have the same wants and needs in a
  year?
• The Chevrolet Camaro example...

29
Potential Bases for Segmentation

• Descriptive Bases
• Demographic variables
• Socioeconomic variables
• Geographic
• Behavioral Bases
• User Status
• Usage Rate
• Benefits Sought
• Personality
• Life Style
• Social Class

30
Potential Bases for Segmentation

• Demographic Variables
• Age
• Sex
• Race
• Family Size
• Marital Status
• Religion
• Place of Residence
• Socioeconomic Variables
• Income
• Occupation
• Education

31
Exercise 1 - Use of Descriptive Variables in
Segmentation

• Richardson Vicks
• The number of young adults age 20-24 who have
  skin problems now exceeds the number of teenagers
  with blemishes.
• Segmentation response CLEARSIL ADULT CARE

32
Williams-Sonoma

• 15 percent of its cookware customers are male.
  The company has been considering what to do to
  boost the sales of its catalogs.
• Segmentation response _____________
• _________________________________

33
COCA-COLA

• Coca-Colas research found that children of
  working class parents prefer to GULP their
  drinks. Coca-Cola, and other carbonated
  beverages, are difficult to gulp.
• Segmentation response MELLO YELLOW - THE FASTEST
  DRINK IN THE WEST

34

• Behavioral variables are more powerful means of
  segmenting markets than descriptive variables.
• They can be viewed as determining variables.

35
Behavioral Variables

• Product Usage
• Benefits Sought
• Personality and Lifestyle
• Occasions
• Social Class

36
Heavy and Light Users of Common Consumer Products
37
What is the implication on sales?

• One heavy drinker (6 per day) is worth scores of
  light drinkers (6 per year).
• Capturing just this segment insures success!

38
Another example

• Originally Lite by Meisterbrau aimed at ladies -
  light users.

39
Another example the rest of the story

• Miller bought the brand and repositioned it for
  men - Heavy users.
• They fought - less filling - great taste
• And drank a lot of it!

40
Product Usage Examples

• Scheafer is the one beer to have when youre
  having more than one.
• That little pink pill Correctol laxative
• Youre in the Pepsi generation
• Lite Beer from Miller

41
Benefits Sought in Products

• Levis Jeans DURABILITY
• Elmers Glue-All ADHESION
• Revlon Cosmetics HOPE
• Lego Toys POSSIBILITIES
• Close-Up Toothpaste WHITER TEETH AND FRESH BREATH

42
The Best Segmentation Base

• A combination of bases!
• Like..
• BENEFITS DEMOGRAPHICS
• BENEFITS PSYCHOGRAPHICS
• USAGE RATE BENEFITS

43
Steps in the Segmentation Process

• Determine Market Boundaries
• Decide which Segmentation Bases to Use
• Analyze (Consider) Segmentation Data
• Develop a Profile of Each Segment
• Target the Segments to be Served
• Design a Marketing Plan

44
Targeting Segments

• Targeting a segment involves choosing the one or
  ones that are potentially most profitable.
• Also important is response sensitivity - the
  likelihood that the segment will react favorably
  to a marketing program.

45
Reasons Not to Target the Largest Segment

• Large segments do not always offer the best
  opportunity.
• Often the largest segment faces very heavy
  competition.
• Consumers in those segments may be very satisfied
  with the products or brands of competitors.

46
Differentiated Marketing

• Differentiated marketing is a marketing strategy
  that aims at several market segments, varying the
  marketing mix for each segment.

47
Positioning

• A process in which a marketer communicates with
  consumers to establish a distinct place for its
  product or brand in their minds.

48
On the following scale please place a check on
the position that describes your beliefs about
the brandMillerHeavy taste Light
taste-----------------------------------------
--------------------------------------- Dark
color Light color--------------------------
------------------------------------------------
------ BudweiserHeavy taste Light
taste-----------------------------------------
--------------------------------------- Dark
color Light color--------------------------
------------------------------------------------
------
49
On the following scale please place a check on
the position that describes your beliefs about
the brandMillerHeavy taste Light
taste-----------------------------------------
--------------------------------------- -10
-5 0 5
10Dark color Light
color-----------------------------------------
--------------------------------------- -10
-5 0 5
10 BudweiserHeavy
taste Light taste--------------------------
------------------------------------------------
------ -10 -5 0
5 10Dark
color Light color--------------------------
------------------------------------------------
------ -10 -5 0
5 10
50
O GUINESS STOUT
o Budweiser
O MILLER BEER
O MILLER LITE
51
Product Brand Positioning
(a) Product-positioning map (breakfast market)
b) Brand-positioning map (instant breakfast
market)
52
Product Brand Positioning
(a) Product-positioning map (breakfast market)
b) Brand-positioning map (instant breakfast
market)
53
What position does this one occupy?

• The Night Time cough medicine
• Why --- it originally was 25 alcohol
• Antihistamines alcohol unconsciousness

54
Name the products....

• The night-time cough remedy.
• It's after work, it's ______ time.
• We're No. 2, we try harder.
• ______ fights cavities.
• The refrigerator deodorant.
• Here's to good friends.
• The quicker picker-upper.
• The number one in rent-a-car.

55
Upcoming Topics

• Consumer Behavior