CHAPTER

IDENTIFYING MARKET SEGMENTS AND TARGETS

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-1

AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 1. Explain what market segmentation is and when to use it. 2. Identify the five steps involved in segmenting and targeting markets. 3. Recognize the different factors used to segment consumer and organizational markets.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-2

AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

4. Know how to develop a market-product grid to identify a target market and recommend resulting actions. 5. Explain how marketing managers position products in the marketplace.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-3

SNEAKERS MARKETING WARS: JAY-Z, YAO MING, AND A SWOOSHLESS NIKE LINE FOR WAL-MART
How Do You Stand Out on Sneaker Walls?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-4

SNEAKERS MARKETING WARS: JAY-Z, YAO MING, AND A SWOOSHLESS NIKE LINE FOR WAL-MART
New Segments and Strategies

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-5

SNEAKERS MARKETING WARS: JAY-Z, YAO MING, AND A SWOOSHLESS NIKE LINE FOR WAL-MART
Competitive Trends Age Segments Gender Segments Price Segments Sport Segments Lifestyle Segments
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-6

WHY SEGMENT MARKETS? What Market Segmentation Means

Market Segmentation
Market Segments

Product Differentiation
Segmentation: Linking Needs to Actions

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-7

FIGURE 9-1 Market segmentationlinking market needs to an organizations marketing program

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-8

WHY SEGMENT MARKETS? What Market Segmentation Means

How Reeboks Segmentation Strategy Developed Using Market-Product Grids

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-9

FIGURE 9-2 Market-product grid showing how different Reebok shoes reach segments of customers with different needs

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-10

WHY SEGMENT MARKETS? When to Segment Markets

Examples of Successful Market Segmentation
Customer Relationship Management (CRM)

Mass Customization
Build-to-Order (BTO)

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-11

Street & Smiths Baseball

What product/market segmentation strategy?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-12

Harry Potter
What product/market segmentation strategy?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-13

WHY SEGMENT MARKETS? When to Segment Markets

The Segmentation Trade-Off: CRM versus Synergy

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-14

Ann Taylor & Ann Taylor Loft

What is the danger of a two-segment strategy?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-15

Concept Check

1. Market segmentation involves aggregating prospective buyers into groups that have two key characteristics. What are they?
A: The groups should (1) have common needs and (2) respond similarly to a marketing action.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-16

Concept Check

2. When should a firm segment its markets? A: A firm goes to the trouble and expense of segmenting its markets when this will increase its sales, profit, and return on investment.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-17

FIGURE 9-3 The five key steps in segmenting and targeting markets link market needs of customers to the organizations marketing program

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-18

STEPS IN SEGMENTING AND TARGETING MARKETS Step 1: Group Potential Buyers into Segments
Criteria to Use in Forming the Segments
Potential for Increased Profit Similarity of Needs of Buyers within a Segment

Difference of Needs of Buyers Among Segments

Potential of a Marketing Action to Reach a Segment Simplicity and Cost of Assigning Buyers to Segments
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-19

STEPS IN SEGMENTING AND TARGETING MARKETS Step 1: Group Potential Buyers into Segments
Ways to Segment Consumer Markets
Customer Characteristics
Geographic: Region Demographic: Household Psychographic: Lifestyle

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-20

STEPS IN SEGMENTING AND TARGETING MARKETS Step 1: Group Potential Buyers into Segments
Ways to Segment Consumer Markets
Buying Situations
Benefits Sought: Product Features Usage/Patronage: Usage Rate
Frequency Marketing 80/20 Rule

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-21

FIGURE 9-B Segmentation variables and breakdowns for U.S. consumer markets

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-22

Mac-Gray MicroFridge
What benefits sought and what consumer market segments targeted?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-23

FIGURE 9-C 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

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-24

FIGURE 9-4 Comparison of various kinds of users and nonusers for Wendys, Burger King, and McDonalds fast-food restaurants

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-25

STEPS IN SEGMENTING AND TARGETING MARKETS Step 1: Group Potential Buyers into Segments
Variables to use in Forming Segments
Students in Dorms Students in Apartments Day Commuters Night Commuters Faculty/Staff People Living in Area People Working in Area

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-26

STEPS IN SEGMENTING AND TARGETING MARKETS Step 1: Group Potential Buyers into Segments
Ways to Segment Organizational Markets
Customer Characteristics
Geographic: Statistical Area Demographic: NAICS Code Demographic: Number of Employees Benefits Sought: Product Features
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-27

FIGURE 9-D Segmentation variables and breakdowns for U.S. organizational markets

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-28

Xerox WorkCenter C2424

What variables are used to segment organizational markets?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-29

Concept Check

1. The process of segmenting and targeting markets is a bridge between what two marketing activities?

A: identifying market needs and taking marketing actions

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-30

Concept Check

2. What are two main ways to segment consumer and organizational markets?

A: customer characteristics and buying situations

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-31

STEPS IN SEGMENTING AND TARGETING MARKETS Step 2: Group Products to be Sold into Categories Step 3: Develop a Market-Product Grid and Estimate Size of Markets

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-32

FIGURE 9-5 Selecting a target market for your Wendys fast-food restaurant next to an urban university (target market is shaded)

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-33

STEPS IN SEGMENTING AND TARGETING MARKETS

Step 4: Select Target Markets

Criteria to Use in Picking the Target Segments
Market Size Expected Growth Cost of Reaching Segment Compatibility with the Organizations Objectives Competitive Position and Resources

Choose the Segments

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-34

STEPS IN SEGMENTING AND TARGETING MARKETS Step 5: Take Marketing Actions to Reach Target Markets
Your Wendys Segmentation Strategy
Day Commuters Between-Meal Snacks

Dinner to Night Students

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-35

Wendys
How can Wendys target different market segments with different advertising programs?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-36

FIGURE 9-6 Advertising actions to reach specific student segments

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-37

STEPS IN SEGMENTING AND TARGETING MARKETS Step 5: Take Marketing Actions to Reach Target Markets
Apples Ever-Changing Segmentation Strategy

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-38

Apple Computer (1977Today)

How have Apples product lines and market segmentation strategies changed?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-39

STEPS IN SEGMENTING AND TARGETING MARKETS Market-Product Synergies: A Balancing Act

Marketing Synergies Product Synergies

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-40

FIGURE 9-E Benefits (+) and drawbacks (-) of a firms market-product strategies

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-41

Concept Check

1. What are some criteria used to decide which segments to choose for targets?

A: These criteria include market size,

expected growth, competitive position, cost of reaching the segment, and compatibility with the organizations objectives and resources.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-42

Concept Check

2. In a market-product grid, what factor is estimated or measured for each of the cells?

A: Each cell in the grid can show the estimated market size of a given product sold to a specific market segment.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-43

Concept Check

3. What is the difference between marketing

synergies and product synergies in a market-product grid?

A: Marketing synergies run horizontally across a

market-product grid. Each row represents an opportunity for efficiency in the marketing efforts to a market segment. Product synergies run vertically down the market-product grid. Each column represents an opportunity for efficiency in research and development (R&D) and production.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-44

POSITIONING THE PRODUCT Product Positioning Using Perceptual Maps

Identify Important Attributes for a Product Class Judgments of Existing Brands on These Important Attributes Ratings of an Ideal Brands Attributes Perceptual Map
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-45

Chocolate Milk
How can dairies put more zip into sales?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-46

FIGURE 9-7 Your challenge as a marketing manager: Try to position chocolate milk to make it more appealing to adults

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-47

POSITIONING THE PRODUCT Product Positioning Using Perceptual Maps

Positioning Chocolate Milk for Adults
Finding a New Position for Chocolate Milk in the Minds of Adults: Nutrition
Packaging Adult Chocolate Milk

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-48

FIGURE 9-8 A perceptual map to suggest a strategy for positioning chocolate milk to reach adults

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-49

Concept Check

1. What is product positioning?

A: Product positioning refers to the place an offering occupies in consumers minds on important attributes relative to competitive offerings.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-50

Concept Check

2. Why do marketers use perceptual maps in product positioning decisions? A: Marketers use perceptual maps to display in two dimensions the location of their and competing products or brands to see how consumers perceive them and then take marketing actions.
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-51

GOING ONLINE
APPLES LATEST MARKET-PRODUCT STRATEGIES

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-52

Going Online

1. Access the Apple History website. Identify the new and remaining markets Apple has targeted with new and existing products compared to those described in the text and the Marketing NewsNet.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-53

Going Online

2. Can Apple survive as a niche PC marketer like BMW has with autos? Why or why not?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-54

VIDEO CASE 9
NOKIA: A PHONE FOR EVERY SEGMENT

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-55

VIDEO CASE 9
Nokia

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-56

VIDEO CASE 9
Nokia

1. Why has segmentation been a successful marketing strategy for Nokia?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-57

VIDEO CASE 9
Nokia

2. What customer characteristics were used by mobile phone marketers during the industrys early stages of growth? Which customer characteristics and segmentation variables does Nokia use?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-58

VIDEO CASE 9
Nokia

3. Create a market-product grid for Nokia today. What potential new markets could you add to the grid?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-59

SUPPLEMENTAL LECTURE NOTE 9-1

MARKET SEGMENTATION IN PRACTICE: WHAT KIND OF PILLOW DO YOU NEED?

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-60

FIGURE 9-A Market-product grid showing the size of markets for pillows for three different segments of sleepers

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-61

SUPPLEMENTAL LECTURE NOTE 9-2

MARKET-PRODUCT SYNERGIES

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-62

FIGURE 9-F Market-product grid of alternative strategies for a lawnmower manufacturer

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-63

IN-CLASS ACTIVITY 9-1

INTERPRETING CENSUS DATA

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-64

U.S. Census 2000 Promotional Video

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-65

Census 2000 Short Form

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-66

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-67

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-68

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-69

American Community Survey Video

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-70

American Community Survey Form

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-71

IN-CLASS ACTIVITY 9-2

PRODUCT CATEGORIZATION TO IDENTIFY PRODCUT GROUPS

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-72

IN-CLASS ACTIVITY 9-3

PRODUCT POSITIONING FOR CONSUMERS AND RETAILERS

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-73

3M Post-it Notes TV ad

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-74

3M Post-it Flag Highlighter Invention

+ =
Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 9-75

3M Post-it Flag Highlighter Colors and Packages

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-76

3M Post-it Flag Highlighter Front and Back of Package

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-77

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-78

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-79

Market Segmentation

Market segmentation involves aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marketing action.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-80

Market Segments

Market segments are the relatively homogeneous groups of prospective buyers that result from the market segmentation process.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-81

Product Differentiation

Product differentiation is a strategy that involves a firms using different marketing mix activities to help consumers perceive the product as being different and better than competing products.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-82

Market-Product Grid

A market-product grid is a framework to relate the market segments of potential buyers to products offered or potential marketing actions by the firm.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-83

Synergy

Synergy is the increased customer value achieved through performing organizational functions more efficiently.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-84

Usage Rate

Usage rate is the quantity consumed or patronage (store visits) during a specific period of time.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-85

80/20 Rule

The 80/20 rule is a concept that suggests 80 percent of a firms sales are obtained from 20 percent of its customers.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-86

Product Positioning

Product positioning refers to the place an offering occupies in consumers minds on important attributes relative to competitive products.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-87

Perceptual Map

A perceptual map is a means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how consumers perceive competing products or brands relative to its own and then take marketing actions.

Copyright 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Slide 9-88