MKTG Chapter 8: Market Segmentation, Targeting, and Positioning

Market Segmentation

aggregating prospective buyers into groups/segments that have (1) common needs and (2) will respond similarly to marketing action

Product Differentiation

firm use different marketing mix actions to help consumer perceive the product as being different and better than competing products; physical or nonphysical features

Market-Product Grid

framework to relate the market segments of potential buyers to products offered or potential marketing actions; ex. type of sleeper to pillow

Usage Rate

the quantity consumed or patronage (store visits) during a specific period; frequency marketing focuses on usage rate

80/20 Rule

suggests 80 percent of a firm's sales are obtained from 20 percent of its customers

Customer Lifetime Value (CLV)

represents the financial worth of a customer to a company over the course of their relationship

Product Positioning

the place a product occupies in consumers' minds based on important attributes relative to competitive products

Product Repositioning

changing the place a product occupies in a consumer's mind relative to competitive products

Perceptual Map

a means of displaying in two dimensions the location of products/brands in the minds of consumers to enable a manager to see how they perceive competing products/brands, as well as the firm's own product/brand

Head to Head Positioning

competing directly with competitors on similar product attributes in the same target market

Differentiation Positioning

seeking a less-competitive, smaller market niche in which to locate a brand

Segmentation creates value

enables companies to tailor their offering to consumer groups, identify marketing opportunities, and improve consumer satisfaction by enhancing convenience, relevance, and other key facets of the buying experience

Business Benefits

identification of unfulfilled needs, better product design, more targeting promotions, and increased customer satisfaction

Customer Benefits

convenience and time savings, tailored products/services, relevant offers, and personalized experience

Ways to segment markets

demographics, geographic, psychographics, and behavioral (recency, frequency, loyalty, profitability, needs, preferences, decision process)

Criteria in Selecting Target Segments

(1) market size (2) expected growth (3) competitive position (4) cost to reach (5) company fit

Value =

perceived benefits - perceived costs

Elements of a Positioning Statement

(1) defining target market (2) value (3) evidence (4) competitive set

Segmentation Strategies

one product and multiple market segments, multiple products and multiple market segments, segments of one (mass customization)

Cannibalization/

new products stealing customers and sales from older, existing ones

5 Step Process to Segment Market and Select Target Segments

(1) group potential buyers into segments (2) group products to be sold into categories (3) develop a market-product grid and estimate size of markets (groups of related (product synergies) products in columns and segment market (market synergies) groupings in rows, each cell shows estimated market size...) (4) select target markets (5) take marketing actions to reach target markets