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9. Market Segmentation and Target Marketing
9.0 Introductory Case Studies



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Why Do Market Segmentation and Target Marketing Make Sense? | = | 9.1.1 Most Markets Are Heterogeneous | <span style="font-size: 130%;">9.1.2 Today’s Market Realities Often Make Segmentation Imperative | Exhibit 9.1 Can Under Armour become another Nike?



References

  1. ^ market segmentation definition
  2. ^ Target marketing definition
  3. ^ Product positioning definition
  4. ^ enduring competitive advantage in the target market

  5. ^ market segmentation definition
  6. ^ Target marketing definition
  7. ^ Product positioning definition
  8. ^ resources are usually limited compared with the number of alternative market segments available for investment
  9. ^ markets are rarely homogenous
    the response rate to marketing programmes differs

  10. ^ appropriate segmentation approach
  11. ^ market segmentation has become increasingly important
  12. ^ __population growth has slowed
      • more product-markets are maturing__

  13. ^ social and economic forces
  14. ^ trend toward microsegmentation in which extremely small market segments are targeted.





Why Do Market Segmentation and Target Marketing Make Sense?


[1] Market segmentation is the process by which a market is divided into


  • distinct subsets of customers (with similar needs and characteristics)

    • that lead them to respond in similar ways

    • to a particular product offering and marketing programme.


[2] Target marketing requires evaluating


  • the relative attractiveness of various segments
    • in terms of market potential,
    • growth rate,
    • competitive intensity, and other factors)
  • and the firm’s mission and capabilities to deliver what each segment wants, in order to choose which segments it will serve.



[3] Product positioning entails


  • designing
    • product offerings and
    • marketing programmes
  • that collectively establish an [4] enduring competitive advantage in the target market by:
    • creating a unique image, or
    • position, in the customer’s mind.

Example :


Knight and Bowerman founded Blue Ribbon Sports in part because they saw a market segment – distance runners – whose needs were not being fully met.

They chose to target this segment because running was growing in popularity and because they had particular knowledge and expertise they could bring to the party.

They positioned their innovative shoes as the ones that enhanced the performance of the best runners in the world and, by implication, of anyone else who cared about his or her running.


These three decision processes –

[5] market segmentation, [6] target marketing, and [7] positioning – are closely linked and have strong interdependence.


All must be well considered and implemented if the firm is to be successful in managing a given product-market relationship.

No matter how large the firm, however, its [8] resources are usually limited compared with the number of alternative market segments available for investment.


Thus, a firm must make choices. Even in the unusual case where a firm can afford to serve all market segments, it must determine the most appropriate allocation of its marketing effort across segments.

But are all these analyses and conscious choices about which segments to serve really necessary?
===----

=

9.1.1 Most Markets Are Heterogeneous



[9] Because markets are rarely homogeneous in benefits wanted, purchase rates, and price and promotion elasticities, their response rates to products and marketing programmes differ.

Variation among market segments in product preferences, size and growth in demand, media habits, and competitive structures further affect the differences and response rates.



Thus, markets are complex entities that can be defined (segmented) in a variety of ways.

[10] The critical issue is to find an appropriate segmentation scheme that will facilitate target marketing, product positioning, and the formulation of successful marketing strategies and programmes.



Example : By focusing their initial efforts on high-performance distance runners, a clearly defined and very narrow market segment, Knight and Bowerman put themselves in position to design shoes especially well suited to these runners’ needs.

Their segmentation scheme, arguably, played just as important a role in their early success as did Bowerman’s wife’s waffle iron!



9.1.2 Today’s Market Realities Often Make Segmentation Imperative


[11] Market segmentation has become increasingly important in the development of marketing strategies for several reasons.
    1. First, [12] population growth has slowed, and more product-markets are maturing.
      • This sparks more intense competition as firms seek growth via gains in market share (the situation in the automobile industry) as well as in
      • an increase in brand extensions (Starbucks coffee ice cream, Colgate toothbrushes, Visa traveler’s checks).
    2. [13] Second, such social and economic forces as :
      • expanding disposable incomes,
      • higher educational levels, and
      • more awareness of the world have produced customers with more varied and sophisticated needs, tastes, and lifestyles than ever before.
      • This has led to an outpouring of goods and services that compete with one another for the opportunity of satisfying some group of consumers.
3. [14] Third, there is an increasingly important trend toward microsegmentation in which extremely small market segments are targeted.



Example:


For a discussion of how one company built itself into a multi-million dollar business while serving a very small niche see //Exhibit 9.1//.

This trend has been accelerated in some industries by new technology such as computer-aided design, which has enabled firms to mass-customise many products as diverse as designer jeans and cars.
//[2//]

For example, many automobile companies are u
sing a flexible production system that can produce different models on the same production line.

This enables the company to produce cars made to order and sell, as does General Motors in the United States, which is using its online presence to fine tune its build-to-order process.
//[3//]



Exhibit 9.1 Can Under Armour become another Nike?


Kevin Plank did not set out to create a cult around athletic underwear – he simply wanted a comfortable T-shirt to wear under his football pads that would wick moisture away from his skin and protect him from heat exhaustion during practice. After hunting through all the sporting goods shops, Kevin realised that there was not a single product on the market that met his needs. He set out to create one. In March 1996, just before graduation, Kevin had some T-shirts sewn up in Lycra and found that he had solved a common problem for all of his teammates.
Under Armour, the company that was soon born in his grandmother’s basement, made its first sale of 200 shirts for $12 a-piece to the football team at Georgia Tech. Kevin ended his company’s first year with sales of $17 000. Under Armour was marketed by word-of-mouth from happy, satisfied customers, and grew with sales to athletic teams in colleges. The company got its big break due to a product placement in the Oliver Stone football movie ‘Any Given Sunday’. Buzz from the movie, and a first time ad in ESPN magazine during the movie premiere, boosted Under Armour sales to $1.35 million in 1999. Under Armour’s, sales in 2001 drove triple-digit growth in its category and led industry peers at Sporting Goods Business to recognize the company as ‘Apparel Supplier of the Year.’ Under Armour posted sales of $55 million in 2002.
The small underserved market segment that Kevin Plank discovered and his success have not gone unnoticed – ironically, recent entrants to this market are Nike and Reebok. Kevin Plank’s reaction? ‘I’ll never let them see me sweat’.
Source: Company website www.underarmour.com; Elaine Shannon, ‘Tight Skivvies; They’re what everyone’s wearing this season. Here’s why’, Time, 13 January 2003, A1 Vol. 161, Issue: 2.







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