Life and Health Marketing (LOMA) - Chapter 7 - MARKET SEGMENTATION AND TARGET MARKETING
Market Segmentation
- dividing large markets into smaller markets w/ similar product/mktg mix needs
- single variable segmentation - only 1 variable to segment market
- multiVariable segmentation - uses combo of variables
- Requirements for Effective Segmentation
- - customers should have similar product needs/buying habits
- - needs/behaviours s/b distinguishable from other segments
- - potential sales/costs/profits s/b lare enough to be measured and compared to other segments
- - profit potential enough to warrant segment attention
- - customers accessible thorugh currently available means
- - size/composition s/b relatively stable over planning period
- Bases for Segmenting Consumer Markets
- Geographic Segmentation
- country/region/state/county/zip/legal boundaries/rural-suburuban/urban
- Demographic Segmentation
- age/sex.marital.household composition/income/education/occupation/family life cycle/nationality/race/etchic group/social class
- GeoDemographic Segmentation - combo of geographic adn demographic
- economic means/cultural background/perspective/neighborhood
- Psychographic Segmentation
- lifestyle/activities/interests/opinions
- Behavioristic Segmentation
- benefits sought/usage rate/buyer readiness/pref method of purchase/risk tolerance/buyer loyalty
- Demographic - commoonly used in consumer markets
- traditional life ins demographics - hi/middle/low-income households and families/boomers/seniors
- Bases for Segmenting Organizational Markets
- Organizational Mkts - group benefits and continuation of business operations
- therefore two markets, group and business
- Georgraphic Segmentation - simialr to consumar markets
- Demographic Charachteristics
- business activity/type of group-organizatoin/size of group-organization
- SIC - Std Industrial Classification - 1930
- NAICS - N. American Industry Classificatino System - by-product of NAFTA
- small groups <=100 - 80% of contracts, 25% or prem
- medium groups 101-499 - 10% of contracts, 25% of premiums
- large groups 500+ - 10% of contract, 50% of prem
- Behavioristic Segmentation
- similar to consumer markets - usage is a key
Target Marketing
- process to identify, select and focus mktg efforts
- Evaluating Potential Target Markets
- Mkt Size and Growth Potential
- majority fallacy - blind pursuit of largest, most easily identified or most accessible mkt segment
- competition makes big mkts less profitable
- should offer combo size/growth/profitability that best meets co's needs
- Mkt Attractiveness
- depends on level of compettition and buying power of consumers
- Company Goals and Resources
- only puruse targets if it has (can easily get) fin/tech/hr necessary to compete sucessfully
- Target Mktg Strategies
- Undifferentiate Mktg - mass mktg - singel mktg mix for entire mkt
- + cheaper since only one mkt strategy
- - might miss differences w/in segment
- - disadvantage to specialty marketers
- Concentrated Mktg
- for a product - focus all mktg efforts on a single segment of total mkt
- Niche Mktg - form of concentrated mktg w/ narrowly defined mkt
- - all eggs in one basket
- + can be profitable
- Differntiated Mktg
- offer differing product/mktg mixes to appeal to diff segments
- - most expensive
- + better served customers = incr customer satisfaction = incr sales
- Factors to consider when picking mktg strategy
- company resources - if limited, concentrated probably best strategy
- product variability - homogenous products - undifferentiated mktg
- Mkt Variability - if buyers have similar usage/purchase patterns - undifferentiated
- product's life cycle stage - new products - concentrated/undiffernetiated
- Consumer and Organizational Target Markets for Ins Products
- Affluent Consumers
- mass affluent - 100k -$1mil liquid assets - 99.9% of affluent mkt, 54% of total mkt assets
- high-net-worth - $1-25 mil liquid assets - 0.1% of mkt, 31.3% of assets
- ultra-high-net-worth - 0.001%, 15.1% of total mkt assets
- Single-Parent Families - need large amt ins to protect single wage earner
- Non-family Households - low need for life ins, high need for health/retirement products
- Working Women - strong potential for wide range of products
- Employer Groups - ex. negotiate trusteeship/voluntary trade assoc/MEWA
- Small Businesses - rapidly growing segment - approx 99% of businesses are small businesses
- significant market for products that
- - protect against loss due to death/dis of owner
- - preserve value/prevent liquidation due to owner/partner death
- - preserve sharelohlder equity/mgmt control due to majority shareholder death
- - protect against death tax on inherited business
- - enhance credit/fin stability by assuring business continuation
- - source of emergency funds
- - non-qual def comp to attract/retain key employees
- - EE health/life/dis ins and qual ret plans
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