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  1. 1. Unit-2Unit-2 Market Segmentation
  2. 2. The STP ProcessThe STP Process • Segmentation is the process of classifying customers into groups which share some common characteristic • Targeting involves the process of evaluating each segments attractiveness and selecting one or more segments to enter • Positioning is arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the mind of the consumer
  3. 3. Steps in Target MarketingSteps in Target Marketing 1. Identify Bases for Segmenting the Market 2. Develop Profiles of Resulting Segments 3. Develop Selection Criteria 4. Select Target Segment(s) 5. Develop Positioning for Each Target Segment 6. Develop Marketing Mix for Each Target Segment Market Positioning Market Targeting Market Segmentation
  4. 4. Target MarketTarget Market • A market is a set of all actual and potential buyers • A target market is a group of people toward whom a firm markets its goods, services, or ideas with a strategy designed to satisfy their specific needs and preferences. • Any marketing strategy must include a detailed (specific) description of this.
  5. 5. What is a Market Segment?What is a Market Segment? According to Philip Kotler and Armstrong , “Market segment is a group of consumers who respond in a similar way to a given set of marketing stimuli”
  6. 6. What is a Market Segmentation?What is a Market Segmentation? According to Philip Kotler , “ Market segmentation is the process of dividing a market into distinct groups of buyers with different needs, characteristics, or behaviour who might require separate products or marketing mix.”
  7. 7. Market Segmentation Conti..Market Segmentation Conti.. Market Segmentation is a method of “dividing a market (Large) into smaller groupings of consumers or organizations in which each segment has a common characteristic such as needs or behavior.”
  8. 8. Requirements for Effective SegmentationRequirements for Effective Segmentation • Size, purchasing power, profiles of segments can be measured. • Segments can be effectively reached and served. • Segments are large or profitable enough to serve. MeasurableMeasurable AccessibleAccessible SubstantialSubstantial DifferentialDifferential ActionableActionable • Segments must respond differently to different marketing mix elements & programs. • Effective programs can be designed to attract and serve the segments.
  9. 9. Levels of SegmentationLevels of Segmentation 1. Mass Marketing or Undifferentiated Marketing 2. Micro Marketing: Micro-Marketing is the practice of tailoring products and marketing programs to the needs and wants of specific individuals and local customer groups. As it is difficult for many companies to bear the high advertising cost to reach mass media, they use micro marketing. –It consists of: –Segment Marketing or Differentiated marketing. –Niche Marketing or Concentrated Marketing. –Local Marketing. –Individual Customer Marketing
  10. 10. Segment 1Segment 1 Segment 2Segment 2 Segment 3Segment 3 Segment 1Segment 1 Segment 2Segment 2 Segment 3Segment 3 Company Marketing Mix Company Marketing Mix Company Marketing Mix Company Marketing Mix Company Marketing Mix 1 Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 2 Company Marketing Mix 3 Company Marketing Mix 3 MarketMarket A. Undifferentiated or Mass Marketing B. Differentiated Or Segmented Marketing C. Concentrated Or Niche Marketing Levels of Segmentation CONTI..Levels of Segmentation CONTI..
  11. 11. Henry Ford epitomized this strategy when he offered the Model- T Ford in one colour , black.-1- Undifferentiated Marketing Henry Ford epitomized this strategy when he offered the Model- T Ford in one colour , black.-1- Undifferentiated Marketing
  12. 12. 2. SEGMENTED MARKETING2. SEGMENTED MARKETING Consists of a group of customers who share a similar set of needs and wants. Identifiable Group with in a Market with Similar •Wants • Purchasing Power • Geographical Location • Buying Attitudes
  13. 13. FLEXIBLE MARKET OFFERINGFLEXIBLE MARKET OFFERING • Even in segments 100 % needs are not same – consists of two parts 1.Naked Solution :- products and services that all members of the segment values. 2.Discretionary options :- that some segment members value. Each option might carry an additional charge.  Example: Automobile industry – basic model is same but for A.C , power steering, power window buyer has to pay extra price.
  14. 14. SEGMENTED MARKETING CONTI..SEGMENTED MARKETING CONTI.. Delta Airlines offers all economy passengers a seat and soft drinks. It charges economy passengers extra for alcoholic beverages.
  15. 15. 3. NICHE MARKETING CONTI..3. NICHE MARKETING CONTI..  Group of customers seeking a distinctive mix of benefits who are ready to pay extra premium.  Niche = segment sub – segments Eg. Washing detergents hard & gentle washes . Surf excel for tough stains ( hard on clothes) & Ezee from Godrej for delicate clothes. --- Astha , Sanskar , Q TV – focus on religion & spiritualism.  DISTINCT NEEDS PAY PREMIUM SPECIALIZATION LESS COMPETITION POTENTIAL
  16. 16. A Niche Social Networking Site A Niche Social Networking Site
  17. 17. 4. LOCAL MARKETING4. LOCAL MARKETING • Marketing programs tailored to the needs & wants of local customer groups in trading areas, neighborhoods , etc. • this trend is called grass roots marketing. Ex. – Spiderman 3 was released in 5 different language in India including Bhojpuri. Pune sarees Kashmiri silk
  18. 18. Baskin Robbins Focuses on Local Marketing Baskin Robbins Focuses on Local Marketing
  19. 19. 5. Individual Customer Marketing5. Individual Customer Marketing • It refers to tailoring products and marketing programs to the needs and preferences of individual customers. • The ultimate level of segmentation leads to: –“Segments of one”. –“Customized marketing”. –“One to one marketing”.
  20. 20. INDIVIDUAL MARKETING Conti..INDIVIDUAL MARKETING Conti.. • Ultimate segmentation – segments of 1 or customized marketing or one to one marketing. • Customerization – empower the consumers to design the product or service offering of their choice. • Ex. Paint companies have started doing this- Asian Paint , Nerolac , Berger Paints • Arvind mills launched Ruff’n Tuff Jeans, branded ready – to – stitch
  21. 21. Bases for Segmenting Consumer MarketsBases for Segmenting Consumer Markets GeographicGeographic DemographicDemographic PsychographicPsychographic BehavioralBehavioral
  22. 22. 1. GEOGRAPHIC SEGMENTATION1. GEOGRAPHIC SEGMENTATION Divide the market into different group based on : • Region – South India , North , Western Region, East • City – metro cities, cities with population more than 1 million • World • Density • Climate • States Ex.- Mcdonalds globally, sell burgers aimed at local markets, for example, burgers are made from lamb in India rather then beef because of religious issues. In Mexico more chilli sauce is added and so on.
  23. 23. 2. Demographic Segmentation2. Demographic Segmentation Age and Life CycleAge and Life Cycle Life StageLife Stage GenderGender IncomeIncome GenerationGeneration Social ClassSocial Class
  24. 24. Age and Life CycleAge and Life Cycle • For example, Hindustan Unilever Limited introduced pears soap in pink color, specially targeted towards children. • For example, The magazine Magic Pot published by the Malayala Manorama Group in India is targeted at “nursery and primary school children”. • For example, Television channels in India indicate segmentation based on age and life cycle.
  25. 25. Life StageLife Stage • For example, Insurance companies offer schemes for people who are planning their retirement life. • The Al Habib Bank of Pakistan targets senior citizens with special savings schemes that yield a higher interest rate.
  26. 26. GenderGender • For example, ‘Virginia Slims’ is addressed to women and accompanied by appropriate flavor, packaging and advertising cues to reinforce a female image • ‘Nike’ is viewed as more masculine than ‘Reebok’. • For example, Emami launched a new fairness cream, fair and handsome, targeted exclusively at men, and in the process created a new product category. • For example, Men prefer to drive motorcycles whereas for women there are specific brands of scooters for example Bajaj Wave and Scotty Pep.
  27. 27. IncomeIncome • For example, ‘Blue-Collar Workers’ were among the first purchasers of color television sets, it was cheaper for them to buy these sets than to go to movies and restaurants. • For example, Nirma washing powder was launched as the lowest priced detergent in India primarily targeted at the middle-income segment of the market.
  28. 28. GenerationGeneration
  29. 29. Social ClassSocial Class
  30. 30. 3. Psychographic Segmentation3. Psychographic Segmentation Divides Buyers Into Different Groups Based on:
  31. 31. 4. Behavioral Segmentation4. Behavioral Segmentation • Dividing the market into groups based on variables such as: –Occasions –Benefits –User Status –Usage Rate –Buyer-Readiness –Loyalty Status –Attitude
  32. 32. OccasionsOccasions • For example, “Orange Juice” is usually consumed at breakfast. But orange growers have promoted drinking juice as a cool and refreshing drink at other times of the day. • For example, Biscuits are used as an accompaniment with tea or coffee in the evening.
  33. 33. BenefitsBenefits • For example, Liril offers the benefits of “freshness” Dettol soap offers the benefits of “total protection”.
  34. 34. User StatusUser Status • For example, Blood Banks cannot rely on regular donors to supply blood, they must also recruit new first- time donors and contract ex-donors and each will require a different marketing strategy.
  35. 35. Usage RateUsage Rate • For example, Heavy beer drinkers accounts for 87% of the beer consumed-almost seven times as much as the light beer drinkers. • For example, In the mobile phone service market, heavy users account for a significant proportion of the revenue earned by the service providers.
  36. 36. Loyalty StatusLoyalty Status Switchers Shifting loyals Split loyals Hard-core
  37. 37. Buyer-Readiness StageBuyer-Readiness Stage
  38. 38. AttitudeAttitude • For, example, Door-to-Door workers in a political campaign us the voter’s attitude to determine how much time to spend with that voter. • They thank enthusiastic voters and remind them to vote. • They reinforce those who are positively disposed. • They try to win the votes of indifferent voters. • They spend no time trying to change the attitudes of negative and hostile voters.
  39. 39. Segmenting for Business MarketsSegmenting for Business Markets DemographicDemographic Operating VariableOperating Variable Purchasing ApproachesPurchasing Approaches Situational FactorsSituational Factors Personal Characteristics Personal Characteristics
  40. 40. 40 Process Of Market SegmentationProcess Of Market Segmentation Step 1. Identifying Customer Segments Step 2. Developing Measures for Structural Attractiveness Step 3. Selecting Customer Segments
  41. 41. Advantages of SegmentationAdvantages of Segmentation  Facilitates Proper Choice of Target Market  Facilitates Tapping of the Market, Adapting the Offer to the Target  Helps “Divide the Markets and Conquer Them  Makes the Marketing efforts More Efficient and Economic
  42. 42. Advantages of Segmentation Conti..Advantages of Segmentation Conti..  Helps Identify Less Satisfied Segments and Concentrate on Them  Benefits the Customer as Well  Helps Distinction one Customer Group from another within a Given Market  Helps Spot the less Satisfied Segments and Succeed by Satisfying such Segments
  43. 43. Limitations of Market SegmentationLimitations of Market Segmentation • Market segmentation can be expensive proposition in both production and marketing of products. • Other expenses like keeping adequate inventories of each style, colour, promotional expenses also go up because different promotional mixes have to the formulated for different elements. • Administrative expenses also go up because marketer must plan an important several different marketing programmes.