Chapter 9

Markets

Groups of people, individuals, or organizations that have:

1) desires or needs for products in a product class

2) ability, willingness, and authority to purchase such products

STP

Segmenting, Targeting, and Positioning

Market segmentation → market segment → targeting segments → positioning

Market Segmentation

Dividing a total market into groups with relatively similar product needs to design marketing mix

Involves aggregating prospective buyers into groups, or segments that

1) have common needs

2) will respond similarly to a marketing action

Market Segment

Customer base sharing one or more similar characteristics that cause them to have similar product needs

Relatively homogenous groups of prospective buyers that result from the market segmentation process

Market-product grid

A framework to relate the market segments of potential buyers to products offered to potential marketing actions

When and How to Segment Markets

1) one product and multiple market segments

2) multiple products and multiple market segments

3) segments of one: mass customization

One product and multiple market segments

When a firm produces only a single product or service, it:

1) attempts to sell it to two or more market segments

2) avoids the extra costs of developing and producing additional versions of the product

Multiple products and multiple market segments

Marketing different products is more expensive than producing just one but it is justifiable if it:

1) serves customers’ needs better

2) doesn’t increase price

3) doesn’t reduce quality

4) adds to sales and profits

Segments of One: Mass Customization

Involves tailoring products or services to the tastes of individual customers on a high volume scale

It is made possible via Internet as well as flexible manufacturing and marketing processes

Build-To-Order

Involves manufacturing a product only when a customer places an order for it

Organizational Synergy

The increased customer value achieved through performing organizational functions more efficiently

Ex. Tiffany and Walmart offers different variations of the same basic offerings to high-end and low-end segments

Cannibalization

The stealing of customers and sales from an existing product or chain of retail stores

Steps in Segmenting and Targeting Markets

1) Group potential buyers into segments

2) Mass versus Targeted Marketing

Grouping potential buyers into segments

1) geographic segmentation

2) demographic segmentation

3) psychographic segmentation

4) behavioral segmentation

Geographic segmentation

Based on where prospective customers live or work (region, city, size)

Demographic segmentation

Objective physical characteristics (gender, race), measurable (age, income,) and other classification attributes (birth era, household size)

Psychographic segmentation

Subjective mental or emotional attributes (personality) and aspirations (lifestyle)

Behavioral segmentation

Based on observable actions or attitudes by prospective customers → where they buy, what benefits they seek, how frequently they buy, why they buy

Mass marketing

Selling the same product to all customers → evolved with mass production

Targeted Marketing

Selecting a group(s) of consumers for marketing

Strategy selection for target market is affect by the market’s attributes, product attributes, and organization’s objectives and resources

Target market

Consumers for whom a business creates and maintains a marketing mix

Homogenous market

Large proportion of customers have similar needs for a product

Heterogenous market

Customers have diverse needs for products in a specific product class

Positioning

Creating a preferred position of the company’s products in the minds of consumers

Product positioning, re-positioning, head-to-head positioning, and differentiation positioning

Product positioning

The place a product occupies in consumers’ minds based on important attributes relative to competitive products

Re-positioning

Changes the place and offering occupies in consumers’ minds relative to competitive products

Head-to-head positioning

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

Differentiation positioning

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