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Segmentation target

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Segmentation target

  1. 1. Segmentation and Targeting
  2. 2. What Is Market Segmentation? <ul><li>Market segmentation is the subdividing of a market into distinct subsets, where any subset may conceivably be selected as a marketing target to be reached with a distinct marketing mix </li></ul>
  3. 3. Segmentation Dilemma MASS MARKETING Economies of Scale CUSTOMIZATION Everyone Wants Something Different
  4. 4. Segmentation Criteria <ul><li>I. Customer Characteristics </li></ul><ul><li>II. Benefits Sought </li></ul><ul><li>III. Customer Behaviors </li></ul>
  5. 5. Customer Characteristics DEMOGRAPHICS <ul><li>Consumer Markets: </li></ul><ul><ul><li>Gender </li></ul></ul><ul><ul><li>Age </li></ul></ul><ul><ul><li>Income </li></ul></ul><ul><ul><li>Dual income family </li></ul></ul><ul><li>Industrial Markets: </li></ul><ul><ul><li>SIC code </li></ul></ul><ul><ul><li>Size of company </li></ul></ul>
  6. 6. Customer Characteristics PSYCHOGRAPHICS <ul><li>Consumer Markets: </li></ul><ul><ul><li>Environmentally-conscious </li></ul></ul><ul><ul><li>Value and lifestyles </li></ul></ul><ul><ul><ul><li>VALS (1978); VALS 2 (1989) </li></ul></ul></ul><ul><ul><ul><li>Distinct patterns based on attitudes and values </li></ul></ul></ul><ul><li>Industrial Markets: </li></ul><ul><ul><li>Corporate culture </li></ul></ul><ul><ul><li>Purchasing orientation </li></ul></ul>
  7. 7. <ul><li>Struggler </li></ul>Customer Characteristics VALS CLASSIFICATION Principle Status Action Abundant Resources Minimal Resources Fulfilled Achiever Experiencer Believer Striver Maker Actualizer Fulfilled Achiever Experiencer Believer Striver Maker Struggler http://www.future.sri.com/vals/vals2desc.shtml
  8. 8. Customer Characteristics GEOGRAPHY <ul><li>Regional Segmentation </li></ul><ul><li>Zip Clustering </li></ul><ul><ul><li>Distinct marketing strategies created for similar types of neighborhoods stretched across the nation </li></ul></ul><ul><ul><li>Examples include PRIZM, Market Metrics </li></ul></ul>
  9. 9. Benefit Segmentation WHAT BENEFIT DO YOU WANT? <ul><li>Rationale - The benefits people are seeking in consuming a given product are the true reasons for the existence of segments </li></ul><ul><li>Example - Toothpaste </li></ul><ul><ul><li>Cavity prevention (e.g., Crest) </li></ul></ul><ul><ul><li>Fresh breath (e.g., Aquafresh) </li></ul></ul><ul><ul><li>White teeth (e.g., Rembrandt) </li></ul></ul>
  10. 10. Behavior Segmentation USAGE BEHAVIORS <ul><li>Volume of usage </li></ul><ul><ul><li>Heavy users, moderate users, light users and nonusers </li></ul></ul><ul><ul><li>80/20 rule </li></ul></ul><ul><li>Brand usage </li></ul><ul><ul><li>Increase usage among users </li></ul></ul><ul><ul><li>Get users of competing brand to switch </li></ul></ul><ul><ul><li>Get nonusers to start </li></ul></ul><ul><li>Usage occasion </li></ul>
  11. 11. What Is “Targeting” a Market Segment? <ul><li>“ You can’t be all things to all people” </li></ul><ul><li>Therefore, companies typically focus on one or more segments and orient their marketing activities to those (potential) customers </li></ul>
  12. 12. Which Are the “Good” Segments to Target? <ul><li>The most attractive market segments are: </li></ul><ul><li>Large </li></ul><ul><li>Growing </li></ul><ul><li>and have: </li></ul><ul><li>High purchase volume </li></ul><ul><li>High margins </li></ul><ul><li>High customer value </li></ul>
  13. 13. Which Are the “Good” Segments to Target? <ul><li>However, the most attractive segments are frequently already well-served and so are highly competitive </li></ul><ul><li>… so you must also consider: </li></ul><ul><li>Number and strength of competitors </li></ul><ul><li>Ease of entry into the segment </li></ul><ul><li>Company’s current positioning </li></ul>
  14. 14. Targeting Dilemma - Segment Attractiveness SEGMENT VALUE More Opportunity COMPETITION More Companies Compete for Valuable Segments
  15. 15. Which Are the “Good” Segments to Target? <ul><li>Additional considerations for targeting: </li></ul><ul><li>Customers are addressable - you can reach them </li></ul><ul><li>The company is capable of building a marketing program to target them </li></ul>
  16. 16. Targeting <ul><li>Examples of successful targeting: </li></ul><ul><ul><li>Wal-Mart - Value-conscious shoppers that do not want to worry about short-term sales </li></ul></ul><ul><ul><li>Lexus - People with high disposable income who value reliability and service, as well as prestige and luxury </li></ul></ul><ul><ul><li>Cray - Price insensitive computer users that require maximum computing power </li></ul></ul><ul><ul><li>Dupont - Less price-sensitive innovators in the use of plastics (skim pricing) </li></ul></ul>
  17. 17. Porter’s Market Forces Model
  18. 18. Porter’s Market Forces Model <ul><li>An important tool to help us understand the character of competition in a market is Michael Porter’s market forces model </li></ul><ul><li>It assists in evaluating the attractiveness of a market for potential entry </li></ul>
  19. 19. Porter’s Market Forces Model <ul><li>The character of competition in markets varies widely: </li></ul>“ Cooperative” Competition Intense Rivalry Character of Competition in a Market
  20. 20. Porter’s Market Forces Model <ul><li>What determines the attractiveness, or potential long-term profitability, of a market? </li></ul>Buyers (Buyer Power) Substitutes (Threat of Substitutes) Suppliers (Supplier Power) Potential Entrants (Threat of Mobility) Industry Competition (Segment Rivalry) Michael E. Porter
  21. 21. Porter’s Market Forces Model <ul><li>How does the model predict the intensity of competitive rivalry? </li></ul>

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