IDENTIFYING MARKET SEGMENTS & SELECTING TARGET MARKETS BY: Jonathan T. Luanzon
Introduction“ The customers are to “ Many companies instead numerous & diverse in of scattering their their buying marketing effort ( a requirements, a shotgun approach), they company needs to focus on the buyers they have the greatest chance identify the market of satisfying ( a rifle segments it can serve approach)…” effectively…” What criteria can a How can a company company use to choose the identify the market most attractive target segments that make up a markets? market?
Levels of market segmentationIn mass marketing, the seller engages in mass production, mass distribution & mass promotion of one product for all buyersIn micromarketing, it is focused on certain levels such segments, niches, local areas and individuals
Levels of market segmentationSEGMENT MARKETING NICHE MARKETINGA market segment consists of A niche is a more narrowly defined groups of similar wants. group of seeking a distinctive mix of benefits. Marketers usually identify niches by dividing aBenefits over mass marketing segment into sub – segments. An attractive niche is characterized - The company can create as follows: more fine tuned product or - The customers in the niche service offering and price it have a distinct set of needs appropriately for the target segment - They will pay a premium - The company can easily to the firm that best satisfies select the best distribution & their needs communication channels - The niche is not likely to - The company can also have attract other competitors clearer picture of its - The nicher gains certain competitors, economies through specialization - and the niche has size, growth & potential.
Levels of market segmentationLOCAL MARKETING INDIVIDUAL MARKETINGTarget marketing is leading to The ultimate level of marketing programs tailored segmentation leads to “ to the needs and wants of segments of one”, local customer groups customized marketing” or “ ( trading areas, one to one marketing”. neighborhood, even individual Ultimately, every individual stores) has a unique set of wants and preferences.Those favoring localizing a company’s marketing see a national advertising as Mass customization is the wasteful because it fails to ability of the company to address local needs. prepare a mass basis individually designed products, services, programs and communications to meet customer requirements.
Patterns of market segmentation1) Homogenous preferences Shows a market where all the consumers have roughly the same preferences. The market shows no natural segments2) Diffused preferences Shows that customers vary greatly in their preferences3) Clustered preferences The market might reveal distinct preference clusters called natural market segments.
Steps in segmentation process Description1) Needs - Based Group customers into segments based on similar needs Segmentation & benefits sought by customer in solving particular consumption problem.2) Segment For each needs – based segment, determine which Identification demographics, lifestyles & usage behaviors make the segment distinct & identifiable Using predetermined segment attractiveness criteria,3) Segment determine the overall attractiveness of each Attractiveness segment.4) Segment Determine segment profitability. Profitability For each segment, create a “value proposition” &5)Segment product price positioning strategy based on that Positioning segment’s unique customer needs & characteristics6)Segment “Acid Create “segment storyboards” to test the attractiveness Test” of each segment’s positioning strategy.7) Marketing Mix Expand segment positioning strategy to include all Strategy aspects of the marketing mix
Effective market segments Measurable The size, purchasing power & characteristics of the segment can be measured The segments are large & profitable enough to Substantial serve The segments can be reached & served. Accessible The segments are conceptually distinguishable & Differentiable respond differently to different marketing mix element & programs. Actionable Effective programs can be formulated for attracting & serving the segments.
Bases for segmenting consumer marketsGeographic Demographic Psychographi Behavioral c Region Age Lifestyle Occasions City size Family Size Personality Benefits Density Family life cycle User Status Climate Gender Usage Rate Income Loyalty Status Occupation Readiness Stage Education Attitude toward product Religion Race Generation Nationality Social Class
Segmentation variables for business marketsDemographic Situational Factors1) Industry: 12) Urgency2) Company Size:3) Location 13) Specific application 14) Size of orderOperating Variables4) Technology5) User or Non – User Status Personal Characteristics6) Customer capabilities 15) Buyer seller similarityPurchasing Approaches 16) Attitudes towards risk7) Purchasing function organization 17) Loyalty8) Power structure9) Nature of existing relationships10) General purchase policies11) Purchasing criteria
Segmentation variables for business marketsSegments of business buyersA) * First time prospect * Novices * SophisticatesB) > Programmed buyers > Relationship buyers > Transaction buyers > Bargain huntersC) √ Price oriented customers √ Solution oriented customers √ Strategic value customers