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market segmentation
Strategy of 1)IDENTIFYING groups of people or organizations with certain shared needs and characteristics within the broad markets for consumer or business products and 2)AGGREGATING (combining) these groups into larger market segments according to their mutual interest in the product's utility.

LECTURE: Breaking large markets into smaller units based on measurable criteria
shared characteristics

3 categories
important part of market segmentation; groups of consumers with similar needs and wants:
1) behavioristic,
2)geographic,
3)psychographic
Marketer's purpose in segmentation
1)identify people who are likely to be responsive
2)develop rich descriptions of them in order to better understand them, create marketing mixes for them, and reach them with meaningful advertising and other communications
A.Behavioristic Segmentation
Method of determining market segments by grouping consumers into product-related groups based on their PURCHASE BEHAVIOR.
Most important variables in Behavior Segmentation:
1) user status
2) usage rate
3) purchase occasion
4) benefits sought
1) User Status
Six categories into which consumers can be placed, which reflect varying degrees of loyalties to certain brands and products.
a)sole users
b)semisole users
c)discount users
d)aware nontriers, e)trial/rejectors
f) repertoire users.
a) sole users

b) semi-sole users

c) Discount users
a)the most brand loyal and require the least amount of advertising

b)typically use brand A but have an alternative selection if it is not available or if the alternative is promoted with a discount

c) the semi-sole users of competing brand B. They don't buy brand A at full price but perceive it well enough to buy it at a discount
e) Aware nontriers

f) Trial/rejectors

g) Repertoire users
e) use competitive products in a category but haven't taken a liking to brand A. These people are rarely much potential

f) bought brand A's advertising message but didn't like the product. Only a reformulation will bring them back.

g) percieve two or more brands to have superior attributes and will buy at full price. Primary brand switchers, and respond to persuasive advertising= Primary target for brand Advertising!
2) Usage Rate

a)Volume Segmentation
The extent to which consumers use a product: light, medium, or heavy.

Defining consumers as light, medium, or heavy users of products. Measures people's usage rate.
___% of the population consumes ___% of the product.
20%, 80%
Goal: define that 20% and aim advertising at them
-find similar characteristics
-sometimes use other products to define. Starbucks+Infiniti
3)Purchase Occasion
A method of segmenting markets on the basis of WHEN consumers buy and use a good or service.
-frequency of need
-a fad
-seasons
*common purchase occasions = potential target segment, know when to run specials /promote certain product categories
4)Benefits



a)Benefit Segmentation
The particular product attributes offered to customers, such as high quality, low price, status, speed, sex appeal, good taste, and so on.


a)Method of segmenting consumers based on the benefits being sought.
symbolism
what the brand name means to them, to associates, or to reference groups
brand switching
changing from one purchase occasion to the next; occurs in response to different "need states that customers may experience from one occasion to another.
-based on benefits the consumer is seeking at the time of purchase
B.Geographic Segmentation
A method of segmenting markets by geographic regions based on the shared characteristics, needs, or wants of people within the region.
*want to advertise in areas where sales potential is best

Prizm & 9 Nations
PRIZM, by Claritas
geographic segmentation system; updated with each 10-yr census; it analyzes urbanization measures, as well as household and neighborhood characteristics in order to assign one of 66 geographic segments w/rich desciptions
C.Demographic Segmentation
segmentation based on a population's statistical characteristics such as sex, age, ethnicity, education, occupation, income, or other quantifiable factors.
Geodemographic Segmentation
Combining demographics with geographic segmentation to select target markets in advertising.

Ex. Hispanic market growth = brand loyalty. Measure size of "strongly hispanic" community.
*Peoples lives are influenced by their ethnicity and community
other demographic trends:
-Best Buy and women.
-Age and product purchase behavior.
-Fast food: Children, young males
-International markets: demographics change rapidly. New middle class.
D. Psychographic Segmentation
Method of defining consumer markets based on psychological variables including values, attitudes, personality, and lifestyle.
Psychographics
The grouping of consumers into market segments on the basis of psychological makeup—values, attitudes, personality, and lifestyle.
*Allows marketers to view people as individuals with feelings and inclinations
VALS
assigns consumers to one of eight groups based on : primary motivation and resources.
Primary Motivation
The pattern of attitudes and activities that help people reinforce, sustain, or modify their social and self-image. An understanding of the primary motivation of individuals helps advertisers promote and sell goods and services.
Resources (Resources Axis)
A term in the Values and Lifestyles (VALS) typology relating to the range of psychological, physical, demographic, and material capacities that consumers can draw upon. The resources axis includes education, income, self-confidence, health, eagerness to buy, and energy level.
3 Primary Motivations:
Ideals(principles)

achievement(success/accomplishment)

self-expression (desire for experiences/risk)
Purpose of VALS
help marketers id whom to target, ID what target group buys and does, locate where groups of people live , ID how to communicate with them, and gain insight into why the target group behaves the way it does.
"Tipping Point" by Malcom Gladwell
identifies people who are important social influences.
-they create "social epidemics": almost overnight increases in the popularity of a product.
three groups responsible for "social epidemics"
Connectors-wide social circles

Mavens- spend time and energy accumulating knowledge and sharing knowledge.

Salesmen- people that others view as credible, trustworthy and authoritative. Influential in affecting the consumption of others.
2) Business Markets
Organizations that buy natural resources, component products, and services that they resell, use to conduct their business, or use to manufacture another product.EX. manufacturers, govt. agencies, retailers, banks
Resellers
Businesses that buy products from manufacturers or wholesalers and then resell the merchandise to consumers or other buyers; also called middlemen.
a. business purchasing procedures:
business consumers use a much more complex and rigid process than the consumer purchase process.
-large companies have buying dept.
- some buyers have brand-equity behaviors: prefer certain brands to reduce risk of product failure
-Making a sale takes much longer
b. industrial classification
-focus sales and advertising efforts to firms that are in the right business for their products.
North American Industry Classification System (NAICS) codes
Census bureau collects data; Method used by the U.S. Department of Commerce to classify all businesses. The NAICS codes are based on broad industry groups, subgroups, and detailed groups of firms in similar lines of business.
-organizes all industries into 20 broad sectors, which are then subdivided into smaller groups
-helps companies segment markets and do research
c. market concentration
reduces the number of geographic markets for an advertiser

-15% of US manufacturing establishments account for more than 80% of all manufacturing dollars
-can also segment by end users
3) Aggregating market Segments
second step in market segmentation process: reorganizing and aggregating groups into larger market segmets based on their potential for sales and profits
a.Primary Demand


b.Primary Demand Trend
a.Consumer demand for a whole product category.

b.The projection of future consumer demand for a whole product category based on past demand and other market influences.
-using marketing research
-challenge of market segmentation:
estimating profits if the company decides to target 1) the whole market or 2) only a specific market segment
-Combining Groups into Target Markets
find groups that are relatively homogeneous and offer a good potential for profit
II. Target Marketing Process
The sequence of activities aimed at assessing various market segments, designating certain ones as the focus of marketing activities, and designing marketing mixes to communicate with and make sales to these targets.
Target Market
The market segment or group within the market segment toward which all marketing activities will be directed; group that the company wants its products to appeal to, designs products for, and tailors its activities toward.
-the segment(s) that offer the greatest profit potential and can be most easily penetrated.
bundle of values
the number of utilities that products offer to consumers.
Product Concept
The consumer's perception of a product as a "bundle" of utilitarian and symbolic values that satisfy functional, social, psychological, and other wants and needs. ***As an element of the creative mix used by advertisers to develop advertising strategy, it is the bundle of product values the advertiser presents to the consumer.
Marketing Mix

*What are the Four Ps
Four elements, called the 4Ps (product, price, place, and promotion), that every company has the option of adding, subtracting, or modifying in order to create a desired marketing strategy.

-the strategic way the marketer mixes and blends product, price, place and promotion to create the marketing strategy
III. Advertising and the...
*Product Element
*The most important element of the marketing mix: the good or service being offered and the values associated with it—including the way the product is designed and classified, positioned, branded, and packaged.
A. Product Life Cycle
Progressive stages in the life of a product—including introduction, growth, maturity, and decline— that affect the way a product is marketed and advertised.
Early Adopters
consumers who are willing to try new things
-targeted to stimulate primary demand (for the whole product category)
1)Introductory (pioneering) phase
The initial phase of the product life cycle (also called the pioneering phase) when a new product is introduced, costs are highest(high cost of educating consumers, building distribution, and encouraging demand), and profits are lowest
-must spend a lot on advertising at this stage to be market leader
Pull Strategy
Marketing, advertising, and sales promotion activities aimed at inducing trial purchase and repurchase by consumers.
-pull product through channel of distribution
Push Strategy
Marketing, advertising, and sales promotion activities aimed at getting products into the dealer pipeline and accelerating sales by offering inducements to dealers, retailers, and salespeople. -Inducements might include introductory sales promotions: price allowances, distribution allowances, and advertising dollar allowances to stock the product and set up displays.
2) Growth Stage
The period in a product life cycle that is marked by *market expansion as more and more customers, stimulated by mass advertising and WOM, make their first purchases while others are already making their second and third purchases.
-competitors enter the market
-advertising expenditures increase
3) Maturity Stage
That point in the product life cycle when the market has become saturated with products, the number of new customers has dwindled, and competition is most intense.
-Conquest sales: companies increase sales only at the expense of competitors
-weak companies die
-companies try to extend life cycle. Strategy=revitalization
Selective Demand
Consumer demand for the particular advantages of one brand over another
4) Decline Stage
The stage in the product life cycle when sales begin to decline due to obsolescence, new technology, or changing consumer tastes.
-companies may phase product out slowly or quickly
B. Product Classifications : ways to classify
by markets, by purchasing habits of buyers, by consumption rate or degree of tangibility, or by physical attributes
Service
A bundle of benefits that are INTANGIBLE, that are temporary in nature, and that come from the completion of a task.-> task utility
Equipment-Based Service
A service business that relies mainly on the use of specialized equipment.
EX. railroad
People-Based Service
A service that relies on the talents and skills of individuals rather than on highly technical or specialized equipment.
EX. Ad agency, Bank, Law Firm
C. Position
The way in which a product is ranked in the consumer's mind by the benefits it offers, by the way it is classified or differentiated from the competition, or by its relationship to certain target markets.
-First Strategic decision once stage in life cycle is determined
- GOAL: own a specific word that ranks the product in the prospect's mind EX. jeans, safety
-ranked by way product is differentiated, benefits offered, market segment, or classification.
D. product differentiation
-creates a product difference that appeals to the preferences of a distinct market segment
3 ways we classify product differences:
Perceptible

Hidden

Induced
a. Perceptible Differences

b. Hidden differences

c. Induced Differences
a.Differences between products that are visibly apparent to the consumer.

b.Imperceptible but existing differences that may greatly affect the desirability of a product.-Advertisers must make you aware.

c.Distinguishing characteristics of products effected through unique branding, packaging, distribution, merchandising, and advertising. (Branding, Packaging, Advertising)
E. product branding

a. Brand
a.That combination of name, words, symbols, or design that identifies the product and its source and distinguishes it from competing products—the fundamental differentiating device for all products.
b. Individual brand

c. Family Brand
b.Assigning a unique name to each product a manufacturer produces.
-distinct target market for each product and separate personality and image for each brand

c.The marketing of various products under the same umbrella name.
EX. Heinz condiments
-problem: one product image may have bad effect on others
d. National (Manufacturer's) Brands

e. Private Labels (private labeling strategy)
d.Product brands that are marketed in several regions of the country.

e.Personalized brands applied by distributors or dealers to products supplied by manufacturers. Private brands are typically sold at lower prices in large retail chain stores.
-distributer/retailer creates brand image
f. licensed brands
f.Brand names that other companies can buy the right to use.
EX. Coca-Cola clothes, Mickey Mouse Watches
Role of Brands
-offer instant recognition, promise consistent, reliable standards of quality, taste, size or psychological satisfaction.
-consumers must believe a brand's promise
Brand Equity


*"brand stewardship"
The totality of what consumers, distributors, dealers, and competitors feel and think about a brand over an extended period of time; in short, it is the value of the brand's capital.
-requires time and money

*maintain consistence in message to maintain and reinforce brand's personality
F. Product Packaging

*Four consideration in package design:
-exhibitive medium
-marketers last chance to communicate at the point of sale

*Identification
Containment, Protection, Convenience
Consumer Appeal
Economy
Copy points
copywriting themes in a product's advertising.

-may come form packaging
a)identification
a) the unique combination of trade name, trademark,or trade character, reinforced by the package design, quickly IDs the product and differentiates it from competitors

-must have high visibility and legibility
-must have correct tone, image, and personality of the product concept
b) containment, protection, and convenience
b) hold and protect the product;
keep product fresh and protect form damage
-Must also be convenient for retailers
c) consumer appeal


d) econony
result of size, color, material, and shape.
-certain colors have special meanings
-green marketing
-package shape

d) low cost of packaging is important, but should be weighed against importance of other factors
IV. Advertising and the...
*Price Element
* In the marketing mix, the amount charged for the good or service—including deals, discounts, terms, warranties, and so on. The factors affecting price are market demand, cost of production and distribution, competition, and corporate objectives.
Key factors influencing Price:

1) Market Demand
1) as demand for a product increases its price tends to rise. If demand drops below the supply, price tends to fall.
-Advertising plays the role of trying to increase demand
2) Production and Distribution Costs

3) Competition
2) increased costs must be passed on to the consumer or the company will go out of business.

3) consumers are more interested in the perceived price relative to competitors
*Good advertising maintains the Value Perception
4) Corporate Objectives and Strategies

+ other variable influences
4) companies usually set a high price initially to recover development and start up costs. They may also position a brand as inexpensive.
-marketing stratgy(image advertising) may justify a higher price
V. Advertising and the...
**Distribution (Place) element
How and where customers will buy a company's product; either direct or indirect distribution.
-must be consistent with image
- advertising depends on method of distribution
-a lot of advertising is done by resellers
A. Direct distribution
The method of marketing in which the manufacturer sells directly to customers without the use of retailers.
-advertising burden carried out by manufacturer
Network (multilevel)marketing

*no media advertising
A method of direct distribution in which individuals act as independent distributors for a manufacturer or private-label marketer.
-people sign up friends and relatives in chain

*advertising done mainly through word-of-mouth
B. indirect distribution
market products through a DISTRIBUTION CHANNEL that includes a network of resellers.
-make the flow of goods from producers to consumers convenient and economical
Reseller (also called middlemen)
Businesses that buy products from manufacturers or wholesalers and then resell the merchandise to consumers or other buyers; These businesses do not change or modify the goods before they resell them. Resellers make their profits by selling the goods they buy for more than they paid.
-The most common examples of resellers are retail stores and catalog retailers. Internet retailers comprise a growing portion of the reseller business segment.
Distribution Channel
The network of all the firms and individuals that take title, or assist in taking title, to the product as it moves from the producer to the consumer.
C. Three distribution strategies/levels:

a) Intensive Distribution
a)A distribution strategy based on making the product available to consumers at every possible location so that consumers can buy with a minimum of effort.
EX. Soft Drinks
-profit very low, high sales volume
-push and pull strategies
-adv=manufacturer
b) Selective Distribution
b) Strategy of limiting the distribution of a product to select outlets in order to reduce distribution and promotion costs.
-adv= retailer
Cooperative Advertising
The sharing of advertising costs by the manufacturer and the distributor or retailer.
-sometimes use in selective distribution
c) Exclusive Distribution
-selected resellers are granted exclusive rights to distribute a product; The strategy of limiting the number of wholesalers or retailers who can sell a product in order to gain a prestige image, maintain premium prices, or protect other dealers in a geographic region.

-manufacturers and retailers are forced to cooperate closely in advertising and promotion programs.
Vertical Marketing System (VMS)
A centrally programmed and managed distribution system that supplies or otherwise serves a group of stores or other businesses.
Franchising
A type of vertical marketing system in which dealers pay a fee to operate under the guidelines and direction of the parent company or manufacturer.
-Pros: centralized coordination of marketing and advertising efforts , customer recognition
-good for introducing products to global markets
VI. Advertising and the...
*Communication (Promotion) Element
Includes all marketing-related communications between the seller and the buyer.
Communications Mix
A variety of marketing communications tools, grouped into personal and nonpersonal selling activities.
a) Personal Communication

b) Nonpersonal Communication
a)Marketing activities that include all person-to-person contact with customers.

b)Marketing activities that use some medium as an intermediary for communication, including advertising, direct marketing, public relations, collateral materials, and sales promotion.
a) personal selling
face to face situation in which marketer can learn firsthand about customer wants and needs, and customers find it harder to say no
b) advertising:
Important factors for advertising success
1) High primary demand
2)Chance for signifcant product differentiation
3)Hidden qualities highly important to customers
4) Opportunity to use strong emotional appeals
5) Substantial $ available
c) Direct marketing

*Telemarketing
A system of marketing in which companies build their own database of customers and use a variety of media to communicate with them directly such as through ads and catalogs.

*Selling products and services by using the telephone to contact prospective customers.
d) public realtions

i. Publicity

ii. Special events
i.The generation of news about a person, product, or service that appears in broadcast or print media.

ii. Scheduled meetings, parties, and demonstrations aimed at **creating awareness and understanding for a product or company.

-build corporate trustworthiness and image
e) Collateral Materials
All the accessory nonmedia advertising materials prepared by manufacturers to help dealers sell a product—booklets, catalogs, brochures, films, trade-show exhibits, sales kits, and so on.

-should always reinforce the company's image or the brand's position
f) sales promotion/ or just promotion
f) supplements other marketing mix elements for short periods of time
-aimed at stimulating consumers to some immediate behavior.
-coupons, etc.
-used primarily as an adaptation to some external situation (competition, changing seasons, declining sales, new product introductions)