This document discusses different levels and bases for market segmentation. It begins by explaining mass marketing versus more targeted micro-marketing approaches. There are four levels of micro-marketing: segment marketing, niche marketing, local marketing, and customerization. Segment marketing involves dividing the market into groups that share needs and wants. Niche marketing focuses on small, distinct customer subgroups. Local marketing tailors programs to local customer groups. Customerization involves segments of one. The document then covers demographic, psychographic, and behavioral bases for segmenting consumer markets. It provides examples of variables used for each type of segmentation, such as age, gender, and benefits sought. Finally, it discusses bases for segmenting business markets, like purchase decision stage and type

1. Part 3: Connecting with Customers > Levels of Market Segmentation > Segmenting Consumer Markets > Bases for Segmenting Business Markets Class Presentation | Session 12 | 27 Sep 2010

2. Levels of Market Segmentation Mass Marketing is: Mass Production, Mass Distribution and Mass Promotion of one product for all buyers COKE’s 300 Ml bottle for everyone BUT…. Mass marketing is becoming difficult as it is not profitable to reach mass audience always Micro-Marketing is done at one of four levels: Segments - Segment Marketing Niches – Niche Marketing Local Areas – Local Marketing Individuals - Customerization MG 220 Marketing Management 2

3. Levels of Market SegmentationSegment Marketing Market Segment consists of a group of customers who share a similar set of needs and wants. Clarification of segment & sector In a sector, consumers may have different preferences Who creates Segments? Marketers or ….they just exist They exist and keep evolving Marketer’s task is to identify segments and decide which ones to target In today’s research, segment is considered to be partly fiction as not everyone would want exactly same thing….even in a segment Thus, Concept of Flexible Market Offering: Naked Solution – product/service elements that all segment members value Discretionary options – elements that some segment members value MG 220 Marketing Management 3

4. Levels of Market SegmentationSegment Marketing (…contd.) Market Segment can be defined in several ways like ‘preference segments’ Homogenous Preferences No difference Diffused Preferences No clear pattern Clustered Preferences Clusters of preferences Example is for preferences in ice cream’s creaminess and sweetness COLORED CIRCLE IS TO SHOW WHERE COMPANY SHOULD OPERATE(A generalization only) MG 220 Marketing Management 4

5. Levels of Market SegmentationNiche Marketing Niche is a narrowly defined customer group seeking a distinctive mix of benefits. Niches can be identified by dividing segments into sub-segments Segments are fairly large and attract several competitors. Niches are small and attract only one or two Characteristics of an attractive niche: Customers have a distinct set of needs They will pay premium to firm best satisfying their needs Niche doesn’t attract other competitors Niche firm/product gains economies through specialization Niche has size, profit and growth potential Internet businesses have helped niches grow a lot MG 220 Marketing Management 5

6. Levels of Market SegmentationLocal Marketing Marketing programs tailored to needs and wants of local customer groups A growing trend also called ‘grassroots marketing’ Marketing activities concentrated on getting as close and personally relevant to individual customers as possible Those favoring Local Marketing consider national advertising to be wasteful Those against Local Marketing consider it to increase manufacturing costs by reducing economies of scale and increased logistical problems MG 220 Marketing Management 6

7. Levels of Market SegmentationCustomerization Ultimate level of segmentation: Segments of one Customerization combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the products and service offering of their choice. Choice to be made between going for Segments (Segment marketing) or Individuals (Customerization) Those favoring segmentation: More efficient | Less customer information | More standardization Those favoring Customerization: Segments are fiction | Those in a segment differ greatly MG 220 Marketing Management 7

8. Segmenting Consumer MarketsKey Points Two broad set of variables used in segmentation: Descriptive Characteristics Geographic Demographic Psychographic Behavioral Characteristics Consumers are divided and it needs to be seen whether they have different preferences towards product or not MG 220 Marketing Management 8

9. Segmenting Consumer MarketsDemographic Segmentation Age and Life-Cycle Stage Wants and abilities change with age Age segmentation can be refined further Important to do it carefully by understanding consumers’ preferences as they change New Swift advertisement Life Stage What events and stages a person goes through in his/her life They affect buying behavior Users in age group of 50-60 are about to retire from work life and are segmented/targeted for pension plans etc. Gender Importance of understanding how they differ in purchasing behavior How they approach purchase decision is to be observed Income Long-standing and established practice Again understanding of exact behaviors is important People from middle class in income may be targeted with premium products MG 220 Marketing Management 9

10. Segmenting Consumer MarketsDemographic Segmentation (…contd.) Generation A generation is impacted by lifestyle of times it grows in Cohorts are formed whose members share same political, cultural and economic experiences Profiling of American generation is done famously as: Baby boomers (born: 1946-64) Generation X (born: 1965-77) Generation Y (born: 1978-94) Millennials (born: 1995-2002) Behaviors are highly coherent Social Class Has strong impact on lifestyle, product preferences etc. MG 220 Marketing Management 10

11. Segmenting Consumer MarketsPsychographic Segmentation Psychographic Segmentation is dividing buyers into groups/segments based on: Psychological / personality traits Lifestyle Values Culture may also play role in Psychographics A good example is VALS™ model used in USA MG 220 Marketing Management 11

12. Segmenting Consumer MarketsBehavioral Segmentation In Behavioral segmentation, buyers are divided into groups based on: Their knowledge of product Attitude towards product Use of product Response to a product Decision Roles Who buys what? What influence they have Consumers may have following roles in buying process: Initiator Influencer Decider Buyer User Consider different household products purchased in daily life: Class discussion MG 220 Marketing Management 12

13. Segmenting Consumer MarketsBehavioral Segmentation (…contd.) Behavioral Variables Occasions: Activities in different occasions help define needs and purchasing behavior When consumers consumer a product? Traveling in holidays, Grocery at start of month etc. Benefits: Based on benefits sought by consumers User Status: Non-users | Ex-users | Potential Users | First-time users | Regular Users Usage Rate: Light, medium and heavy users Heavy users are less in number but contribute major part of sales How to target these segments is to part of strategy because they have different attitudes towards product Buyer-Readiness Stage: Unaware | Aware | Informed | Interested | Desire the product | Intend to buy Building awareness and informing is a key part of marketing effort Loyalty Status Hard core loyals | Split loyals | Shifting loyals | Switchers Study product’s strengths (hardcore loyals) | Identify competitors (split loyals) etc. Attitude: enthusiastic | Positive | Indifferent | Negative | Hostile MG 220 Marketing Management 13

14. Segmenting Consumer MarketsBehavioral Segmentation (…contd.) Behavioral Variables (breakdown) MG 220 Marketing Management 14

15. Segmenting Consumer MarketsConversion Model Groups in Users (based on strength of commitment) and Nonusers (based on balance of disposition with current brand) MG 220 Marketing Management 15 Convertible Shallow Average Entrenched Nonusers Users Strongly unavailable Ambivalent Available Weakly unavailable

16. Bases for Segmenting Business MarketsSequential Segmentation Based on their stage in purchase decision First-time prospects Novices Sophisticates Based on type of selling Price-oriented customers Solution-oriented customers Strategic-value customers MG 220 Marketing Management 16

17. Part 3: Connecting with Customers > Market Targeting Part 4:Creating Brand Equity > What is Brand Equity? > Building Brand Equity > Measuring Brand Equity > Discussion on Term Project Class Presentation | Session 13 | 29 Sep 2010