The document provides an overview of marketing fundamentals related to researching and selecting target markets. It discusses consumer behavior models and the factors that influence buying decisions. It also covers market segmentation techniques such as identifying variables to segment the market and profiling the resulting segments. The document explains how to evaluate segment attractiveness and select target segments for a business based on factors like segment size, growth potential, and structural attractiveness. An example of segmenting the Netflix market is also provided to illustrate how to identify segments and determine which ones a company should target along with possible marketing strategies.

1. Marketing Fundamentals
- Session 2 -

2. What we will cover…
Researching & Selecting Target Markets
• A Model of Consumer Behavior
• Market Segmentation
– Identifying Segmentation Variables & segmenting the market
– Profiling the Segments
• Market Targeting
– Evaluate attractiveness of each segment
– Select the target segment for the business
• Product Positioning (Session 3)

3. A Model of Consumer Behavior

4. Categories of Buying Decisions - Exercise
• Categorise the following into 3 groups
– Those requiring very little time and effort
– Those requiring moderate time and effort
– Those requiring considerable time and effort
• Bread Magazines
• Tissue Chewing Gum
• Home
• Coffee
• Detergent
• Lipstick
• Shampoo
• Car
• Laptop
• Shaving Foam
• Butter
• Soda
• Luxury Handbag

5. Types of Buying Decisions
Types of
Buying
Decisions
Impulse
Buying
Extended
Problem
Solving
Habitual
Buying
Now, consider the
products on the earlier
slide – where would
you place each of them
– and what do we learn
from this?

6. Model of Consumer Behavior
Outside
Stimuli
Marketing
- 4 Ps
Environment
- Economic,
Technological, Political,
Cultural
Buyer’s
Black Box
Buyer Profile
- Cultural, Social,
Personal, Psychological
Decision Process
- Need Recognition,
Information Search,
Evaluation, Decision,
Post-purchase
Outcomes
Choices on Product,
Brand, Channel, Timing,
Amount

7. Model of Consumer Behavior
Outside
Stimuli
Marketing
- 4 Ps
Environment
- Economic,
Technological, Political,
Cultural
Buyer’s
Black Box
Buyer Profile
- Cultural, Social,
Personal, Psychological
Decision Process
- Need Recognition,
Information Search,
Evaluation, Decision,
Post-purchase
Outcomes
Choices on Product,
Brand, Channel, Timing,
Amount

8. The Buyer Profile … in Detail
Cultural & Social Factors
•Culture/Subculture
(Nationality Groups,
religious groups..)
•Social Class (based on
variables like wealth,
income, occupation,
education etc)
•Reference Groups incl.
family, friends,
colleagues, etc.
Personal Factors
•Age
•Lifecycle Stage
•Occupation/Economic
status
•Lifestyle
•Personality/Self-
concept
Psychological Factors
•Motivaton (Maslow’s
theory/Herzberg’s
Theory)
•Beliefs, Attitudes,
Perceptions

9. Buyer Profile – Exercise 1
• Visit any 1 of the sites below
• Choose 1 ad from the work portfolio
• Prepare a profile of the target buyer that the ad seems to be aimed at and reasons
• http://www.jwt.com/worldwide/work JWT
• http://www.bbdo.com/#!/the-work BBDO
• http://www.ogilvy.com/#/{filter:The-Work} Ogilvy

10. The Buyer Decision Process…. In Detail
Need
Recognition
Information
Search
Evaluation of
Alternatives
Purchase
Decision
Post-
purchase
behavior
Stacey Brown is
looking to upgrade
her computer skills –
but she does not
have a computer at
home to practice
She begins to notice
ads for computers
(heightened
attention) or starts
looking for
recommendations/m
aterial/visiting
outlets etc. for
information (active
search)
Stacey prepares an
initial ‘awareness set’
but then starts
zoning onto a smaller
set of brands that
she is actively
considering
(consideration set)
Based on the
benefits, she is
looking for, and the
product attributes,
she develops a set of
brand beliefs/image
evaluations
With these
evaluations in mind,
Stacey forms a
Purchase Intention
for a brand – which is
then
executed/otherwise
based on situational
factors
(offers/availability/pe
rsonal changes)
Finally, the product
experience kicks in
and the
satisfaction/otherwis
e from this refines
the brand image
perceptions and
consequent Word of
Mouth
recommendations
etc.
Note: You may not always go through
all the steps all the time – examples ??

11. Buyer Behavior - Exercise
• Now consider 2 products that you have bought in the recent past
– 1 should be of low value
– The other of high value
• Trace the Decision Process you went through for each product using the framework just
introduced

12. Market Segmentation

13. 13
What is segmentation?
• Segmentation is a key principle of marketing ; it involves dividing up of the market into a series
of sub groups on the basis of selected criteria
Why Segment?
• Many markets can not be treated in an aggregate way
• Segmentations provide companies with a way to tailor their marketing spend to particular
consumers to maximise return on investment
• Segments must be actionable and identifiable
• Before conducting a segmentation exercise it is essential to determine
– What are the objectives of the segmentation
– What variables will segmentation be based on

14. Features of Good Segmentation
Homogeneous
within :
Respondents
within a segment
will be as similar
as possible
Substantial :
Segments need
to be large
enough so that
any targeting of
segments is cost
effective
Heterogeneous
Between :
Respondents in
different
segments will be
as different as
possible
Operational :
Segments must
be identifiable
using variable
such as
demographics
and/or attitudes

15. Segmentation Variables
Geographic
• Region/State
• Climate
Demographic
• Age
• Gender
• Family
Size/Stage
• Income
• Occupation
• Religion/race
Psychographic
• Social Class
• Lifestyle
• Personality
Behavioral
• Usage status
• Usage Rate
• Benefits
VALS
(Values/Attitudes/Lifestyles)
AIO Framework
(Activities/Interests/Opinion
s)

16. Segmentation Examples
Category Segmentation Base Identified Segments
Toothpaste Benefit Whitening, Sensitive Teeth, Fresh Breath,
Cavity Protection
Credit Card Demographic Young & single, DINK, Young families, Middle-
aged with families, Empty Nesters, Retired
Cars Demographic +
Psychographic
Young Speed-Cravers, Young, Affluent Socially
Mobile, Middle-Aged Practicals, Middle-Aged
Status Conscious..
Hotels Behavioral/Occasions Business Meetings, Family Vacations,
Honeymoon/Special Occasions
Local Health Club Behavioral Heavy Users, Regular users, Occasional Users,
Program Attenders…

17. Segmentation – Exercise 1
• Suggest suitable segmentation variables for:
– Breakfast Cereal Maker
– Coca Cola
– Washing Detergent
– Apple Iphone
– Coffee
– Toyota Lexus

18. Profiling the Segments
• Once the segments have been defined, need to focus on creating a more granular fingerprint
of the segment
– Profiling the segment in detail so that decisions regarding attractiveness and suitability of the
segment for the marketer can be taken
– Need to access various sources of information for this
– Surveys are key for segmentation
• Niche Segments:
– These are segments (usually small), characterized by highly defined characteristics
– Example – high-end sports cars, a very specific type of coffee, stem cell storage facilities etc.
– Since niche segments are very narrowly focused, marketers need to aim to be the only one/of a few
serving the small segment – for profitability

19. Segment Profiles*
Decaffeinated Non-decaffeinated Ground
Size 35% 33% 32%
Distinguishing
features
Decaffeinated
Not make me
nervous
Prepared quickly
Not wake up
Concentrated form
Not decaffeinated
Wake up
Convenient package
Well-known brand
Easy to prepare
Not prepared quickly
Not easy to prepare
Special Equipment
Not concentrated
form
Frequency of Use Light Medium Heavy
Type Usage Instant Both Ground
Demographics Older
Widowed
Lower income
More minorities
Average Age
Divorced
Average Income
More minorities
Younger
Married
Higher Income
Fewer minorities
* Source: Market Segmentation, Robert Smythe – an NFO pamphlet
Exercise: What brands do you think each of the
segments is likely to be using?

20. Market Targeting

21. Tools for Segment Evaluation
Segment Size
and growth
Segment
Structural
Attractiveness
Company
Objectives &
Resourcese.g. structural shift to online travel

22. Segment Structural Attractiveness
• Porter’s 5 Forces Model
Industry Competitors
(Segment Rivalry)
Threat of New Entrants
Threat of Substitutes
Buyer PowerSupplier Power

23. Selecting Market Segments
• Based on evaluation, company now must select 1 or more segments to target
• 5 patterns of target market selection (Source: Derek F.Abell: Defining the Business: The
Starting Point of Strategic Planning)
M1 M2 M3
P1
P2
P3
Note: M: Market; P : Product
Single Segment Concentration
M1 M2 M3
P1
P2
P3
1 2
Selective Specialization
Examples? Class Discussion

24. Selecting Market Segments
M1 M2 M3
P1
P2
P3
Note: M: Market; P : Product
Market Specialization
M1 M2 M3
P1
P2
P3
3 4
Product Specialization
M1 M2 M3
P1
P2
P3
5
Full Coverage
Examples? Class
Discussion

25. 25
Segmentation for Netflix – An Exercise
• Given the data in the next slide, identify the different types of segments
emerging.
– Assign descriptive names to these segments based on their profiles
• Which segment/s should Netflix target? Develop initial thoughts on
possible marketing strategies for these segments

26. Segmentation for Netflix
Total # of customers – 200 Cluster 1 Cluster 2 Cluster 3 Cluster 4
Size 68 32 45 55
Age of Customer (Mean) 32 26 44 58
Gender (in %)
Male
Female
58%
42%
47%
53%
36%
67%
64%
36%
# of children in Household (mean) 1.03 0.54 2.4 1.1
# of movies rented in last 3 months 10 12 3 8
Genre of movies rented in last 3
months (mean %)
Action
Comedy
Child
Romance
Drama
War
30%
22%
20%
4%
15%
9%
26%
31%
2%
27%
12%
2%
18%
27%
32%
3%
15%
5%
32%
20%
1%
2%
17%
28%

27. Thank You!