Multimedia Marketing/Marketing.iso/market/chapter2.6p

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SECTION 2.6   Market Segmentation

INSTRUCTIONS Answer this question: Should a company restrict its efforts to only
serving certain types of consumers or should it try to satisfy everyone?

EXAMPLE

A unique store sells upscale  and state of the art children's
items in San Francisco's trendy Union Square. It contains several
stores-within-a-store, laid out in a series of boutiques that feature
everything from clothes and hair-styling to books and computers.
Store sales are rising rapidly. Inside the store are toddler-height
counters, low handrails, and free diapers in the restrooms.

One of the store's success secrets is what it does not carry. There
are no sex-typed toys on the shelves, each book in inventory is
screened for violence, and all violent toys and books containing
violence are banned. The store only carries clothes with natural
fibers and handles the city's widest selection of European shoes.

This store is exclusive in its target selection, focusing on customers
with money who view themselves as contemporary and success-oriented.
Most store customers are college educated. In short, this successful
enterprise appeals to only a limited group, and does it very
capably.

DETAILS

Market segmentation is a strategy in which management produces and
carries out programs designed for groups of potential buyers that
the company is able to satisfy. Rather than trying to satisfy
everyone, management aligns its efforts toward the unique needs and
characteristics of particular groups. A large New York based bank,
for instance, appeals mainly to small and medium sized companies
with operations in Europe.

Firms that use market segmentation strive to serve market targets
that they are able to satisfy, not just any group of buyers that
represent a sizeable market. They sell to "segments" (groups of
buyers) that the company is in an especially advantageous position
to please. The children's store described earlier, for instance,
is not in a position to satisfy bargain conscious low income consumers.

The advantages of segmentation are of sufficient magnitude to lead
numerous marketers to pursue this strategy. Segmentation results in
the creation of a specific marketing mix for each subgroup of
potential buyers that the company intends to satisfy. Management's
goal is to produce goods and services that furnish substantial
need gratification to selected groups of potential buyers.

When it is successful, segmentation leads to high customer loyalty
for the brand and the company. Rivals will experience difficulty
in winning away the patronage of target customers. Those marketers who
have carved out particular portions of the market and who serve these
portions well are in a relatively secure position.

Like any other strategy, market segmentation has its drawbacks. It
leads  management to a position where it directs the marketing effort
to only a portion of the population and neglects other portions. A
radio station that broadcasts rock music and attempts to appeal to
teenagers, for instance will not be effective in reaching the 40-and-
older group.

A second disadvantage of market segmentation is that it may increase
the company's costs. A firm that pursues two or more segments  normally
has to develop and offer two or more different marketing mixes. If
the company appeals to two different segments, for instance, it may
have to design two individual products or services, physical
distribution systems, channels of distribution, price structures,
advertising programs, personal selling programs, and sales promotion
programs.

PROBLEM 1

A paperback book company appeals mainly to non-working females in
middle class homes (with a series of romance books). An advantage
of this strategy is:

A. It will probably also appeal to older consumers.
B. It has a good chance of uniquely satisfying the desires of
   these consumers.
C. Company costs will be lower than if it attempted to segment younger
   consumers.
D. Few rivals strive to serve this particular market.

WORKED

A paperbaack book company appeals mainly to non-working females in
middle class homes (with a series of romance books). An advantage
of this strategy is that it has a good chance of uniquely satisfying
the desires of these consumers. If the company tried to branch out
and appeal to men, teenagers, senior citizens, or other groups, it
probably would not satisfy its target market. By orienting all
company efforts to that target, however, the company maintains a
high share of the book market.

Segmentation allows a company to provide substantial utility
to a segment by isolating a particular group, taking steps to
discover the unique needs of this group, and then creating a marketing
mix which satisfies these needs. A running shoe manufacturer, for
instance, produces a shoe that is heavily padded. This provides
protection to the feet while running and satisfies consumers who have
or worry about having foot and knee problems. Such consumers are
highly pleased with the company's product. On the other hand, it does
not fit the needs of another group that prefers minimal padding to
make the shoes light in weight for races.

ANSWER  B

INSTRUCTIONS Answer this question: Should a company restrict its efforts to only
serving certain types of consumers or should it try to satisfy everyone?

EXAMPLE

A unique store sells upscale  and state of the art children's
items in San Francisco's trendy Union Square. It contains several
stores-within-a-store, laid out in a series of boutiques that feature
everything from clothes and hair-styling to books and computers.
Store sales are rising rapidly. Inside the store are toddler-height
counters, low handrails, and free diapers in the restrooms.

One of the store's success secrets is what it does not carry. There
are no sex-typed toys on the shelves, each book in inventory is
screened for violence, and all violent toys and books containing
violence are banned. The store only carries clothes with natural
fibers and handles the city's widest selection of European shoes.

This store is exclusive in its target selection, focusing on customers
with money who view themselves as contemporary and success-oriented.
Most store customers are college educated. In short, this successful
enterprise appeals to only a limited group, and does it very
capably.

DETAILS

The firm must fulfill four conditions in order to implement a profitable
segmentation program:

1. There must be subgroups of potential customers whose anticipated
reactions to marketing efforts are similar but different from those
in other subgroups.
2. The subgroups mjust be reachable through either promotion media
or channels of distribution.
3. The marketer should be able to acquire information that determines
the subgroup to which each potential customer belongs.
4. Segmentation should provide an adequate profit return.

If all potential customers will react the same, there is no point
in designing a unique marketing mix for each one. In the computer
field, for example, departments of large corporations react
differently than do small businesseses, so they are separate segments.

For successful segmentation, management must reach target customers
through either promotion media or channels of distribution that have
direct customer contact. For instance, management can reach children
through Saturday morning television commercials. Or they can elect
to use distribution channels, as when producers of clothing for
petite women sell dresses through special small-size stores.

A requisite to segmentation is that management is able to identify
the subgroup to which each target customer belongs. This is not
difficult when the target customers are easily located, as when
the members of one group reside in a particular suburb and the
members of other groups live in other suburbs. Problems arise in
the identification process, however, when the firm employs variables
such as behavioral characteristics of potential buyers as a basis
for developing subgroups.

A fourth requisite to segmentation is that it yields a higher level
of profits than is the case without segmentation. To some degree,
management can forecast anticipated profitability by discovering the
number and volume of purchases that potential buyers in each segment
make.

PROBLEM 2

A producer of high quality kitchen appliances plans to introduce
a new line next fall. Which of the following subgroups would it
most likely be able to reach through promotion?

A. Consumers who desire long product life.
B. Consumers who identify with the middle class.
C. Consumers with an interest in health
D. Consumers who are achievement oriented.

WORKED
A producer of high quality kitchen appliances plans to introduce
a new line next fall. It could reach consumers with an interest
in health through both channels of communication and promotion.
There are health food stores that serve this segment, providing
one avenue for reaching it. Another avenue is through magazines
and television programs that target those with an interest in health.

Effective segmetation requires that the company be able to reach
target customers through either promotion or channels of distribution.
A marketer of exercise equipment has been very successful in using
both. There are a number of magazines and television programs that
appeal to health conscious consumers, allowing the company to reach
consumers through promotion. Also there are a number of retailers
who appeal to health-conscious consumers, permitting the company
to reach them through channels of distribution.

ANSWER  C

INSTRUCTIONS Answer this question: Should a company restrict its efforts to only
serving certain types of consumers or should it try to satisfy everyone?

EXAMPLE

A unique store sells upscale  and state of the art children's
items in San Francisco's trendy Union Square. It contains several
stores-within-a-store, laid out in a series of boutiques that feature
everything from clothes and hair-styling to books and computers.
Store sales are rising rapidly. Inside the store are toddler-height
counters, low handrails, and free diapers in the restrooms.

One of the store's success secrets is what it does not carry. There
are no sex-typed toys on the shelves, each book in inventory is
screened for violence, and all violent toys and books containing
violence are banned. The store only carries clothes with natural
fibers and handles the city's widest selection of European shoes.

This store is exclusive in its target selection, focusing on customers
with money who view themselves as contemporary and success-oriented.
Most store customers are college educated. In short, this successful
enterprise appeals to only a limited group, and does it very
capably.

DETAILS

Marketers employ a variety of variables or bases for segmenting
markets. Whether or not they utilize a particular variable depends
on its success in meaningfully discriminating one group of targeted
buyers from others. If each resulting group has different needs
and motivations, then such a variable is relevant. The major
segmentation variables include the following:

1. Demographic characteristics
2. Geographic characteristics
3. Lifestyle characteristics.
4. Buyer benefits.
5. Volume

Demographics are objectively measurable characteristics of human
populations. Some examples of demographic characteristics are age,
income, occupation, education, family size, gender, and race. For
companies that sell industrial goods, some demographic characteristics
are customer type, customer size, and customer location.

Considerable demographic information has been collected and published
by parties such as the government and universities and by individual
companies. Hence this information is widely available. Many companies
use demographics to effectively segment markets. The biggest
disadvantage of this method is that it does not always cluster the
market into subgroups with similar reactions to marketing efforts.
It may not be useful to choose senior citizens as a segment for
rocking chairs, for instance, because some seniors are sedentary
but others are very physically active.

Geographic segmentation involves subdividing the market into
geographic areas and orienting the marketing mix to the potential
buyers located in each area. The value of this strategy is most
obvious when segmenting foreign markets. In some countries toothpaste
is purchased for its ability to brighten teeth. In others, stained
teeth is a mark of distinction. Within the U.S., ZIP codes are
sometimes used to segment markets. People who live within a ZIP
code area are often very similar to others in that area, making the
areas targets for segmentation.

Markets can be segmented by lifestyle. This means utilizing subgroups
that share certain psychological characteristics, such as consumer
attitudes, opinions, behavior, interests, activities, or a combination
of these. Some examples of such characteristics are:
1. Activities: work, social activities, hobbies, entertainment,
   vacation, shopping
2. Interests: job, family, home, fashion, food.
3. Opinions: personal, social issues, business, politics, the future.

Frequently marketers find that consumers with particular lifestyles
are heavy users of a product, but that other consumers are not.
Heavy users of Scotch whiskey, for instance, are urban businesspeople,
active achievers, older urban sophisticates, and pleasure-seekers.

PROBLEM 3

A travel magazine management wants to segment the market. Probably the
most effective basis for this segmentation would be:

A. By gender.
B. By state of residence.
C. By lifestyle.
D. By occupation.

WORKED

A travel magazine management wants to segment the market. Probably the
most effective basis for this segmentation would be lifestyle. People
of both sexes have reasonably similar travel frequencies and
preferences, although there are some differences. Likewise the state
of residence and occupation probably are not especially predictive
of travel preferences. Lifestyle, however, could be an excellent
means of segmentation. The magazine could collect information on the
lifestyles of people who are frequent travelers. These lifestyles
might include interest in history, art, and some sports that are
available overseas. They might include mastery of foreign languages
and interest in world affairs, as well as religious beliefs. An
analysis of these and other related variables could provide a very
good basis for segmentation.

ANSWER C

INSTRUCTIONS Answer this question: Should a company restrict its efforts to only
serving certain types of consumers or should it try to satisfy everyone?

EXAMPLE

A unique store sells upscale  and state of the art children's
items in San Francisco's trendy Union Square. It contains several
stores-within-a-store, laid out in a series of boutiques that feature
everything from clothes and hair-styling to books and computers.
Store sales are rising rapidly. Inside the store are toddler-height
counters, low handrails, and free diapers in the restrooms.

One of the store's success secrets is what it does not carry. There
are no sex-typed toys on the shelves, each book in inventory is
screened for violence, and all violent toys and books containing
violence are banned. The store only carries clothes with natural
fibers and handles the city's widest selection of European shoes.

This store is exclusive in its target selection, focusing on customers
with money who view themselves as contemporary and success-oriented.
Most store customers are college educated. In short, this successful
enterprise appeals to only a limited group, and does it very
capably.

DETAILS

Buyers can be segmented by benefits. Here, marketers subdivide
potential buyers by assigning them to subgroups comprised of
those who want particular benefits from the product or service
in question. Some individuals, for instance, buy toothpaste to
brighten their teeth. Others, however purchase the product to
prevent decay, to prevent plaque, to improve their breath, or
because of its pleasant flavor.

Benefit segmentation makes considerable sense, because the benefits
are the majaor reason why individuals purchase the product. It seems
logical that those who desire similar benefits would respond in a
similar manner to a particular marketing program. Other methods
of segmentation do not necessarily have this advantage.

Volume segmentation, the last method that we will examine, takes
place when marketers group customers according to the degree to
which they use the product in question. During a typical time
period, some potential buyers use the product a great deal, others
frequently, others sparingly, and still others not at all. Hence,
marketers can create groups based upon the amount of use: for example,
heavy users, average users, light users, and nonusers.

In a segmentation study for professional basketball, the categories
included nonattenders,low attenders, and high attenders, based upon
the frequencies of games viewed. After the membership of the usage
groups has been ascertained, the demographic, geographic, and/or
lifestyle characteristics of each can be compiled and a search begun
for differences in these characteristics between user groups.

PROBLEM 4

A manufacturer of fishing poles aims the product line at consumers
who desire a light-weight yet durable pole that is suitable for fly
fishing This is segmentation by:

A. Volume.
B. Benefits.
C. Lifestyle
D. Demographics

WORKED

A manufacturer of fishing poles aims the product line at consumers
who desire a light-weight yet durable pole that is suitable for fly
fishing. This is segmentation by benefits. The company is aiming its
marketing mix at people who want the same benefits in a fishing pole.

A number of companies have successfully segmented their markets
by benefits. This method often results in a marketing mix that
very effectively satisfies target customers. In the beverage industry,
for example, those who are weight-conscious desire low-calorie
soft drinks. Fruit drinks furnish a natural, nonchemical thirst
quencher for those who are concerned about good health. Noncarbonated
drinks promise a means of avoiding that "too full" sensation.

ANSWER  B