IDENTIFYING MARKET SEGMENTS AND TARGETS

Chapter 2By: Prof. Dipti

Purohit

Consumers Have Different Needs

Market: An aggregate of people who, as individuals or as organizations, have needs for products in a product class and who have the ability, willingness, and authority to purchase such products

Segment: A group of individuals, groups, or organizations that share one or more similar characteristics which make them have relatively similar products needs

Segmentation: The process of identifying smaller markets (groups of people or organizations) that exist within a larger market

Baby Boomers: A Lucrative Market

Segmentation The more you know about a customer –

age, gender, what he owns, what he spends and what his preferences are - the more likely it is that you can create and pitch a product or service that will hit a bull's-eye.

Identifying and interacting with your customers in ever-smaller groups is a tantalizing prospect - and now easier and more cost effective than ever, 

Segmentation

Segmentation is done to ◦Provide distinct & unique value proposition (allocate its resources more efficiently)

◦Servicing, nurturing, developing as profitable customers (increase the returns)

Segmentation

Segmenting consumer market.Segmenting business market.Segmenting international markets

Identify and profile distinct groups of buyers who differ in their needs and preferences

Select one or more market segments to enter

Establish and communicate the distinctive benefits of the market offering

Effective Targeting Requires

Four levels of Micromarketing

Segments

Local areas Individuals

Niches

A market segment consists of a group of customers who share a similar set of needs ad wants.

What is a Market Segment?

No Market Segmentation

Segmented by Sex

Segmented by Age

Naked solution: Product and service elements that all segment members value

Discretionary options: Some segment members value options but not all

Flexible Marketing Offerings

Homogeneous preferences exist when consumers want the same things

Diffused preferences exist when consumers want very different things

Clustered preferences reveal natural segments from groups with shared preferences

Preference Segments

Preference Segments

Homogeneous preferences

Diffused preferences

Clustered preferences

Preference Segments

A niche market is a focused, targetable portion of a market.

By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. You can think of a niche market as a narrowly defined group of potential customers.

Niche market

Niche Marketers

Enterprise Rent-A-Cartargets the insurance-replacement market

Facebook: A Niche Social Networking Site

Focus on Ayurvedic medicines and health supplemen

ts

Local Marketing

local marketing approach is that it allows a business to connect with consumers on a more personal level. As part of the public outreach, the company creates an image that conveys understanding and appreciation for factors that impact that local community

Local Marketing

Individualized Marketing When the firm deals with each customer on

a one – to – one basis. When products are customized for the

customer. Wind and Rangaswamy gave the concept of-

customerisation.

What is Customerization?

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.

How to Segment Consumer Markets

How to Segment Consumer Markets

CommonBases for

SegmentingMarkets

Geographic

Psychographic

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Segmenting Consumer Markets

GeographicGeographic

DemographicDemographic

PsychographicPsychographic

BehavioralBehavioral

FIGURE 7.3

Segmentation Variables for Consumer Markets

Geographic Segmentation Dividing the market into different

geographic units

◦ Nations◦ States◦ Regions◦ Counties◦ Cities◦ Neighborhoods

Shop outlets: Locations for new shop outlets can be identified.

Advertising: Areas for advertisement can be identified. Segmentation can also reveal information for advertisement media.

Product selection: Different geographic segments have differing consumption patterns. Introducing different products for different geographic segment can bring more sales!

Catalog sales: In catalog sales direct marketing, generally demographic information of customers is not available. Census information derived from geographic data can be used to develop better customer segmentation and predictive models.

Geographical segmentation can be used for various purposes. The followings are geographic segmentation examples;

For more information visit:

India: http://www.censusindia.net/

Climate conditions differs in north & south

South requires Voltas ac North requires Voltas coolers

Food habits

TATA for different habits

Demographic Segmentation

Age and Life CycleAge and Life Cycle

Life StageLife Stage

GenderGender

IncomeIncome

GenerationGeneration

Social ClassSocial Class

Family Life

Cycle

Bachelor stage

(Single men and women

living on their own- Newly married

couples (spend on vacations,

cars, and clothing) 

Full Nest I (youngest child under 6 -- spend

on baby food, toys; buy home and furniture) 

Full Nest II (youngest child is older than 6 -- spending money

on children)Full Nest III (older children, -- major

expense is college; may travel and

replace furniture) 

Empty Nest I (children have left

home; family income at peak --

travel, cruises, vacation) 

Empty Nest II (head of household has

retired -- may move to warmer climate

and purchase a condominium) 

Solitary Survivor in Labor Force (travel, vacations, medical

expenses) 

The Retired Solitary Survivor (medical

expenses)

Few Examples Age- sex-

Size and strc. of family-

Income-

Education level-

Dabur, ITC (cigrette), Gillete, Sahnaaz hussain

beauty parlours, kaya kalp

macdonalds, Automobile, companies(cars)

Hindustan uniliver Computer

manufacturers,

Toyota Scion Targets Gen Y Consumers

Dove Targets Women

PsychographicMarket SegmentationPsychographic:

◦Social class◦Lifestyle◦Personality

TITAN watches have wide range

The VALS Segmentation System

Decision Roles Initiator Influencer Decider Buyer User

Behavioral Variables

Occasions Benefits User Status Usage Rate Buyer-Readiness Loyalty Status Attitude

Behavioral Segmentation

Behavioral Variables1.Occasions

2.Benefits

3. User StatusNonusersEx-usersPotential users

First-time users

Regular users

4.LightMediumHeavyProduct users

Aware Ever tried Recent trial Occasional user Regular user Most often used

5.The Brand Funnel Illustrates Variations in the

Buyer-Readiness Stage

6.Loyalty Status

Switchers

Shifting loyals

Split loyals

Hard-core

Five attitude groupsI. EnthusiasticII. PositiveIII. IndifferentIV. NegativeV. Hostile

7. Attitude

Figure 8.3 Behavioral Segmentation Breakdown

Choose any one product and explain the market segmentations by the company to increase the sale.

Detail structure of Company strategy is required

Assignment for the Day

Segmenting for Business Markets

DemographicDemographic

Operating VariableOperating Variable

Purchasing ApproachesPurchasing Approaches

Situational FactorsSituational Factors

PersonalCharacteristics

PersonalCharacteristics

Bases for Segmenting Business MarketsBusiness markets can be segmented with some of the same variables used in consumer market segmentation, such as geography, benefits sought, and usage rate, but business marketers also use other variables.

Bonoma and Shapiro proposed segmenting the business market with the variables shown below. The demographic variables are the most important, followed by the operating variables —down to the personal characteristics of the buyer.

Demographic:1. Industry: Which industries should we serve?2. Company size: What size companies should we serve?3. Location: What geographical areas should we serve?

Operating Variables:4. Technology: What customer technologies should we focus on? 5. User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers? 6. Customer capabilities: Should we serve customers needing many or few services?

Purchasing Approaches:7. Purchasing-function organization: Should we serve companies with highly centralized or decentralized purchasing organizations? 8. Power structure: Should we serve companies that are engineering dominated, financially dominated, and soon?9. Nature of existing relationships: Should we serve companies with which we have strong relationships or simply go after the most desirable companies? 10. General purchase policies: Should we serve companies that prefer leasing? Service contracts? Systems purchases? Sealed bidding? 11. Purchasing criteria: Should we serve companies that are seeking quality? Service? Price?

Bases for Segmenting Business Markets

Situational Factors12. Urgency: Should we serve companies that need quick and sudden delivery or service?13. Specific application: Should we focus on certain applications of our product rather than all applications?14. Size of order: Should we focus on large or small orders?

Personal Characteristics15. Buyer-seller similarity: Should we serve companies whose people and values are similar to ours? 16. Attitudes toward risk: Should we serve risk-taking or risk- avoiding customers? 17. Loyalty: Should we serve companies that show high loyalty to their suppliers?

Bases for Segmenting Business Markets

Steps in Segmentation Process

Needs-based segmentation

Segment identification

Segment attractiveness

Segment profitability

Segment positioning

Segment acid test

Marketing-MixStrategy

Effective Segmentation Criteria

MeasurableMeasurable

SubstantialSubstantial

AccessibleAccessible

DifferentiableDifferentiable

ActionableActionable

Crest Whitestrips Follows a Multisegment Strategy

Marketing Debate

Is mass marketing dead?

Take a position:1. Mass marketing is dead.

or

2. Mass marketing is still a viable way to build a profitable brand.

Marketing Discussion

Think of various product categories. How would you classify yourselfin terms of the various segmentationschemes? How would marketing be more or lesseffective for you depending upon the segment involved?

Thank you