The Truth on Segmentation

  • 826 views
Uploaded on

The fourth in a series of tutorials on business development. For video, case studies, briefing notes and self assessment checks, go to: …

The fourth in a series of tutorials on business development. For video, case studies, briefing notes and self assessment checks, go to: http://www.coaching-business.co.uk/tutorials-marketing-segmentation-case.php

More in: Business
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
826
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
8
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide
  • The evolving use of STP; Segmentation, Targeting and Positioning follows the wish of companies to seek opportunities to differentiate their product offerings from those of their competitorsThe process begins with efforts to identify new segments and to target those that offer the most attractive product opportunities in which suitable position (and communication ) strategies can be defined
  • Re-directing marketing strategies, e.g. NPD, communications & brand Differentiation
  • Amway invests heavily in R&D and evolves products for professional people seeking recommendations for high quality products. Satinque a hair moisturising product contains a special moisturising agent. Having developed the product Amway then undertook market research to identify the segment to target. A highly successful marketing strategy/plan was then implementedBy contrast NIVEA Sun operating in 3 usage segments, protection, after sun and self tan conducted research to identify the needs of their customers. Interestingly NIVEA established they found that women appreciated the luxury nature of sun care, men preferred convenience and children didn’t enjoy the process at all. Their response was to evolve a spray product that could easily be applied to childrenWhich of these two companies uses a product differentiation approach and which uses a market segmentation approach? Justify your selection.Should either change their strategy
  • A Priori MethodsA priori segmentation is a procedure whereby a company chooses to break out customer groups by a generally accepted classification procedure related to variations in customer purchase or usage of the product category. This grouping may be the result of company tradition, recognized industrial groups, or some other external or internal criteria. Examples of a priori segments include such classification schemes as: Standard Industrial Classification (SIC) groups,Geographic regions or sales territories,Basic demographic groups (e.g., sex, age, household composition),Purchase or usage groups (e.g., heavy users, light users, nonusers),VALS (SRI's Values and Life Styles classification system), andPRIZM, or similar geodemographic classification systems.Post Hoc Segmentation Method; and ProceduresPost hoc segmentation is empirically derived based on the results of a research study undertaken for the specific purpose of segmenting a market. Segments generated from such a study are formed by aggregating buyers who respond similarly to a set, or sets, of basis questions. The most critical question facing the researcher in conducting a post hoc segmentation study is selecting the basis variables for the segmentation. It takes an astute and product-experienced researcher to chose the relevant set. Examples include: Product attribute preferences, Values,Product purchase patterns,Product usage patterns,Benefits sought,Brand preferences,Price sensitivityBrand loyalty,Socioeconomic status,Deal proneness,Lifestyles,Self-image,Attitudes and opinions toward one's environment,Dealer loyaltyThe initial market segmentation research to first form post hoc market segments is usually called a baseline segmentation study. A baseline post hoc segmentation study will usually include a large number of non-basis variables, called descriptive variables. These descriptive variables are used to further describe and help delineate the segments that are derived from the basis variables.
  • Segmenting criteria for goods and services markets Profile Demographic: Key variables concern age, sex, occupation, level of education, religion, social class, & income characteristicsLife stage: Based on the principle that people need different products & services at different stages in their lives (e.g. childhood, adulthood, young couples, retired) Geographic: The needs of potential customers in one geographic area are often different from those in another area, due to climate, custom, or traditionGeodemographic: There is a relationship between the type of housing & location that people live in & their purchasing behaviours PsychologicalPsychographic (lifestyles): Analysing consumers' activities, interests, & opinions, we can understand individual lifestyles & patterns of behaviour, which affect their buying behaviour and decision-making processes. We can also identify similar product & /or media usage patterns Benefits sought: The motivations customers derive from their purchases provide an insight into the benefits they seek from product use BehaviouralPurchase/ transaction: Data about customer purchases & transactions provide scope for analysing who buys what, when, how often, how much they spend, & through what transactional channel they purchase Product usage: Segments can be derived on the basis of customer usage of the product offering, brand, or product category. This may be in the form of usage frequency, time of usage, & usage situationsMedia usage: What media channels are used, by whom, when, where, & for how long provides useful insight into the reach potential for certain market segments through differing media channels, & also insight into their media lifestyle
  • It might use demographic methods , social economics (class, income) and geographic location (post code systems)Thus it would use age, employment, income, and asset net worth
  • Lifestage analysis is based on the principle that people have varying amounts of disposableincome and different needs at different stages in their lives. Their priorities for spendingchange at different points and these points or lifestages do not occur at the same time.Adolescents need different products from a single 26-year-old person, who in turn needs different products from a 26-year-old who is married with young children. For example, in the UK, Tesco, ASDA Wal-Mart, and Sainsbury's have all invested in the development of product lines targeted at singles with high disposable incomes and busy lifestyles with their 'meal for one' ranges in contrast with the 'family value' and 'multipacks' targeted at families. As families grow and children leave home so the needs of the parents change and their disposable income increases. Holidays (e.g. Euro Disney) and automobiles (e.g. people carriers) are key product categories that are influenced by the lifestage of the market.Historically, the family lifecycle consisted of nine categories through which individuals andhouseholds would): single bachelor, newly married, married with children under 6 years old, married with children over 6 years old, older married couples with dependent children, empty nest household with or without employment, and solitary survivor in work or retired. However, since this classification was developed, society has changed and continues to change in terms of values, beliefs, and family lifecycle. A more modern lifecycle classification was developed with support from the British Market Research Bureau (BMRB) called the Target Group Index (TGI) Lifestage Segmentation Product, which classifies 12-13 life stage groups based on marital status, housefold composition & children
  • Segmenting criteria for goods and services markets Profile Demographic: Key variables concern age, sex, occupation, level of education, religion, social class, & income characteristicsLife stage: Based on the principle that people need different products & services at different stages in their lives (e.g. childhood, adulthood, young couples, retired) Geographic: The needs of potential customers in one geographic area are often different from those in another area, due to climate, custom, or traditionGeodemographic: There is a relationship between the type of housing & location that people live in & their purchasing behaviours PsychologicalPsychographic (lifestyles): Analysing consumers' activities, interests, & opinions, we can understand individual lifestyles & patterns of behaviour, which affect their buying behaviour and decision-making processes. We can also identify similar product & /or media usage patterns Benefits sought: The motivations customers derive from their purchases provide an insight into the benefits they seek from product use BehaviouralPurchase/ transaction: Data about customer purchases & transactions provide scope for analysing who buys what, when, how often, how much they spend, & through what transactional channel they purchase Product usage: Segments can be derived on the basis of customer usage of the product offering, brand, or product category. This may be in the form of usage frequency, time of usage, & usage situationsMedia usage: What media channels are used, by whom, when, where, & for how long provides useful insight into the reach potential for certain market segments through differing media channels, & also insight into their media lifestyle 
  • Consumer spending in children swear suffered due to the economic downturn. To stimulate fashion sales, European retailers are keeping entry-level price points low to encourage fashion shoppers.  In the UK, consumers are switching from specialty high street fashion retailers to cheaper more convenient outlets for children swear. According to Mintel (2010b), UK supermarkets now have 29% of the childrens wear market, clothing multiples 26%, and department stores 7%. Almost seven in 10 shoppers have reported that supermarkets were their most likely source of kids' clothing, with ASDA WalMart and Tesco the most popular. However, leading global fashion retailer Gap Inc. offers clothing and accessories for children through its brand Gap Kids and for babies at BabyGap. In 2009,Gap decided to target a very different children swear segment-the fashion-conscious mother. Fashion designer Stella McCartney to design a new clothing collection for children and babies for Gap Inc. Launched in October 2009, the range is sold in select GapKids and BabyGap stores in the USA, Canada, the UK, & elsewhere. With 70 designs in the collection, consisting of both boys wear and girls wear, with pieces for new born babies to 12-year-olds, the collection includes little replicas of McCartney's women’s wear range. The range is targeted at fashion-conscious mums, who want to keep their children suitably attired in designer clothes.  However, at a time of economic downturn and recovery, will the price tag keep many jumpers out of kids' reach? 
  • Lifestage analysis is based on the principle that people have varying amounts of disposableincome and different needs at different stages in their lives. Their priorities for spendingchange at different points and these points or lifestages do not occur at the same time.Adolescents need different products from a single 26-year-old person, who in turn needs different products from a 26-year-old who is married with young children. For example, in the UK, Tesco, ASDA Wal-Mart, and Sainsbury's have all invested in the development of product lines targeted at singles with high disposable incomes and busy lifestyles with their 'meal for one' ranges in contrast with the 'family value' and 'multipacks' targeted at families. As families grow and children leave home so the needs of the parents change and their disposable income increases. Holidays (e.g. Euro Disney) and automobiles (e.g. people carriers) are key product categories that are influenced by the lifestage of the market.Historically, the family lifecycle consisted of nine categories through which individuals andhouseholds would): single bachelor, newly married, married with children under 6 years old, married with children over 6 years old, older married couples with dependent children, empty nest household with or without employment, and solitary survivor in work or retired. However, since this classification was developed, society has changed and continues to change in terms of values, beliefs, and family lifecycle. A more modern lifecycle classification was developed with support from the British Market Research Bureau (BMRB) called the Target Group Index (TGI) Lifestage Segmentation Product, which classifies 12-13 life stage groups based on marital status, housefold composition & children
  • Segmenting criteria business markets ORGANISATIONAL CRITERIADEMOGRAPHIC; Size, Age/Lifecycle, Industry (SIC) Type /RoleECONOMIC: Revenue, Profit, Budget, Net worthGEOGRAPHIC: Local, National, Multinational, Global
  • Size & growth: purchasing power, profitability & stability in the long runStructural attractiveness includes factors that affect long-run attractiveness. These factors might include strong and aggressive competitors, substitute products, & high power of buyers or powerful suppliers.Company objectives: is the company able to leverage its competencies/capabilities to create/ sustain a unique strategic position in the segmentAndMeasurable: The size, purchasing power, and profiles of the segments can be measured.Accessible: The market segments can be effectively reached and served.Substantial: The market segments are large or profitable enough to serve.Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programmes.If men and women respond similarly to marketing efforts for soft drinks, they do not constitute separate segments.Actionable: Effective programs can be designed for attracting and serving the segments.
  • Decisions need to be made about whether A single product is to be offered to a range of segmentsA range should be offered to a multiple segments, or a single segmentA single product should be offered to a single segmentWhatever the decision a marketing strategy is required to meet the needs of the segment(s)The next slide shows the alternative strategies to adopt
  • Target Market ApproachesUndifferentiated: No distinction between market segments. The market is viewed as one mass market with one marketing strategy. Therefore the whole market is targeted with one offer . Mass marketing focuses on common needs rather than what’s different. The Olympics was marketed at a world market. VW make parts for its different brands, Golf, Seat, Audi and SkodaDifferentiated: Targets several different segments with separate offers for each, to achieve higher sales & stronger position. E.g. Hewlett Packard has developed its product range /marketing strategy to target a number of user segmentsHome officeSMEsLarge businessesHealth, education and other government departmentsFocused or Concentrated (Niche): Targets a small share of a large market, in a small number of segments. Companies uses this strategy where resources are limited, to create a stronger position or where there is an exclusive product More effective and efficient. Jordan's specializes in organic cereals.Customised: Where marketing is developed for each customer as opposed to a market segment. Predominates in B2B, e.g. suppliers of electronics might target Nissan, Unilever and levis given differing requirements in assembly line processing cars, foodstuffs and clothing
  • Tide is positioned as a powerful, all-purpose family detergent; Ivory is positioned as the gentle detergent for fine washables and baby clothes. At Subway restaurants, you “Eat Fresh;” at Olive Garden, “When You’re Here, You’re Family;” and at Applebee’s you’re “Eatin’ Good in the Neighborhood.” In the automobile market, the Nissan Versa and Honda Fit are positioned on economy, Mercedes on luxury, and Porsche and BMW on performance. Volvo positions powerfully on safety. And Toyota positions its fuel efficient, hybrid Prius as a high-tech solution to the energy shortage. “How far will you go to save the planet?” it asks.
  • Provides A visual representation of the different attributes and brandsA means to determine how different (ours and competitors) brands are perceived according to the attributes that consumers valueNote : The tighter the cluster the greater the competition, and the further apart the greater the possibility for new brands to enter. These clusters may be characterised. A map drawn of the UK car market in 2010 showed 4 clusters:High end luxury: Jaguar, Lexus, Mercedes S-ClassShows that women prefer Mini, Suzuki & Hyundai; Men prefer Lexus, Jaguar & SaabHigher income families are likely to buy Mercedes Lexus and SubaruExample of positioning in Mobile market; Determinants are value by range of features. Some interesting featuresExample of Repositioning a Brand in the Soft Drink Market: The determinant attributes of sugar and caffeine have been used, as these product attributes are often highly relevant to consumers when choosing between the various product offerings. For this example, we have assumed that the Mountain Dew brand is trying to reposition itself, by highlighting that it contains a reasonable level of caffeine and wants to promote that benefit to consumers, with the goal of changing their perceptions of the brand.
  • A Priori MethodsA priori segmentation is a procedure whereby a company chooses to break out customer groups by a generally accepted classification procedure related to variations in customer purchase or usage of the product category. This grouping may be the result of company tradition, recognized industrial groups, or some other external or internal criteria. Examples of a priori segments include such classification schemes as: Standard Industrial Classification (SIC) groups,Geographic regions or sales territories,Basic demographic groups (e.g., sex, age, household composition),Purchase or usage groups (e.g., heavy users, light users, nonusers),VALS (SRI's Values and Life Styles classification system), andPRIZM, or similar geodemographic classification systems.Post Hoc Segmentation Method; and ProceduresPost hoc segmentation is empirically derived based on the results of a research study undertaken for the specific purpose of segmenting a market. Segments generated from such a study are formed by aggregating buyers who respond similarly to a set, or sets, of basis questions. The most critical question facing the researcher in conducting a post hoc segmentation study is selecting the basis variables for the segmentation. It takes an astute and product-experienced researcher to chose the relevant set. Examples include: Product attribute preferences, Values,Product purchase patterns,Product usage patterns,Benefits sought,Brand preferences,Price sensitivityBrand loyalty,Socioeconomic status,Deal proneness,Lifestyles,Self-image,Attitudes and opinions toward one's environment,Dealer loyaltyThe initial market segmentation research to first form post hoc market segments is usually called a baseline segmentation study. A baseline post hoc segmentation study will usually include a large number of non-basis variables, called descriptive variables. These descriptive variables are used to further describe and help delineate the segments that are derived from the basis variables.

Transcript

  • 1. How would a breakfast cereals manufacturer identify which consumers to target for a muesli product?
  • 2.  Principles of STP & segmentation  Characteristics & differences between market segmentation & product differentiation  Segmentation in B2C & B2B markets  Different targeting strategies  Concept of positioning  Use of perceptual maps as a positioning tool Market Segmentation & Positioning Session Outlines
  • 3. Segmentation, Targeting and Positioning STP Market Segmentation Brand Positioning Similar Customer Groups Customer Group Selection Value Proposition Male/Female. Fashion Apparel. Aged 18-25, 26- 35, 36-45 etc Female 18- 25, 26- 30 Affordable and fast changing fashion Target Market
  • 4. The Advantages of STP  Enhances competitive positioning  Generates & develops new customers & product uses  Targets resources effectively  Non price based competition
  • 5. What is market segmentation & What is product differentiation
  • 6. New Segment New SegmentProduct Differentiation Market Segmentation Market Segmentation & Product Differentiation
  • 7. PRIORI Classification Procedures POST HOC (Post Research Studies) SIC Group Product attribute preferences, Geography regions Product purchase patterns Demography classifications Product usage patterns Life Style Systems Benefits / Values sought, Geodemographic method Lifestyles, Purchase groups Brand preferences, Price sensitivity Segmentation Principles & Criteria
  • 8. CONSUMER CRITERIA BEHAVIOURAL Who, How, Where & When PSYCHOLOGICAL Why & Who PROFILE Who & Where Transaction Lifestyle Demographic Consumption Usage Personality Socioeconomic Media Usage Perceptions Geographic Technology usage Attitudes Motives Benefits sought Segmenting Consumer Markets
  • 9. Using PROFILE Criteria in Market Segmentation What criteria would a financial investment fund use to identify attractive market segments?
  • 10. Variable • Beauty Products, Magazines (Cleo, FHM), Hair Products, Clothing (H&M, Zara) • Some for both genders fragrances (Calvin Klein), watches (Tag) • Sun protection (Nivea), Breakfast cereals (Kellogg's) Drinks (Petits Filous Plus) • Affluent income earners (Channel, Bentley) / low income segments (Aldi, Lidl), Tesco (Finest; Value Strategies) • Disposable income , needs & spending priorities change over time & vary by marital status, household composition & children. • Tastes vary by region. Low income regions (Low cost retail formats) • Combine demographic & census data with geographic variables ACORN ; classification of neighbourhoods by 5 lifestyle categories to help define demand for p/s Profile Criteria Gender Geodemographic Age Income Lifecycle Geographic
  • 11. PSYCHOGRAPHIC BENEFIT Relies on understanding ATTITUDES, INTERESTS & OPINIONS (AIO) of customers & their VALUES Meet customer wants with the BENEFITS they derive from the use of a p/s Accor Hotel Group use value base segmentation • Economy (Ibis Budget) • Midscale (Novotel – efficiency) • Upscale (Grand Mecure) • Luxury (Sofilel) Benefits comprise, convenience, accessibility, durability, value, novelty, innovation, multi-functionality Nivea purchasers are based on the benefits users derive from sun care products; luxury, convenience, appearance, co mfort etc. Psychological Criteria
  • 12. Psychological Criteria How does Gap’s segmentation strategy differ form that used by Supermarkets for children's wear? Is their an alternative?
  • 13. Variable Frequency /volume of use; HIGH, MEDIUM & LOW lead to an appreciation of how products are used, when & what context family (Bisto), cameras (Olympus) http://www.youtube.com/watch?v=prSQv6aTfDI EPOS tracks consumer purchasing data, viz quantities, incentives, region, seasons for different p/s & different segments to gain customer understanding. (Application by Dunhumby) http://www.youtube.com/watch?v=HgKthEm4afQ Segmenting on the basis of media usage determines responsiveness to advertising, consumption & behaviour Profile Criteria Usage Transaction Media
  • 14. COMPANY CRITERIA ORGANISALTIONAL BUYER Size: MLC, Large, SME, Micro indications of order size, rates etc DMU Structure Location: Needs may be different area by area Choice Criteria : types of p/s bought, selection/tendering processes form basis of clustering companies (NHS, PC by graphical or educational need) Industry (SIC) Purchase Situation: buying situation, first time, early/late stage in buying decision, structure (centralised or other) Segmenting Business Markets
  • 15. What segmentation criteria would you suggest a specialist restaurant use to help it expand its London based operation into other regions of the UK Hybrid Market Segmentation
  • 16. How would you measure the attractiveness of any one of a number of new segments to target? Target Markets Deciding Between New Segments
  • 17. Measurable Accessible Substantial Differentiable Compatible Profitable Size Competition Target Markets Deciding Between New Segments Rating 1. Weight each Criteria 2. Rate each Criteria High 10-7 Medium 6-4 Low 3-0 3. Multiply Weighting by Rating Score per Segment 4. Derive a total of all the scores Evaluation Criteria
  • 18. One Product Multiple Products For Multiple (or Single) Segments One Product for a Single Segment Product-Segment Decisons
  • 19. Undifferentiated Marketing Target Market Approaches Customised Marketing Differentiated Marketing Focussed Marketing HP, Black & Dekker Jordan’s, Ryan Electronic gear for each user group Olympics, Common parts for different cars Target Marketing Strategies
  • 20. Positioning The means by which P/S:  Offer functionality & capability ,  Convey a promise of value relative to competing offers  Meet & satisfies customer expectations  Can be communicated  Occupy a place in consumers’ minds relative to competing products
  • 21. Perceptual Map for US Fragrance Market
  • 22. www.perceptualmaps.com/example-maps/ Perceptual Mapping Competitive Positioning Repositioning
  • 23. FUNCTIONAL EMOTIONAL Product features: or benefits (Jordans, Redbull, Volvo) TM User: (Pepsi Max for men, men & women, women, Hotels for particular breaks, John Smiths ‘No nonsense’) Price & Quality: (Stella Artois, ‘reassuringly expensive’) Benefit: Experience, feeling, emotion offered. (Times ;‘Join the debate,’ Car, toothpaste) Use: When / how. (After Eight mints, Kellogg's cereals) Heritage: used to symbolize experience (Konenbourg ; ‘Established since 1803’) Product Positioning Strategies
  • 24. To target a specific customer need with a unique offer of value to create a point of difference, e.g.  No nonsense  Life goes on  The drive of your life  The ultimate driving machine http://www.youtube.com/watch?v=zFSLUJ8SIbc
  • 25. 4 Ways to Reposition a Product or Service 1 Change the tangible attributes of the product for the same market 2 Change the communications of the same product TM Bisto, Oxo, Mars 3 Change the TM & deliver the same product Lucozade, Pegasus tour operators 4 Change both product (attributes) & TM Boddingtons from beer to retail & hospitality Repositioning
  • 26. easyJet
  • 27.  Define the basis of easyJet’s market segmentation  What was easyJet market positioning  How did easyJet’s rivals’ position in the low cost air travel segment?  How can easyJet exploit their positioning  What lessons can we learn from easyJet to take away and apply elsewhere?