Market Segmentation
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Market Segmentation

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Why segments markets? How can segmentation be done effectively. What are the benefits of segmentation?

Why segments markets? How can segmentation be done effectively. What are the benefits of segmentation?

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    Market Segmentation Market Segmentation Presentation Transcript

    • Markets: Segmentation,Targeting and Positioning Lecture 4 Chapter 6 © 2009 John Wiley and Sons Australia
    • Chapter 6: Markets: segmentation, targeting and positioning Learning Objectives: •explain the broad concept of a ‘market’ •understand the target marketing concept •identify market segmentation variables for consumer and business markets, and develop market segment profiles •select specific target markets based on evaluation of potential market segments •understand how to effectively position an offering to a target market in relation to competitors, and develop an appropriate marketing mix. © 2009 John Wiley and Sons Australia
    • The marketMarket• A group of customers with heterogeneous needs and wants.• Consumers and businesses vary considerably in their needs, wants and demands, and it is virtually impossible for an organisation to successfully appeal to every consumer or business. © 2009 John Wiley and Sons Australia
    • Target marketingMarkets can have a variety of characteristics:1.Buyers have common wants, needs anddemands.2.Buyers have unique wants, needs and demands.3.The market contains subgroups.Market segments• Subgroups within the total market that are relatively similar in regards to certain characteristics. © 2009 John Wiley and Sons Australia
    • Target marketingTarget marketing• An approach to marketing based on identifying, understanding and developing an offering for those segments of the total market that the organisation can best serve. © 2009 John Wiley and Sons Australia
    • Target marketing © 2009 John Wiley and Sons Australia
    • R n R White Water Rafting – Target Market Tully River Rafting Dial-up Broadband © 2009 John Wiley and Sons Australia
    • Target marketingMass marketing• Buyers have common wants, needs and demands. A single product will meet the needs of most people in the market, with an undifferentiated approach.• Producing large volumes at a low cost per unit (due to ‘economies of scale’) makes it possible to sell at a low price and capture very large markets, ensuring high levels of profitability. © 2009 John Wiley and Sons Australia
    • Target marketingOne-to-one marketing• Providing a unique, customised offering to meet individual customer needs.• A one-to-one approach often results in higher unit costs and a more restricted market.• One-to-one conditions typically form the basis for a focus or niche strategy. Many small services businesses take a one-to-one marketing approach, for example, hairdressers. © 2009 John Wiley and Sons Australia
    • Target marketingDifferentiated targeting strategy• A marketing approach that involves developing a different marketing mix for each target market segment.• Market segmentation forms the basis of target marketing.• A differentiation strategy entails high costs. To achieve high profits requires higher retail prices, high market share and strong customer loyalty. © 2009 John Wiley and Sons Australia
    • Target marketing• Product specialisation: Marketing efforts are concentrated on offering a single product range to a number of market segments.• Market specialisation: Marketing efforts are focused on meeting a wide range of needs within a particular market segment.• Product–market specialisation: Marketing efforts are concentrated on offering a single product to a single market segment. © 2009 John Wiley and Sons Australia
    • Target marketing © 2009 John Wiley and Sons Australia
    • Market segmentationSegmentation variables: Characteristics thatbuyers have in common and that might be closelyrelated to their purchasing behaviour. © 2009 John Wiley and Sons Australia
    • Market segmentation at Virgin Australia Dial-up Broadband © 2009 John Wiley and Sons Australia
    • Market segmentationSegmenting consumer markets• The variables for segmenting consumer markets fall into four broad categories: demographic, geographic, psychographic and behavioural variables.• Effective segmentation involves choosing segmentation variables that are easy to measure and readily available, and linked closely to the purchase of the product in question . © 2009 John Wiley and Sons Australia
    • Market segmentation by genderFernwood Women’s Health Club Dial-up Broadband © 2009 John Wiley and Sons Australia
    • Market segmentation links market needs to anorganization’s marketing program through marketing mix actions © 2009 John Wiley and Sons Australia
    • Reasons for segmenting marketsMarket segmentation links market needs to anorganization’s marketing program throughmarketing mix actions Efficiency Effectiveness © 2009 John Wiley and Sons Australia
    • One Product and Multiple Market SegmentsWhenA firm produces only a single product or service, it:Attempts to sell it to two or more market segments.Avoids the extra costs of developing and producingadditional versions of the product. © 2009 John Wiley and Sons Australia
    • Multiple Products and Multiple Market Segments Marketing different products is more expensive than producing just one but is justified if it: • Serves customers’ needs better. •Doesn’t reduce quality or increase price. • Adds to sales and profits. © 2009 John Wiley and Sons Australia
    • Differentiated Strategy © 2009 John Wiley and Sons Australia
    • Segments of One: Mass Customization Made mass-produced goods affordable. Encouraged customers to compromise their individual tastes and settle for standardized products. © 2009 John Wiley and Sons Australia
    • Market segmentation• Geographic segmentation  Market segmentation based on variables related to geography.• Useful geographic variables include: climate, local population, market density, region, topography and urban, suburban, rural footprint.• Geo-demographic segmentation  Combines demographic variables and geographic variables to profile very small areas, such as suburbs. © 2009 John Wiley and Sons Australia
    • Market segmentationDemographic segmentation• Market segmentation based on demographic variables, which are the vital and social characteristics of populations, such as age, education and income.• Demographic variables are the most commonly used variables for market segmentation. © 2009 John Wiley and Sons Australia
    • Market segmentationPsychographic segmentation• Market segmentation based on the psychographic variables of lifestyle, motives and personality attributes.• Psychographic segmentation is based on the need to understand not who you are, but how you live your life. This is reflected in activities such as hobbies or choice of entertainment. © 2009 John Wiley and Sons Australia
    • Roy Morgan Values Segments™ © 2009 John Wiley and Sons Australia
    • Market segmentationBehavioural segmentation• Market segmentation based on actual purchase and/or consumption behaviours.• Behavioural variables include: benefit expectations, brand loyalty, occasion, price sensitivity and volume usage. © 2009 John Wiley and Sons Australia
    • © 2009 John Wiley and Sons Australia
    • Market segmentationSegmenting business markets• As business markets are often characterised by a small number of buyers who might display a very close relationship with the seller, ‘customised’ or ‘one-to-one’ marketing is a good approach to use.• Business marketers isolate business customers by using commercial industrial directories that contain detailed information on companies. © 2009 John Wiley and Sons Australia
    • Market segmentationEffective segmentation involves ensuring:• measurability – abstract variables can be difficult to measure• accessibility – through distribution and communication channels• substantiality – the segment must be of sufficient size to allow profitability• practicability – segments are only of use if they can be identified and serviced. © 2009 John Wiley and Sons Australia
    • Market segmentation• Market segment profile  A description of the typical potential customer in the market segment (i.e.. the common variables shared by members of market segments and how the variables differ between segments).• Market segments must be sufficiently different from each other for a distinctive offer to be created for each segment, without risk of overlapping segments or sending confusing images and messages. © 2009 John Wiley and Sons Australia
    • Demographic SegmentationDemographic segmentation is about dividing themarket into various groups based on differentvariables such as:age,gender,race,religion,nationality,marital status,income,family size © 2009 John Wiley and Sons Australia
    • Psychographics Based on individual psychological characteristics,rather than demographic or other factorsThese include peoples lifestyles and behaviors: where they like to vacation, the kinds of interests they have, the values they hold, and how they behave. © 2009 John Wiley and Sons Australia
    • VALS Psychographic Segments • VALS (by SRI Consulting) provides examples of how psychographic segmentation has been successful used in such areas as product introduction, product repositioning and targeted direct mail campaigns. • According to the VALS Framework, groups of people are arranged in a rectangle and are based on two dimensions. © 2009 John Wiley and Sons Australia
    • © 2009 John Wiley and Sons Australia
    • VALS™ identifies eight consumersegments INNOVATORS Sophisticated, Change Leading, Active, Take Charge ACHIEVERS Successful, Career & Family Oriented, ModerateTHINKERS EXPERIENCERSInformation Seeking, Risk Seeking,Satisfied, Enthusiastic,Reflective ImpulsiveBELIEVERS MAKERSConservative, Homegrown, SelfConventional, Sufficient, Macho,Traditional Family OrientedSTRIVERSTrendy, Approval,Seeking,Disenfranchised SURVIVORS Passive, Risk Averse, Constrained Copyright © 2010 by Strategic Business Insights. All rights reserved. © 2009 John Wiley and Sons Australia
    • Global Market Segmentation• More and more companies are approaching global market segmentation by attempting to identify consumers with similar needs and wants reflected in their behavior in the marketplace in a range of countries. © 2009 John Wiley and Sons Australia
    • Market targetingMarket targeting: The selection of target marketsresulting from an evaluation of identified marketsegments. © 2009 John Wiley and Sons Australia
    • Market targeting• Market potential: The total sales of a product category that all organisations in an industry are expected to sell in a specified period of time, assuming a specific level of marketing activity.• Sales revenue: Total volume of sales multiplied by the average selling price.• Market share: The proportion of the total market held by the organisation. © 2009 John Wiley and Sons Australia
    • Market targeting• Company sales potential: An estimate of the maximum sales revenue and market share that an organisation can expect to achieve for a specific product.• Potential: is influenced by the market potential, the level of marketing activity in the industry and the effectiveness of an organisation’s promotional spending. © 2009 John Wiley and Sons Australia
    • Market targetingBark Busters – Corporate Video Dial-up Broadband © 2009 John Wiley and Sons Australia
    • PositioningMarket positioning• The way in which target market segments perceive an organisation’s offering in relation to competing offerings.Company positioning• A positioning strategy designed to create a single market perception of the entire organisation in relation to competitors. © 2009 John Wiley and Sons Australia
    • PositioningBrand positioning• A positioning strategy designed to create a market perception of a particular brand, usually based on product attributes. © 2009 John Wiley and Sons Australia
    • TOOTHPASTE PRODUCT POSITIONS © 2009 John Wiley and Sons Australia
    • The target marketing process stage © 2009 John Wiley and Sons Australia
    • Perceptual map of the Australian surfwear industry © 2009 John Wiley and Sons Australia
    • HYPOTHETICAL PERCEPTUAL MAP FOR PAIN RELIEVERS © 2009 John Wiley and Sons Australia
    • Chapter 6: Markets: segmentation, targeting and positioning Summary: • Explain the broad concept of a ‘market’ • Understand the target marketing concept • Identify market segmentation variables for consumer and business markets, and develop market segment profiles • Select specific target markets based on evaluation of potential market segments • Understand how to effectively position an offering to a target market in relation to competitors, and develop a marketing mix. © 2009 John Wiley and Sons Australia
    • EXAMPLE: GMHSellers look for broad classes of buyers who differ in their product needs or buying responses• GMH has found that high and low-income groups differ in their car-buying needs and wants• Young consumers’ needs and wants differ from those of older consumers• Hence GMH has designed specific models for different income and age groups 49 © 2009 John Wiley and Sons Australia
    • EXAMPLE: GEOGRAPHIC SEGMENTATION• Dividing the market into different zones -• Regions, States, Cities• ICI’s fertiliser arm segments by geography - emphasising the right product in the right areas• Can localise products, advertising, promotion and sales efforts to fit needs of individual areas• People in different areas have different need and wants 50 © 2009 John Wiley and Sons Australia
    • EXAMPLE:STRATEGIC POSITIONINGShampoo Market• Shampoo market is highly fragmented - overflowing with brands that promise: - body and control - renewed life for dull hair - elimination of split ends - avoidance of dandruff.• Effective marketers understand the value of establishing a solid position in the minds of consumers. 51 © 2009 John Wiley and Sons Australia
    • EXAMPLE: FORD MOTOR COMPANY• A company that has evolved from a mass-marketer to a market-targeter.• Ford originally made one car for the entire — didn’t even have a choice of colours.• “You can have any colour car you want so long as it’s black” Henry Ford• Over time, Ford added other cars to its line (product-variety marketing), and eventually developed cars for nearly every market segment (target marketing). 52 © 2009 John Wiley and Sons Australia
    • EXAMPLE: PROCTER & GAMBLE• Most companies that have been around for a long time have shown a similar evolution.• Procter & Gamble, had been in existence more than 80 years when it introduced Ivory Flakes to supplement Ivory Soap (product variety)• Was almost 90 years old when it first developed a product (Camay) to compete with an existing P&G product (Ivory) (“150 Years of P&G”, Advertising Age, August 20, 1987, p. 10).• Today, P&G is one of the pre-eminent market targeting companies in the world. 53 © 2009 John Wiley and Sons Australia
    • EXAMPLE: SEGMENTS IN THE BEER MARKET• The beer market is segmented in many ways:• region (through regional brewers and brands),• income and social class (premium beers and imports versus budget beers),• life style (“The original party animal”),• purchase occasion (“Here’s to good friends”), and• usage rate (“The one beer to have when you’re having more than one”). 54 © 2009 John Wiley and Sons Australia
    • EXAMPLE: BENEFIT SEGMENTATION IN INDUSTRIAL MARKETS• Service, selection, and reliability can all be used in benefit segmentation of industrial markets.• Suppliers who want to emphasise these characteristics must identify firms that need these benefits.• By better satisfying these firms’ needs, the supplier is able to charge higher prices than competitors who offer fewer services or less selection.• Other suppliers can find market segments that do not need these benefits, and sacrifice service, selection, and reliability to reduce costs and be able to sell at a lower price. 55 © 2009 John Wiley and Sons Australia