Segmentation

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Segmentation

  1. 1. Market Segmentation, Targeting for Competitive Advantage
  2. 2. What is Market Segmentation? <ul><li>Market segmentation : The act of dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who might require separate products and/or marketing mixes. </li></ul><ul><li>How does market segmentation differ form product differentiation? </li></ul>
  3. 3. The Steps in Segmenting a Market <ul><li>Goal: Identify marketing opportunities </li></ul><ul><li>6 steps </li></ul><ul><ul><li>Choose a basis or bases for segmenting the market </li></ul></ul><ul><ul><li>Develop Segment Profiles </li></ul></ul>
  4. 4. Steps in Segmentation cont’d <ul><li>Step 3: Develop measure of segment attractiveness </li></ul><ul><ul><ul><li>Size, growth, purchase frequency, current brand usage, loyalty and long-term sales/profit potential </li></ul></ul></ul><ul><li>Step 4: Select a target segment </li></ul><ul><ul><ul><li>Review definition (most likely to buy…) </li></ul></ul></ul><ul><ul><ul><li>Major decision that determines the marketing mix </li></ul></ul></ul><ul><li>Step 5: Develop positioning for target segment </li></ul><ul><li>Step 6: Design, implement, and maintain appropriate marketing mix </li></ul>
  5. 5. Levels of Market Segmentation Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Services That Match Their Unique Needs. Mass Marketing Same product to all consumers (no segmentation, i.e Coca-Cola) Segment Marketing Different products to one or more segments (some segmentation, i.e. Marriott)
  6. 6. Levels of Market Segmentation Niche Marketing Different products to subgroups within segments (more segmentation, i.e. Standard or Luxury SUV’s) Micromarketing Products to suit the tastes of individuals and locations (complete segmentation) Local Marketing Tailoring brands/ promotions to local customer groups, i.e Sears Individual Marketing Tailoring products and programs to the needs of individual customers, i.e. Dell
  7. 7. Basic Market-Preference Patterns (a) Homogeneous preferences Sweetness Creaminess (c) Clustered preferences Creaminess Sweetness (b) Diffused preferences Creaminess Sweetness
  8. 8. The Segmentation Variables <ul><li>Geographic Segmentation </li></ul><ul><ul><li>Define– Market is divided into geographical units like nations, counties, states, cities, regions etc. </li></ul></ul><ul><ul><li>Four good reasons to use region: </li></ul></ul><ul><ul><ul><ul><li>Adapt better to sluggish or competitive markets </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Data (via scanners, etc.) tells us what sells in a region </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Regional brand preference data </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Faster to react to competition in a given region </li></ul></ul></ul></ul>
  9. 9. Demographic Segmentation <ul><li>Define– Market is divided into groups on the basis of variables such as age, gender, income, ethnic background, education, occupation, religion,race etc. </li></ul><ul><li>Age segmentation (know key characteristics) </li></ul><ul><ul><ul><li>Importance of 38 million children < 9 </li></ul></ul></ul><ul><ul><ul><li>Teens- have allowances, specific preferences </li></ul></ul></ul><ul><ul><ul><li>Young adults </li></ul></ul></ul><ul><ul><ul><li>Baby Boomers </li></ul></ul></ul><ul><ul><ul><li>Seniors </li></ul></ul></ul>
  10. 10. Demographic Segmentation cont’d <ul><li>Gender segmentation </li></ul><ul><ul><li>Clothing, cosmetics, personal care items, magazines and footwear make heavy use of gender segmentation </li></ul></ul><ul><li>Income segmentation </li></ul><ul><ul><li>Housing, clothing, cars, and food </li></ul></ul>
  11. 11. Psychographic Segmentation <ul><li>Buyers are divided into groups based on the following variables </li></ul><ul><ul><ul><li>Personality – habits, traits and attitudes </li></ul></ul></ul><ul><ul><ul><li>Motives- economy, reliability, dependability– status-related vs. rational motives </li></ul></ul></ul><ul><ul><ul><li>Lifestyles- how do you spend your time and what things do you have (i.e. H-D segments) </li></ul></ul></ul>
  12. 12. Behavioral Segmentation <ul><li>Dividing the market into groups based on variables such as: </li></ul><ul><ul><li>Occasions </li></ul></ul><ul><ul><li>Benefits </li></ul></ul><ul><ul><li>User status </li></ul></ul><ul><ul><li>Usage rate </li></ul></ul><ul><ul><li>Loyalty status </li></ul></ul><ul><ul><li>Readiness stage </li></ul></ul><ul><ul><li>Attitude toward product </li></ul></ul>
  13. 13. Usage Rate <ul><li>Dividing the market by the amount of product bought or consumed </li></ul><ul><ul><li>Heavy users, former, potential, first-time, light or irregular, or medium </li></ul></ul><ul><ul><li>Heavy users account for large % of product sales, so the marketing mix… </li></ul></ul><ul><ul><li>80/20 principle– 20 % of all customers generate 80% of the demand </li></ul></ul><ul><ul><ul><li>Goal: create a heavy user (frequency/loyalty programs) </li></ul></ul></ul><ul><ul><ul><li>Reward and retain heavy users </li></ul></ul></ul>
  14. 14. Effective Segmentation Measurable Accessible Substantial Differential Actionable <ul><li>Segments must be large or profitable enough to serve. </li></ul><ul><li>Segments can be effectively reached and served. </li></ul><ul><li>Size, purchasing power, profiles of segments can be measured. </li></ul><ul><li>Segments must respond differently to different marketing mix elements & actions. </li></ul><ul><li>Must be able to attract and serve the segments. </li></ul>
  15. 15. Segmenting Business Markets Demographics Operating Variables Purchasing Approaches Situational Factors Personal Characteristics Business Marketers Use Many of the Same Consumer Variables, Plus:
  16. 16. Table 10-3: Major Segmentation Variables for Business Markets <ul><li>Demographic </li></ul><ul><li>Industry: Which industries should we serve? </li></ul><ul><li>Company size: What size companies should we serve? </li></ul><ul><li>Location: What geographical areas should we serve? </li></ul><ul><li>Operating Variables </li></ul><ul><li>Technology: What customer technologies should we focus on? </li></ul><ul><li>User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers? </li></ul><ul><li>Customer capabilities: Should we serve customers needing many or few services? </li></ul><ul><li>Purchasing Approaches </li></ul><ul><li>Purchasing-function organization: Should we serve companies with highly centralized or decentralized purchasing organizations? </li></ul><ul><li>Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on? </li></ul>
  17. 17. Segmenting Consumer and Business Markets <ul><ul><li>Business buyers seek different benefit bundles based on their stage in the purchase decision process. </li></ul></ul><ul><ul><ul><li>First-time prospects </li></ul></ul></ul><ul><ul><ul><li>Novices </li></ul></ul></ul><ul><ul><ul><li>Sophisticates </li></ul></ul></ul>
  18. 18. Segmenting Consumer and Business Markets <ul><ul><li>Rackman and Vincentis proposed a segmentation scheme that classifies business buyers into three groups </li></ul></ul><ul><ul><ul><li>Price-oriented customers (transactional selling) </li></ul></ul></ul><ul><ul><ul><li>Solution-oriented customers (consultative selling) </li></ul></ul></ul><ul><ul><ul><li>Strategic-value customers (enterprise selling) </li></ul></ul></ul>
  19. 19. Segmenting International Markets Factors Used to Segment International Markets Geographic Location Economic Factors Political and Legal Factors Cultural Factors
  20. 20. Target Market: <ul><li>Target market: the group of people for whom your company is designing, implementing and maintaining a marketing mix in order to meet the needs of that group (who is most likely to buy your product) </li></ul>
  21. 21. Five Patterns of Target Market Selection Single-segment concentration Product specialization M1 M2 M3 P1 P2 P3 Selective specialization M1 M2 M3 P1 P2 P3 M1 M2 M3 Full market coverage P1 P2 P3 Market specialization M1 M2 M3 P1 P2 P3 P1 P2 P3 M1 M2 M3 P = Product M = Market
  22. 22. Segment-by-Segment Invasion Plan Customer Groups Truckers Railroads Airlines Large computers Product Varieties Personal computers Mid-size computers Company B Company C Company A
  23. 23. Evaluating Market Segments <ul><li>Segment Size and Growth </li></ul><ul><ul><li>Analyze current sales, growth rates and expected profitability for various segments. </li></ul></ul><ul><li>Segment Structural Attractiveness </li></ul><ul><ul><li>Consider effects of: competitors, availability of substitute products and, the power of buyers & suppliers. </li></ul></ul><ul><li>Company Objectives and Resources </li></ul><ul><ul><li>Company skills & resources needed to succeed in that segment(s). </li></ul></ul><ul><ul><li>Look for Competitive Advantages. </li></ul></ul>
  24. 24. Socially Responsible Target Marketing <ul><li>Smart targeting helps companies and consumers alike. </li></ul><ul><li>Target marketing sometimes generates controversy and concern. </li></ul><ul><ul><li>Disadvantaged and vulnerable can be targeted. </li></ul></ul><ul><ul><li>Cigarette, beer, and fast-food marketers have received criticism in the past. </li></ul></ul><ul><ul><li>Internet has come under attack because of the loose boundaries and lack of control in marketing practices. </li></ul></ul>
  25. 25. THANK YOU

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