2. Targeting the market(s)

o undifferentiated

o concentrated

o multisegmented

Developing the marketing strategy

• Selecting a Target Market

1. Need to aggregate consumers with similar needs.

2. Demand patterns: Do all potential customers have similar needs/desires or are there clusters? Types of demand patterns are:

3. Homogeneous Demand-uniform, everyone demands the product for the same reason(s). Very rare in the US, staple foods..

4. Clustered Demand-consumer demand classified in 2 or more identifiable clusters. IE Automobiles:

o luxury

o cheap

o Sporty

o Spacious

5 Diffused Demand-Product differentiation more costly and more difficult to communicate IE Cosmetic market, need to offer hundreds of shades of lipstick. Firms try to modify consumer demand to develop clusters of at least a moderate size.

• Undifferentiated Approach (Total Market Approach)

Single Marketing Mix for the entire market.

All consumers have similar needs for a specific kind of product. Homogeneous market, or demand is so diffused it is not worthwhile to differentiate, try to make demand more homogeneous.

Single MM consists of:

• 1 Pricing strategy

• 1 Promotional program aimed at everybody

• 1 Type of product with little/no variation

• 1 Distribution system aimed at entire market

The elements of the marketing mix do not change for different consumers, all elements are developed for all consumers.

Examples include Staple foods-sugar and salt and farm produce. Henry Ford, Model T, all in black. Popular when large scale production began. Not so popular now due to competition, improved marketing research capabilities, and total production and marketing costs can be reduced by segmentation. Organization must be able to develop and maintain a single marketing mix.

Market Segmentation Approach

Individuals with diverse product needs have heterogeneous needs.

Market segmentation is the process of dividing a total market into market groups consisting of people who have relatively similar product needs, there are clusters of needs. The purpose is to design a MM(s) that more precisely matches the needs of individuals in a selected market segment(s). A market segment consists of individuals, groups or organizations with one or more characteristics that cause them to have relatively similar product needs.

There are two Market Segmentation Strategies.

• Concentration strategy

• Multi –segment strategy

• Concentration Strategy

A single market segment with one MM.

Market

|

|A Market Segment

|-------------------

One MM------------------>A Market Segment

|-------------------

|A Market Segment

|

PROS include:

• It allows a firm to specialize

• can focus all energies on satisfying one group's needs

• A firm with limited resources can compete with larger organizations.

CONS include:

• Puts all eggs in one basket.

• Small shift in the population or consumer tastes can greatly effect the firm.

• May have trouble expanding into new markets (especially up-market). Haggar having problems finding someone to license their name for womens apparel, even though women purchase 70% Haggar clothes for men.

• Objective is not to maximize sales, it is efficiency, attracting a large portion of one section while controlling costs.

Multi –segment strategy

2 or more segments are sought with a MM for each segment, different marketing plan for each segment. This approach combines the best attributes of undifferentiated marketing and concentrated marketing.

Market

MM--------------------->|A Market Segment

|_______________________

MM--------------------->|A Market Segment

|_______________________

MM--------------------->|A Market Segment

|_______________________

MM--------------------->|A Market Segment

|

|

Example: Marriott International:

1. Marriott Suites...Permanent vacationers

2. Fairfield Inn...Economy Lodging

3. Residence Inn...Extended Stay

4. Courtyard By Marriott...Business Travellers

PROS include:

• Shift excess production capacity.

• Can achieve same market coverage as with mass marketing.

• Price differentials among different brands can be maintained Contact Lens!!

• Consumers in each segment may be willing to pay a premium for the tailor-made product.

• Less risk, not relying on one market.

CONS include:

• Demands a greater number of production processes.

• Costs and resources and increased marketing costs through selling through different channels and promoting more brands, using different packaging etc.

• Must be careful to maintain the product distinctiveness in each consumer group and guard its overall image (Contact lenses)

Criteria for Segmentation

• Criteria needed for segmentation

For segmentation to occur:

1. Segments must have enough profit potential to justify developing and maintaining a MM

2. Consumer must have heterogeneous (different) needs for the product.

3. Segmented consumer needs must be homogeneous (similar)

4. Company must be able to reach a segment with a MM, IE Review to reach Delaware undergraduates.

How do marketers reach children?

o Cartoons on saturday

o Nickelodian

o Cereal boxes

o Sports illustrated for kids

Look at how media has changed recently due to changing demographics etc. and therefore the need of marketers to reach these groups. Media must respond because they are essentially financed by the marketers or at least heavily subsidised Handout...Stations switching to lucrative... Indicates how media format changes due to changing population needs.

5. Must be able to measure characteristics & needs of consumers to establish groups.

• Variables for Segmentation

Need to determine the variables that distinguish marketing segments from other segments.

• Segmentation variables should be related to consumer needs for, and uses of, or behavior toward the product. IE Stereo; age not religion.

• Segmentation variable must be measurable. No best way to segment the markets. Selecting inappropriate variable limits the chances of success.

Variables for segmenting Consumer Markets include:

• Demographic - age, sex, fertility rates, migration patterns, and mortality rates, ethnicity, income, education, occupation, family life cycle, family size, religion and social class.

Handout...Photography companies try to click...

Photography companies identify a new target market (children) to market their product to, current sales are declining with current target market due to advances in technology (video cameras etc.)

Handout...Two income marriages are now the norm

Families have more income and less time...esp. for children!!