Market Segmentation

THE MARKETING MIX The FOUR FACTORS OF MARKETING are: Product Price Place Promotion CONTROLLABLE PARTS of the marketing process involve: Designing a want-satisfying PRODUCT Setting a PRICE for the product Placing the product in a PLACE where people will buy it PROMOTING the product

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Elements in the Marketing Mix

Product
Marketing Program

Place

Buy at Computers R Us

Price
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Promotion

DESIGNING A PRODUCT TO MEET NEEDS First, develop a product to fill the identified need. A PRODUCT is any physical good, service, or idea that satisfies a want or need plus anything that would enhance the product in the eye of consumers, such as the brand. The next step is CONCEPT TESTING developing an accurate description of your product and asking people whether or not the concept (the idea of the cereal) appeals to them. TEST MARKETING is the process of testing products among potential users. Next, decide which brand names should be offered to attract customers.

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Product Design
Concept Test Test Market Package Design/Brand Name

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A BRAND NAME is a word, letter, or group of words or letters that differentiates one seller s goods and services from those of competitors. These steps create THE FIRST P PRODUCT. SETTING AN APPROPRIATE PRICE (the second P ) The price depends on a number of factors, such as the price of competing restaurants. You also have to consider the costs of pro-ducing, distributing, and promoting the product.

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GETTING THE PRODUCT TO THE RIGHT PLACE (the third P ) Once the product is manufactured, you have to decide how to get it to the consumer. You may want to sell your product through INTERMEDIARIES, (MARKETING MIDDLEMEN,) organizations that specialize in distributing goods from producer to customer. DEVELOPING AN EFFECTIVE PROMOTIONAL STRATEGY (the fourth P )

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PROMOTION consists of all the techniques sellers use to motivate people to buy products or services. RELATIONSHIP BUILDING WITH CUSTOMERS includes responding to any suggestions they may make to improve the product or the marketing of the product.

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Marketing is an ONGOING PROCESS; companies must continually adapt to changes in the market. Listening to customers is the key to marketing.

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TWO DIFFERENT MARKETS: CONSUMER AND BUSINESS-TOBUSINESS (B2B) THERE ARE TWO MAJOR MARKETS: The CONSUMER MARKET consists of all the individuals or households that want goods and services for personal consumption or use. The BUSINESS-TO-BUSINESS (B2B) MARKET consists of all the individuals and organizations that want goods and services to use in producing other goods and services or to sell, rent, or supply goods to others (traditionally called INDUSTRIAL GOODS.) The buyer s REASON FOR BUYING and the END USE of the product determine whether it is considered a consumer product or a B2B product.

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Business-to-Business (B2B)
1. Number 2. Size 3. Geographic Concentration 4. Rational 5. Direct Sales 6. Personal Selling
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THE CONSUMER MARKET Consumer groups differ greatly in age, education level, income, and taste. Marketers must first decide which group to serve and then develop products and services specially tailored to their needs (as Campbell Soup Company does.) MARKET SEGMENTATION is the process of dividing the total market into groups whose members have similar characteristics. TARGET MARKETING is marketing directly toward those groups (market segments) an organization decides it can serve profitably.

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Market segmentation the process of dividing a total market into several relatively homogeneous groups.

SEGMENTING THE CONSUMER MARKET Learning goal 4 Explain how marketers meet the needs of the consumer market through market segmentation, relationship marketing, and the study of consumer behavior. GEOGRAPHIC SEGMENTATION is dividing the market by geographic area. DEMOGRAPHIC SEGMENTATION is dividing the market by age, income, and education level. PSYCHOGRAPHIC SEGMENTATION is dividing the market using the group s values, attitudes, and interests. BENEFIT SEGMENTATION is dividing the market by determining which benefits of the product to talk about.
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Market Segmentation
Target Marketing Geographic Demographic Psychographic Benefit Volume
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Geographic Segmentation Divides market into homogeneous groups on the basis of their locations. Demographic Segmentation Divides market on the basis of various demographic or socioeconomic characteristics: gender, income, age, occupation, household size, stage in the family life cycle, education, and ethnic group. Psychographic Segmentation Divides consumer market into groups with similar psychological characteristics, values, and lifestyles. Product-Related Segmentation Divides market based on buyer s relationship to the good or service.

Geographic segmentation targets geographically concentrated industries. Demographic, or customer-based, segmentation a good or service intended for a specific organizational market (i.e. healthcare). End-use segmentation - focuses on the precise way a B2B purchaser will use a product.

Consumer behavior - actions of ultimate consumers directly involved in obtaining, consuming, and disposing of products and the decision processes that precede and follow these actions.

Personal factors: needs and motives, perceptions, attitudes, selfconcept. Interpersonal factors: cultural, social, and family influences.
Business buying behavior - often includes a variety of influences from multiple decision makers.

Relationship marketing - developing and maintaining long-term, cost-effective exchange relationships with partners. Consumers enter into relationships only if there is some benefit to them.

Lower costs and higher profits for the business. Efficient targeting of best customers increases the lifetime value of a customer. Stronger relationships with business partners and opportunities to combine capabilities and resources to better accomplish goals.

80/20 principle: Frequent customers have a higher lifetime value, so businesses allocate resources accordingly. Frequency marketing: reward purchasers with cash, rebates, and other premiums. Affinity programs: solicit involvement based on common interest. Comarketing: businesses jointly market each others products. Cobranding: firms link their names in a single product.

VOLUME, OR USAGE, SEGMENTATION is dividing the market by usage (volume of use.) The best segmentation strategy is to USE ALL THE VARIABLES to come up with a consumer profile that s sizable, reachable, and profitable. REACHING SMALLER MARKET SEGMENTS NICHE MARKETING is the process of finding small but profitable market segments and designing custom-made products for them. ONE-TO-ONE MARKETING means developing a unique mix of goods and services for each individual customer. This is easier to do one-to-one marketing in B2B markets, but is becoming possible in consumer markets as well.
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Different Markets
Consumer
Niche One-to-One

Business-to-Business (B2B)
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MOVING TOWARD RELATIONSHIP MARKETING MASS MARKETING means developing products and promotions to please large groups of people. The mass marketer tries to sell products to as many people as possible. That means using mass media, such as TV, radio, and newspapers. RELATIONSHIP MARKETING is a marketing strategy with the goal of keeping individual customers over time by offering them products that exactly meet their requirements. RELATIONSHIP MARKETING moves away from mass production toward CUSTOM-MADE GOODS.

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Customizing products and marketing and rapidly delivering goods. Customer relationship management software helps companies gather, sort, and interpret data about specific customers.

Influences on Consumer Behavior

Culture Learning
Customer

Reference Group

Cognitive Subculture
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Dissonance

SOCIOCULTURAL INFLUENCES such as reference groups and culture Consumer behavior is also influenced by other factors: LEARNING involves changes in an individual s behavior resulting from previous experiences and information. A REFERENCE GROUP is the group that an individual uses as a reference point in formation of his or her beliefs, attitudes, values, or behavior. CULTURE is the set of values, attitudes, and ways of doing things that are transmitted from one generation to another in a given society. .

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SUBCULTURE is the set of values, attitudes, and ways of doing things that results from belonging to a certain group with which one closely identifies. COGNITIVE DISSONANCE is the type of psychological conflict that can occur after a purchase such as doubts about whether they got the best product at the best price.

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The latest in TECHNOLOGY enables sellers to work with buyers to determine their individual wants and needs and to develop goods and services specifically designed for those individuals. One-way messages in mass media are replaced by a personal dialogue among participants. The text uses two examples: service firms such as airlines, rental car companies, and hotels; and the Hard Rock Caf. THE CONSUMER DECISION-MAKING PROCESS Studying consumer behavior centers on studying the CONSUMER

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PURCHASE DECISION PROCESS: Problem recognition Information search Evaluate alternatives Make purchase decision Postpurchase evaluation Consumer behavior researchers also study the various INFLUENCES THAT IMPACT CONSUMER BEHAVIOR. MARKETING MIX VARIABLES (the four Ps) PSYCHOLOGICAL INFLUENCES such as perception and attitudes SITUATIONAL INFLUENCES such as the type of purchase and physical surroundings
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Several factors make BUSINESS-TO-BUSINESS MARKETING DIFFERENT NUMBER: There are relatively FEW CUSTOMERS compared to the consumer market. SIZE Though few in number, industrial customers are relatively VERY LARGE.

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GEOGRAPHICALLY CONCENTRATED: B2B markets tend to be CONCENTRATED in certain areas of the country. RATIONAL Business buyers are generally MORE RATIONAL in their purchase decisions. DIRECT B2B sales tend to be DIRECT. PERSONAL SELLING There is much more emphasis in personal selling than in the consumer market. YOUR PROSPECTS IN MARKETING There is a wider variety of careers in marketing than in most business 13-34 areas.

Place Decisions
Direct Sales Reseller Sales Market Coverage
Intensive Selective Exclusive

Inventory Size Logistics

Source: Perdue University, May 2005

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Why Should You Market To Women?

Women control 80% of all household spending. Women purchase 81% of all products and services manufactured. 80% of all checks written are signed by women. 85% of all automobile purchases are influenced by women. In 2005, 4.7 Million women were self-employed.

Source: St. Louis Small Business Monthly, May 2004

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Consumer Decision Making

Marketing mix
Product Price Place Promotion

Sociocultural
Reference groups Family Social class Culture Subculture

Psychological
Perception Attitudes Learning Motivation
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DecisionDecision-Making Process
Problem Recognition Information Search Alternative evaluation Purchase decision Postpurchase evaluation
(cognitive dissonance)

Situational
Type of Purchase Social surroundings Physical surroundings Previous experience