INFORMATION SHEET DIPLOMA IN DIGITAL MEDIA DESIGN DDM DIGITAL ADVERTISING DESIGN 3.0 SEGMENTATION, TARGETING & MARKETING MIX

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1 INFORMATION SHEET COURSE : DIPLOMA IN DIGITAL MEDIA DESIGN SESSION : JAN - JUN 2010 SEMESTER : 4 CODE/SUBJECT : DDM DIGITAL ADVERTISING DESIGN SHEET NO : 5 LECTURER : AHMAD KAMSOL BIN MAT YUSOP WEEK : 5 TOPIC : 3.0 SEGMENTATION, TARGETING & MARKETING MIX SUB-TOPIC : 3.1 Larger Marketing Context of Advertising 3.2 Market Segmentation Process LEARNING OUTCOME : After completing this topic, students should be able to: 1. Describe the role of marketing in creating satisfying exchange 2. Explain how suppliers and media help advertisers and agencies Page 1

2 SEGMENTATION, TARGETING AND MARKETING MIX 3.1 LARGER MARKETING CONTEXT OF ADVERTISING 1. All advertisers face a perennial challenge how to present their products, services, and ideas effectively through the media to buyers. 2. To do this they must comprehend the important relationship between the product and the market place. 3. The key to a company s prosperity is the ability to attract and keep customer who are willing to pay for the firm s goods and services. 4. This means a company must be able to locate prospective customers, create product and services to satisfy their desires and finally communicate that information in way that resonates with them. Customer Needs and Product Utility 1. Marketing is the business process that management uses to plan and execute the conception, pricing, promotion and distribution of its products. 2. The ultimate purpose of marketing is to create exchanges that satisfy the perceived needs and wants of individual and organizations. 3. Companies use marketing research to discover the needs and wants that exist in the marketplace. 4. The goal of marketing research is to use for product shaping, designing product through manufacturing, packaging or advertising to satisfy more fully the customer needs and wants. 3.2 THE MARKET SEGMENTATION PROCESS 1. Marketing and advertising people constantly scan the marketplace to see what various consumer segments needs and want and how they might be better satisfied. 2. The process of market segmentation is actually a two-step strategy of identifying groups of people (or organizations) with certain shared needs and characteristic within the broad markets for consumer or business products and aggregating (combining) these groups into larger market segments according to their mutual interest in the products utility. 3. This process gives a company a selection of market segments large enough to target and lays the foundation for developing the proper mix of marketing activities including advertising. 4. Markets often consist of many segments. A company may differentiate products and marketing strategy for every segment, or concentrate its marketing activities on only one or a few segments. Page 2

3 Types of Markets 1. Target markets are marketing activities aimed at a particular segment of population. 2. Target audience is advertising that aimed at a particular group. 3. There are two main types of target markets, consumer and business Consumer Markets 1. Most of the advertising daily in the mass media falls under the broad category of consumer advertising. 2. In the end, customers are people. So advertising professionals must understand how people act, think and why they buy. Business Markets 1. Companies use business advertising to reach people who buy goods and services for resale, for use in their own business or for manufacturing other products. 2. It tends to appear in specialized business publications or professional journals, in direct-mail pieces sent to businesses or in trade show. 3. Since business advertising (also called business-to-business or BTB advertising) rarely uses consumer mass media, it is typically invincible to consumers. Segmenting the Consumer Market 1. The concept of shared characteristics is critical to market segmentation. 2. Marketing and advertising people know that based on their needs, wants, and mental files, consumer leave footprints in the sand - the telltale signs of where they live and work, what they buy and how they spend their leisure time. 3. By following these footprints, marketers can locate and define groups of consumers with similar needs and wants, creates messages for them, and know how and where to send those message. 4. The goal is to find that particular niche (or space) in the market, where the advertiser s product or service will fit. 5. There are four categories of segmentation in consumer market behavioristic, geographic, demographic, and psychographic. Page 3

4 Methods for Segmenting Consumer Market Behavioristic Segmentation 1. One of the best ways to segments market is to group consumers by purchase behavior. This is called behavioristic segmentation 2. Behavioral segments are determined by many variables but the most important are user status, usage rate, purchase occasion and benefit sought. 3. These categories tell us who our customers are now when and why they buy and how much they consume. User-status Variables 1. Many markets can be segmented by the user status of prospective customers. 2. Researchers Stephan and Tannenholz have identified six categories of consumers based on user status. a. Sole users - are the most brand loyal and require the least amount of advertising and promotion. b. Semisole - user typically use Brand A but have an alternate selection if it is not available or if the alternate is promote with a discount. c. Discount users - are the semisole 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. Page 4

5 d. Aware nontriers use competitive products in the category but haven t taken a liking to Brand A. A different advertising message could help but these people rarely offer much potential. e. Trial / Rejector - bought Brand Advertising message but didn t like the product. More advertising won t help, only a reformulation of Brand A will bring them back. f. Repertoire users - perceive two or more brands to have superior attributes and will buy a full price. They are the primary brand switchers and respond to persuasive advertising based on their fluctuating wants and desires. Therefore, they should be primary target for brands advertising. Usage-rate variables 1. It usually easier to get a heavy user to increase usage than a light user. 2. In volume segmentation, marketers measure people s usage rates to define consumers as light, medium or heavy users of products. Usage rates vary for different products Page 5

6 Purchase-occasion variables 1. Buyers also can be distinguished by when they buy or use a product or service - the purchase occasion. 2. Air travelers, for example may fly for businesses or vacation so one airline might promote business travel while another promotes tourism. 3. A marketer who discovers common purchase occasions for a group has a potential target segment and can better determine when to run specials and when to promote certain product categories. Benefit-sought variables 1. Consumer seek various benefits in the products they buy example high quality, low price, status, good taste, health-conscious. 2. Benefit segmentation is the prime objective of many consumer attitude studies and the basis for many successful advertising campaigns. 3. Some product categories are characterized by substantial brand switching from one purchase occasion to the next. 4. Researchers have determined that switching occurs in response to different need states that consumers may experience from one occasion to another. 5. Using behavioristic segmentations we can accomplish the first step of identifying likely prospects for our marketing and advertising efforts. The next step in developing rich profiles of these customers makes use of geographic, demographic, and psychographic characteristics. Geographic Segmentation 1. One simple way to define markets is by using geographic segmentation. 2. People in one region of the country (or the world) have needs, wants, an purchasing habits that differ from those in other regions. 3. When marketers analyze geographic data, they study sales by region, country size, city size, specific locations, and types of stores. 4. Many products sell well in urban areas but poorly in suburban or rural ones, vice versa. Page 6

7 Seasonal usage is a common way to segment users. In fact, the purchase occasion provides insight into the most opportune sales periods. For this reason, Columbia Sportswear ( may run its parka ads in fall and winter just befor and during the peak season for snow sports. Demographic Segmentation 1. Demographic segmentation is a way to define groups by their statistical characteristics: sex, age, ethnicity, education, occupation and income. 2. Demographics are often combined with geographic segmentation to select target markets for advertising. This is called geodemographic segmentation. Psychographic Segmentation 1. For certain products, appeals to emotions and cultural values may be persuasive. 2. So some advertisers use psychographic segmentation to define consumer markets. 3. With psychographics, marketers group people by their values, attitudes, personality, and lifestyle. 4. Psychographics enables marketers to view people as individuals with feelings and inclinations. 5. Then, they can classify people according to what they feel, what they believe, the way they live, and the products, services and media they use. Page 7

8 Ads for Adidas ( capture the attitude and lifestyle of its target market - young people around the world who like to make their own fashion statement. Segmentation along psychographic lines is difficult because it is not easily quantifiable. Nevertheless, lifestyle advertisements play a critical role in marketing products that involve feelings, personalities, values, and attitudes. Segmenting Business and Government Markets 1. Business markets (or industrial markets) include manufacturers, government agencies, wholesalers, retailers, banks and institutions that buy goods and services to help them operate. 2. These products may include raw materials, electronic components, mechanical parts, office equipment, vehicles or services used in conducting their businesses. 3. Many business marketers sell to resellers, such as retailers that resell to consumers. 4. Identifying target markets of prospective business customers is just as complex as identifying consumer markets. 5. Many of the variables used to identify consumer markets can also be used for business markets - for example, geography and behavior (purchase occasion, benefits sought, user status and usage rate). Page 8

9 Business Purchasing Procedures 1. Large firms have purchasing departments that act as professional buyers. 2. They evaluate the need for products, analyze proposal purchases, weigh competitive bids, seek approvals from users and managers, make requisitions, place order and supervise all product purchasing. 3. Recent research however showed that professional buyers often exhibit a willingness to pay a substantial premium for their favorite brand. 4. This was especially true for buyers concerned about the negative consequences of a product failure. 5. In other words the buyers perceived well-known brands as a way to reduce risk. Industrial Classification System 1. Industrial customers need different products, depend on their business. 2. For example, apparel manufacturers such as Levi's are the main customers for buttons and zippers. 3. Marketing managers need to focus their sales and advertising efforts on those firms that are in the right business for their products. Market Concentration 1. Many countries markets for industrial goods are concentrated in one region several metropolitan areas. 2. In the United States, for example, the industrial market is heavily concentrated in the Midwest, the South, and California. 3. Market concentration reduces the number of geographic targets for an advertiser. 4. Moreover, business marketers deal with fewer buyers than consumer marketers 5. Customer size is a critical issue for market segmentation. A firm may concentrate its marketing and advertising efforts on a few large customers, many smaller ones, or both. 6. Business marketers can also segment by end users. For example, a firm may develop software for one industry, such as banking, or for general use in a variety of industries. That decision, of course affects advertising media decisions. Page 9

10 REFERENCES: 1. Arens, Weigold, Arens (2009). Contemporary Advertising twelfth edition. McGraw-Hill. 2. Arens, Schaefer, Weigold (2009). Essentials of Contemporary Advertising second edition. McGraw-Hill. 3. Frank Jefkins, Revised by Daniel Yadin (2000). Advertising fourth edition England Prentice Hall. Page 10