At the end of the lesson, students will be able to:
• Define market segmentation, market targeting, and market positioning.
• Discuss the major bases for segmenting consumer and industrial markets
• Explain how companies identify attractive market segments.
• Explain how companies position their products in the marketplace.
Different Marketing Practices
Organizations recognize that they cannot appeal to all buyers in a given market.
Buyers are too numerous, too widely scattered, and too varied in their needs and buying practices.
So instead of trying to compete in the entire market, each company must identify parts of the market that it can serve best. This practice is known as TARGET MARKETING.
In MASS MARKETING, the seller mass-produces, mass-distributes, and mass-promotes one product to all buyers. It leads to the lowest costs and prices and creates the largest potential market.
E.g. At one time, Coca Cola produced only 1 drink for the whole market.
In PRODUCT-VARIETY MKTG, the seller produces 2 or more products that have different features, styles, quality, sizes, etc. Seller recognizes that buyers have differing tastes that change over time.
E.g. Coca-Cola made several soft drinks in diff. sizes and containers.
In TARGET MARKETING, the seller identifies market segments, selects one or more of them, and develops products and marketing mixes tailored to each.
E.g. Coca-Cola now produces soft drinks for the ff. segments:
1. sugared cola (Coke Classic)
2. diet (Diet Coke, Coke Zero)
3. no-caffeine (Caffeine-free Coke)4. non-cola (Minute Maid sodas)
Today's companies are moving away from mass marketing and product-variety marketing and toward target marketing.
• Can better help sellers find their marketing opportunities
• Sellers can develop the right product for each target market and adjust their prices, distribution channels, and advertising to reach the target market efficiently. (shotgun vs rifle approach)
3 Major Steps
1. Market Segmentation - dividing a market into distinct groups of buyers who might call for separate products or marketing mixes.
2. Market Targeting - evaluating each segment's attractiveness, and
- selecting one or more of the market segments to enter
3. Market Positioning
Bases for Segmenting Consumer Markets
First, let us differentiate consumer markets from industrial markets.
Industrial market – made up of buyers who purchase goods and services for business use or resell in order to gain profit.
1. Geographic Segmentation - Calls for dividing the market into different geographical units such as nations, states, regions, cities or neighbourhoods.
- Region (GMA, Luzon, Visayas, Mindanao)
- Density (urban, suburban, rural)
- City size
• A company may decide
- to operate in one or a few geographical areas or
- to operate in all areas but pay attention to geographical differences in needs/wants.
Ex: General Foods' Maxwell House ground coffee is sold nationally but is flavored regionally.
2. Demographic Segmentation - Consists of dividing the market into groups based on demographic variables (age, sex, etc.)
- Age (under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+)
- Sex (male, female)
- Religion (Catholic, Protestant, Jewish)
- Race (Asian, White, Black, Hispanic)
- Income (Under 10k, 11k-40k, 41k-60k, 61k-100k, 100k+)
- Education (GS, HS, college, postgrad)
- Occupation (professional & technical; managers, proprietors & clerical; employed, students, homemakers, unemployed & retired)
- Nationality (Filipino, American, Japanese)
- Family Size (1-2, 3-4, 5+)
- Family Life Cycle (young/single, young/married/no children,...