Chapter Segmentation

Identifying Market Segments& Targets

Chapter#7

Contents

1) Levels of Market Segmentation2) Segmenting Consumer Markets3) Bases for Segmenting Business Markets4) Market Targeting

1) Levels of Market Segmentation

Market Segmentation:

Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.

Mass Marketing vs Micro Marketing

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Undifferentiated or Mass Market Approach

Single

Marketing

Mix

TargetMarket

Undifferentiated or Mass Market Approach

In mass marketing, the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers.

Henry Ford used this strategy for Model-T Ford in one color, black. Coca-Cola used this strategy for Coke in a 6.5-ounce bottle.The argument for mass marketing is that it creates the largest potential market, which leads to the lowest costs, which in turn can lead to lower prices or higher margins. However, many critics point to the increasing splintering of the market, which makes mass marketing more difficult.

The proliferation of advertising media and distribution channels is making it difficult and increasingly expensive to reach a mass audience. Some claim that mass marketing is dying.

Fords Model T Followed a Mass Market Approach

Fords Model T is an automobile that was produced by Henry Ford's Ford Motor Company from 1908 through 1927

Four levels of Micromarketing

i) SegmentMarketing

iii) LocalMarketing

iv) Individuals/Customerization

ii) NicheMarketing

i) Segment Marketing:Differentiated or Multi-Segment Approach

Marketing Mix I

Marketing Mix II

Marketing Mix III

Target Segment I

Target Segment II

Target Segment III

i) Segment Marketing:

Flexible Market Offering:Naked SolutionDiscretionary Options

Preference Segments:Homogeneous PreferencesDiffused PreferencesClustered Preferences

ii) Niche Marketingis a more narrowly defined customer group

seeking a distinctive mix of benefits

Single

Marketing

Mix

Segment I

Segment II(target market)

Segment III

Oversized / Undersized

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Niche characteristics:

the customers in the niche have a distinct set of needs;

they will pay a premium to the firm that best satisfies their needs;

the niche is not likely to attract other competitors;

the nicher gains certain economies through specialization;

and the niche has size, profit, and growth potential.

Whereas segments are fairly large & normally attract several competitors, niches are fairly small & normally attract only one / two.

iii) Local Marketing

Target marketing is leading to marketing programs tailored to the needs and wants of local customer groups.

RAKUB (Rajshahi KrishiUnnayan Bank)Some Tea BrandsSome Lamps BrandCable Operators

iv) Individuals/Customerization

Single

Marketing

Mix

Segment I

Segment II(target market)

Segment III

Customerization combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice.

2) Segmenting Consumer Markets

Segmenting Consumer Markets

Geographical segmentation Demographic segmentation

Most popular segmentation Psychographic segmentation

Lifestyle, Values & personality-basedsegmentation

Behavioral segmentation

Segmentation variables for US consumer markets


Bases for Segmentation

Geographic Demographic Psychographic Behavioral

Nation or country State or region City or metro size Density Climate

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Rural Bangladesh




Age, race, gender Income, education Family size Family life cycle Occupation Religion, nationality Generation Social class




Lifestyle Activities Interests Opinions

Personality Core values

Life-Style Life-style refers to how people live, how

they spend their money, and how they allocate their time.

Distinction between personality & life-style

Personality refers to the internal characteristics of the person and life-style refers to the external manifestations of how a person lives.

AIO statements identify activities, interests, and opinions of consumers(Lifestyle)

Activity questions ask consumers to indicate what they do, what they buy, and how they spend their time.

Interest questions focus on what the consumers preferences and priorities are.

Opinion questions ask for consumers views and feelings on such things as world, local, moral, economic, and social affairs.

The VALS Inventory The VALS life-style classification scheme is a

psychographic inventory of consumers offered by the Strategic Business Insights.

VALS is not an abbreviation. Originally, VALS was based on social values, & at that time VALS was an acronym for Values & Lifestyles. However, currently, VALS is based on selected psychological traits & key demographics instead of values, so we dropped Values & Lifestyles but retained the VALS brand.

Goal of VALS is to identify specific relationships between consumer attitudes and purchase behavior.

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http://www.strategicbusinessinsights.com/vals/ustypes.shtm

http://www.strategicbusinessinsights.com/vals/surveynew.shtml

SBI is the f ormer Business Intelligence div ision of Stanford Research Institute (SRI) International

Innovator: These consumers are on the leading edge of change, have the highest incomes, and such high self-esteem and abundant resources that they can induldge in any or all self-ori entations. Image is important to them as an expression of taste, independence, and character. Their consumer choices are directed toward the "finer things in life."

Thinkers: These consumers are the high-resource group of those who are motivated by ideals. They are mature, responsible, well-educated professionals. Their leisure activities center on their homes, but they are well informed about what goes on in the world and are open to new ideas and social change. They have high incomes but are practical consumers and rational decision makers.

Achievers: These consumers are the high-resource group of those who are motivated by achievement. They are success ful work-oriented people who get their satisfaction from their jobs and families. They are politically conservative and respect authority and the status quo. They favor established products and services that show off their success to their peers.

Experiencers: These consumers are the high-resource group of those who are motivated by self-expression. They are the youngest of all the segments, with a median age of 25. They have a lot of energy, which they pour to physical exercise and social activities. They are avid/enthusiast consumers, spending heavily on clothing, fast-foods, music, and other youthful favorites, with particular emphasis on new products and services.

Believers: These consumers are the low-resource group of those who are motivated by ideals. They are conservative and predictable consumers who favor American products and established brands. Their lives are centered on family, church, community, and the nation. They have modest incomes.

Strivers: These consumers are the low-resource group of those who are motivated by achievements. They have values very similar to achievers but have fewer economic, social, and psychological resources. Style is extremely important to them as they strive to emulate people they admire.

Makers: These consumers are the low-resource group of those who are motivated by self-expression. They are practical people who value sel f-suffi ciency. They are focused on the familiar-family, work, and physical recreation-and have little interest in the broader world. As consumers, they appreciate practical and functional products.

Survivors: These consumers have the lowest incomes. They have too few resources to be included in any consumer self-orientation and are thus located below the rectangle. They are the oldest of all the segments, with a median age of 61. Within their limited means, they tend to be brand-loyal consumers.

Public Broadcasting Serv ice /National Public Radio

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Potential Rating Index by Zip Markets (PRIZM)

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(Car)




Decision Role: Initiator Influencer Decider Buyer User

Behavioral Variables: Occasions Benefits User status Usage rate Loyalty status Buyer-readiness Attitude

Conversion Model:

Occasions: Regular occasion, special occasion Benefits: Quality, service, economy, speed User status: Nonuser, ex-user, potential user,

first-time user, regular user Usage rate: Light user, medium user, heavy user Buyer Readiness stage: Unaware, aware,

informed, interested, desirous, intending to buy Loyalty status: None, medium, strong, absolute Attitude toward product: Enthusiastic, positive,

indifferent, negative, hostile

Behavioral Variables:

Segmenting on the basis of special occasions or situations

Whenever our daughter, Jamie, gets a raise, we always take her out to dinner.

I always buy my wife flowers on Valentines Day.

Benefit Segmentation

Segmenting on the basis of the most important benefit sought by consumers when purchasing the product or service Toothpaste can be bought for

Good Taste (e.g., kids paste) Fresh Breath (e.g, Close Up) Cavity Protection (e.g., fluoride toothpaste )

Conversion ModelThe model segments users of a brand into four groups based on strength

of commitment, from low to high, as follows:1. Convertible (users who are most likely to defect).2. Shallow (consumers who are uncommitted to the brand and could

switchsome are actively considering alternatives).3. Average (consumers who are also committed to the brand they are

using, but not as stronglythey are unlikely to switch brands in the short term).

4. Entrenched/deep trench around consumer (consumers who are strongly committed to the brand they are currently usingthey are highly unlikely to switch brands in the foreseeable future).

The model also classifies nonusers of a brand into four other groups based on their "balance of disposition" and openness to trying the brand, from low to high, as follows:

1. Strongly Unavailable (nonusers who arc unlikely to switch to the brandtheir preference lies strongly with their current brands).

2. Weakly Unavailable (nonusers who are not available to the brand because their preference lies with their current brand, although not strongly).

3. Ambivalent (nonusers who are as attracted to the brand as they are to their current brands).

4. Available (nonusers of the brand who are most likely to be acquired in the short run).

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Behavioral Segmentation Breakdown

3) Bases for Segmenting Business Markets

Segmenting Business Markets

Demographic segmentation Industry, company size, location

Operating variables Technology, usage status, customer capabilities

Purchasing approaches Purchasing function organization

(Centralized/decentralized), Power Structure (Engineer / Financially Dominated), Nature of Existing Relationships, Purchase Policies (Leasing/ Service Contract/ Sealed Bidding), Purchasing Criteria (Quality/Service/Price)

Situational factors Urgency, specific application, size of order

Personal characteristics Buyer-seller similarity, attitudes toward risk, loyalty

4) Market Targeting

Market segmentation:linking market needs to an

organizations marketing program

The five key steps in segmenting and targeting markets link market needs of customers to the organizations marketing program

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Steps in Segmentation Process

Needs-based segmentation

Segment identification

Segment attractiveness

Segment profitability

Segment positioning

Segment acid testStoryboard to test attractiveness

Marketing-Mix

Strategy

Effective Segmentation Criteria

Measurable Size, purchasing power, and profile of segment

Accessible Can be reached and served

Substantial Large and profitable enough to serve

Differentiable Respond differently

Actionable Effective programs can be developed for

attracting and serving the segments

Evaluating & Selecting the Market Segments

Segment-by-Segment Invasion Plan

Chapter Segmentation

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