Description
Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs, and then designing and implementing strategies to target their needs and desires using media channels and other touch-points that best allow to reach them.
Companies divide large, heterogeneous (diverse) markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs
Need for Segmentation
The importance of market segmentation results from the fact that the buyers of a product or a service are no homogenous (similar) group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customer’s individual characteristics, marketers group customers to market segments by variables they have in common. These common characteristics allow developing a standardized marketing mix for all customers in this segment
Benefits of Segmentation
? Market Segmentation Improves ? ?
? ?
Market Position . Products and services meet target market member’s needs Speak their language and relate to them through events and activities. Effectiveness at improving marketing strategies and tactics with characteristics derived from market segmentation, the likeliness of converting target market members into customers is more Market Segmentation Makes You More Competitive Better understanding of target market than the competitors can sell more and business can become more successful
Market Segmentation of Consumer Goods
? Geographic Segmentation ? Demographic Segmentation ? Psychographic Segmentation ? Behavioral Segmentation
Geographic Segmentation
? Geographic segmentation calls for dividing the market
into different geographical units such as nations, regions, states, countries, cities or neighborhood.
? There is a need to localize the product, advertising and
sales effort to fit the needs.
Geographic Segmentation
? World region or country region : North America ,
Europe, China, India, England etc.
? City or Metro Size : Under 5000, 5000 – 20,000, 20,000
– 50, 000, 50,000 – 1,00,000
? Density : Urban, Sub-urban, Rural &
? Climate
Demographic Segmentation
? This Segmentation divides the markets into groups
based on variables such as age, gender, family size, family lifecycle, income, occupation, education, religion, race and nationality E.g. Age: Under 6, 6-11, 12-19, 20-34, 35-49, 50 -64, 65 + Gender : Male/ Female Family Size : 1-2, 3-4, 5+ Family Lifecycle : Young, Single, no children, married with children, no children under 18, other
Demographic Segmentation
? Income : Under 10,000, 10,000 to 20,000, 20,000 to
30,000, 30,000 to 50,000, 50,000 to 1,00,000, 1,00,000 and over
? Occupation : professional and technical managers,
officials, clerical, sales, supervisors, farmers , retired, students, homemakers, unemployed
? Education: grade school or less, high school graduate,
college graduate
Demographic Segmentation
? Religion: Catholic, Protestant, Jewish, Muslim, Hindu
other
? Race : Black, White etc. ? Nationality: North American, South American, British,
French, German, Italian, Japanese, Indian
Psychographic Segmentation
? Dividing a market into different groups based on social
class, lifestyle or personality characteristics
? Social Class : Lower lowers, Upper lowers, Working
Class, middle class, upper middles, lower uppers, upper uppers
? Lifestyle: Achievers, strivers, strugglers ? Personality : Compulsive, authoritarian, ambitious
Behavioral Segmentation
Dividing a market into groups based on consumer knowledge, attitude, use or response to a product
? Occasions: Regular occasion, special occasion ? Benefits : Quality, service, economy, convenience, speed ? User Status: non-user, ex-user, potential user, first time,
regular user
? Usage rate: light user, medium user, heavy user
Behavioral Segmentation
? Loyalty Status : None, Medium, Strong, absolute ? Readiness Stage: Unaware, aware, informed,
interested, desirous, intending to buy
? Attitude toward product : Enthusiastic, positive,
indifferent, negative, hostile
Segmenting Industrial Goods and Services / Business Markets
? Business markets can be segmented on variables like
geography, benefits sought and usage rate and other variables.
? E.g. A rubber tire company should first decide which
industries it wants to serve. It can sell tires to manufacturers of automobiles, trucks, farm tractors or aircraft. Within a chosen target industry a company can further segment by company size.
E.g. DELL Computers
? Dell is divided into two direct sales divisions. One
sells to consumers and small businesses, other manages the company’s corporate accounts. Three key segments are included under the corporate accounts umbrella : the enterprise group, (fortune 500 companies) large corporate accounts (multinational companies in what would be fortune 500 to 2000 range) and preferred accounts (medium sized businesses with 200 to 2000 employees)
Dell
Dell Sales Division
Consumer and small businesses
Corporate Accounts
The enterprise group (fortune 500 Co’s )
Large corporate accounts (MNC’ s 501 to 2000 range)
Preferred accounts (medium business 200 to 2000 employees)
Segmenting Industrial Goods and Services / Business Markets
? Demographics Industry, Company Size and Location
? Operating Variables –
technology, user status, customer capabilities
purchasing function, power structure, general purchasing policies, purchasing criteria
urgency of order fulfillment, product application, size of the order loyalty, attitude towards risk
? Purchasing Approaches – Organizations
? Situational Factors –
? Personal Characteristics – buyer-seller similarity,
Demographics
Industry : which industries that buy this product should we focus on? Needs of different Industries are different. Therefore the purchasing pattern also differs. E.g. Finance Industry is one, single industry but for marketing computers and related services it can be further subdivided into smaller segments such as insurance firms, banks, stock brokerage firms etc.
Company Size : what size companies should we focus on? ? Category customers – large buyers ? Category Customers – medium sized buyers ? Small buyers
? Location : What geographical areas should we focus on?
E.g. Thane belt constitute one segment for a telecom firm while firms located at Nariman point in Mumbai constitute another market segment
Operating Variables
Technology: what customer technologies should we focus on? The requirements of the company using automated process to manufacture and company using manual process will differ widely. The production process to manufacture TV in Japan is totally automated, therefore Japanese manufacturers use few integrated circuits while the same process in the U.S. required discrete components, manual assembly etc.
? User-Non user status: Should we focus on heavy,
medium, or light users or non users?
Customer Capabilities :should we focus on customers needing many services or few services? ? Having sufficient knowledge about the customers financial, technical and operational capabilities will substantially help the marketers in segmenting their markets. ? E.g. Automobiles producer such as Toyota maintain just in time inventory and therefore they depend on suppliers who have excellent delivery records or whom they can rely for consistent and reliable supply of raw materials. ? Some companies that cannot afford to do the quality checks pay a premium to their suppliers who can perform such quality checks. ? Many software firms offer the required technology to firms that lack such technological capabilities. ? Infosys offers computer technology assistance to Boeing
Operating Variables
Purchasing Approaches
? Purchasing function organization: should we focus on
companies with centralized or decentralized purchasing? Some suppliers maintain national sales account to deal with the companies following centralized purchasing method and maintain local sales account to deal with companies that follow a decentralized purchasing method
? Power structure: Should we focus on companies which have
strong relationship or simply after the most desirable companies? Power structures in different organizations vary widely. E.g the financial analysis unit of General Motors has made it stronger in getting better deals from its suppliers
Purchasing Approaches
General purchase policies ? ? Preference for leasing? (a process by which firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax) ? Systems purchase? Buying systems rather than individual components ? Sealed bidding? Govt. organizations usually buy through bidding
? Purchasing Criteria : Should we focus on companies
that are seeking quality ? Service ? Price?
Situational Factors
Urgency: Should we focus on companies that need quick delivery or service?
Marketers can differentiate customers on the basis of products that are used on a regular basis. Customers who want quick supply are usually ready to pay higher prices Product Application : Focus on certain applications of our product rather than all applications? ? E.g. A computer in the software development firm might be used continuously for 18 hours a day, while it may be used for just 2 to 3 hours in the computer lab of the school
? Size of the order : should we focus on large or small orders
Personal Characteristics
? Buyer – Seller Similarity : Should we focus on
companies whose people and values are similar to ours?
? Attitudes toward risk : Should we focus on risk taking
or risk – avoiding customers? Risk avoiders normally do not look for new suppliers
? Loyalty : Should we focus on companies that show
high loyalty to their suppliers? Some customers depend on their existing suppliers and are loyal to them
Effective Segmentation
? Measurable : Measurable to be effective ? Substantial : enough to make economic sense ? Accessible : coverage ? Differentiable : needs and wants
? Actionable : help marketer to develop marketing
programs to attract and serve potential customers effectively
What is target market
A set of buyers sharing common needs or characteristics that the company decides to serve. The firm can adopt one of three market-coverage strategies : undifferentiated marketing, differentiated marketing and concentrated marketing
Undifferentiated Marketing
Company Marketing Mix
Market
In an undifferentiated marketing (or mass marketing) strategy, a firm might decide to ignore market segment difference and go after the whole market with one offer . E.g. Hewlett Packard targets the full market for its printers. It range starts from Rs. 3000/- for home and small office to heavy duty color printer costing more than 1,00,000
Differentiated Marketing
Company Marketing Mix 1 Company Marketing Mix 2
Segment 1 Segment 2 Segment 3
Company Marketing Mix 3
A market coverage strategy in which a firm decides to target several market segments and designs separate offers for each. E.g. Hyundai manufactures different models like Santro, Accent, Sonata to cater different segments with different levels of income. In this case company specializes in cars but targets few segments
Concentrated Marketing
Segment 1 Company Marketing Mix Segment 2 Segment 3
? A market coverage strategy in which a firm goes after a large
share of one or a few submarkets . This is also called as niche market. e.g. Southwest Airlines, walmart, Mercedes
Product Positioning
? The way the product is defined by consumers on
important attributes – the place the product occupies in consumers minds relative to competing products
? The positioning task consist of three steps : identifying
a set of possible competitive advantages upon which to build a position, choosing the right competitive advantages and selecting an overall positioning strategy. The company must then effectively communicate and deliver the chosen position to the market
Positioning strategies
? Product Differentiation ? Services Differentiation ? Channel Differentiation ? People Differentiation
? Brand Image Differentiation
Product Differentiation
? Products
can be differentiated performance or style and design.
on
features,
At one extreme there are products which allow little variation like Chicken, steel, aspirin (yet we find branded chicken)
At other extremes there are products that can be highly differentiated such as automobiles, commercial machinery and furniture
Services Differentiation
? Some companies gain services differentiation through
speedy, convenient, careful delivery, installation, repair, customer training service or consulting service. E.g. BancOne has opened full service branches in supermarkets to provide location convenience along with Saturday, Sunday and weekday evening hours. Installation can installation also differentiate. E.g. systems
Channel Differentiation
? Firms gain competitive advantage through the way
they design their channel coverage, expertise and performance
E.g. Dell Computers and Avon distinguish themselves by their high quality direct channels. Iams pet food achieves success by going against tradition, distributing its products only through veterinarians and pet stores
People Differentiation
? Hiring
and training better people than their competitors do. People differentiation requires that a company select its customer contact people carefully and train them well
? Singapore Airlines enjoys an excellent reputation
largely because of the grace of its flight attendants
Brand Image Differentiation
? A company or brand image should convey the product
distinctive benefits and positioning. Developing a strong and distinctive image calls for creativity and hard work
? Sources : Advertisements, Symbols, colours can
provide strong company brand recognition and image differentiation
Niche Marketing
? A niche is more narrowly defined customer group
seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub segments
? E.g. Progressor a Cleveland insurer sells non standard
auto insurance to risky drivers with a record of auto accidents charges a high price for coverage and makes a lot of money in the process
Niche Marketing
An attractive niche is characterized as follows : The customers in the niche have a distinct set of needs they will pay a premium to the firm that 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 and normally attract several competitors niches are fairly small and attract only one or two
Local Marketing
? Target marketing is leading to the marketing programs
tailored to the needs and the wants of the local customer groups (trading areas, neighborhoods, even individual stores ) ? Local Marketing reflects a growing trend called grass roots marketing. Marketing activities concentrate on getting as close and personally relevant to individual customers as possible E.g. Much of Nike’s initial success has been attributed to the ability to engage target consumers through grassroots marketing such as sponsorship of local school teams, expert conducted clinics and provision of shoes, clothing and equipment Many banks in India have specialized branches that exclusively cater to corporate customers. The services in those branches are customized to serve the needs of business customers
doc_298075943.pptx
Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs, and then designing and implementing strategies to target their needs and desires using media channels and other touch-points that best allow to reach them.
Companies divide large, heterogeneous (diverse) markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs
Need for Segmentation
The importance of market segmentation results from the fact that the buyers of a product or a service are no homogenous (similar) group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customer’s individual characteristics, marketers group customers to market segments by variables they have in common. These common characteristics allow developing a standardized marketing mix for all customers in this segment
Benefits of Segmentation
? Market Segmentation Improves ? ?
? ?
Market Position . Products and services meet target market member’s needs Speak their language and relate to them through events and activities. Effectiveness at improving marketing strategies and tactics with characteristics derived from market segmentation, the likeliness of converting target market members into customers is more Market Segmentation Makes You More Competitive Better understanding of target market than the competitors can sell more and business can become more successful
Market Segmentation of Consumer Goods
? Geographic Segmentation ? Demographic Segmentation ? Psychographic Segmentation ? Behavioral Segmentation
Geographic Segmentation
? Geographic segmentation calls for dividing the market
into different geographical units such as nations, regions, states, countries, cities or neighborhood.
? There is a need to localize the product, advertising and
sales effort to fit the needs.
Geographic Segmentation
? World region or country region : North America ,
Europe, China, India, England etc.
? City or Metro Size : Under 5000, 5000 – 20,000, 20,000
– 50, 000, 50,000 – 1,00,000
? Density : Urban, Sub-urban, Rural &
? Climate
Demographic Segmentation
? This Segmentation divides the markets into groups
based on variables such as age, gender, family size, family lifecycle, income, occupation, education, religion, race and nationality E.g. Age: Under 6, 6-11, 12-19, 20-34, 35-49, 50 -64, 65 + Gender : Male/ Female Family Size : 1-2, 3-4, 5+ Family Lifecycle : Young, Single, no children, married with children, no children under 18, other
Demographic Segmentation
? Income : Under 10,000, 10,000 to 20,000, 20,000 to
30,000, 30,000 to 50,000, 50,000 to 1,00,000, 1,00,000 and over
? Occupation : professional and technical managers,
officials, clerical, sales, supervisors, farmers , retired, students, homemakers, unemployed
? Education: grade school or less, high school graduate,
college graduate
Demographic Segmentation
? Religion: Catholic, Protestant, Jewish, Muslim, Hindu
other
? Race : Black, White etc. ? Nationality: North American, South American, British,
French, German, Italian, Japanese, Indian
Psychographic Segmentation
? Dividing a market into different groups based on social
class, lifestyle or personality characteristics
? Social Class : Lower lowers, Upper lowers, Working
Class, middle class, upper middles, lower uppers, upper uppers
? Lifestyle: Achievers, strivers, strugglers ? Personality : Compulsive, authoritarian, ambitious
Behavioral Segmentation
Dividing a market into groups based on consumer knowledge, attitude, use or response to a product
? Occasions: Regular occasion, special occasion ? Benefits : Quality, service, economy, convenience, speed ? User Status: non-user, ex-user, potential user, first time,
regular user
? Usage rate: light user, medium user, heavy user
Behavioral Segmentation
? Loyalty Status : None, Medium, Strong, absolute ? Readiness Stage: Unaware, aware, informed,
interested, desirous, intending to buy
? Attitude toward product : Enthusiastic, positive,
indifferent, negative, hostile
Segmenting Industrial Goods and Services / Business Markets
? Business markets can be segmented on variables like
geography, benefits sought and usage rate and other variables.
? E.g. A rubber tire company should first decide which
industries it wants to serve. It can sell tires to manufacturers of automobiles, trucks, farm tractors or aircraft. Within a chosen target industry a company can further segment by company size.
E.g. DELL Computers
? Dell is divided into two direct sales divisions. One
sells to consumers and small businesses, other manages the company’s corporate accounts. Three key segments are included under the corporate accounts umbrella : the enterprise group, (fortune 500 companies) large corporate accounts (multinational companies in what would be fortune 500 to 2000 range) and preferred accounts (medium sized businesses with 200 to 2000 employees)
Dell
Dell Sales Division
Consumer and small businesses
Corporate Accounts
The enterprise group (fortune 500 Co’s )
Large corporate accounts (MNC’ s 501 to 2000 range)
Preferred accounts (medium business 200 to 2000 employees)
Segmenting Industrial Goods and Services / Business Markets
? Demographics Industry, Company Size and Location
? Operating Variables –
technology, user status, customer capabilities
purchasing function, power structure, general purchasing policies, purchasing criteria
urgency of order fulfillment, product application, size of the order loyalty, attitude towards risk
? Purchasing Approaches – Organizations
? Situational Factors –
? Personal Characteristics – buyer-seller similarity,
Demographics
Industry : which industries that buy this product should we focus on? Needs of different Industries are different. Therefore the purchasing pattern also differs. E.g. Finance Industry is one, single industry but for marketing computers and related services it can be further subdivided into smaller segments such as insurance firms, banks, stock brokerage firms etc.
Company Size : what size companies should we focus on? ? Category customers – large buyers ? Category Customers – medium sized buyers ? Small buyers
? Location : What geographical areas should we focus on?
E.g. Thane belt constitute one segment for a telecom firm while firms located at Nariman point in Mumbai constitute another market segment
Operating Variables
Technology: what customer technologies should we focus on? The requirements of the company using automated process to manufacture and company using manual process will differ widely. The production process to manufacture TV in Japan is totally automated, therefore Japanese manufacturers use few integrated circuits while the same process in the U.S. required discrete components, manual assembly etc.
? User-Non user status: Should we focus on heavy,
medium, or light users or non users?
Customer Capabilities :should we focus on customers needing many services or few services? ? Having sufficient knowledge about the customers financial, technical and operational capabilities will substantially help the marketers in segmenting their markets. ? E.g. Automobiles producer such as Toyota maintain just in time inventory and therefore they depend on suppliers who have excellent delivery records or whom they can rely for consistent and reliable supply of raw materials. ? Some companies that cannot afford to do the quality checks pay a premium to their suppliers who can perform such quality checks. ? Many software firms offer the required technology to firms that lack such technological capabilities. ? Infosys offers computer technology assistance to Boeing
Operating Variables
Purchasing Approaches
? Purchasing function organization: should we focus on
companies with centralized or decentralized purchasing? Some suppliers maintain national sales account to deal with the companies following centralized purchasing method and maintain local sales account to deal with companies that follow a decentralized purchasing method
? Power structure: Should we focus on companies which have
strong relationship or simply after the most desirable companies? Power structures in different organizations vary widely. E.g the financial analysis unit of General Motors has made it stronger in getting better deals from its suppliers
Purchasing Approaches
General purchase policies ? ? Preference for leasing? (a process by which firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax) ? Systems purchase? Buying systems rather than individual components ? Sealed bidding? Govt. organizations usually buy through bidding
? Purchasing Criteria : Should we focus on companies
that are seeking quality ? Service ? Price?
Situational Factors
Urgency: Should we focus on companies that need quick delivery or service?
Marketers can differentiate customers on the basis of products that are used on a regular basis. Customers who want quick supply are usually ready to pay higher prices Product Application : Focus on certain applications of our product rather than all applications? ? E.g. A computer in the software development firm might be used continuously for 18 hours a day, while it may be used for just 2 to 3 hours in the computer lab of the school
? Size of the order : should we focus on large or small orders
Personal Characteristics
? Buyer – Seller Similarity : Should we focus on
companies whose people and values are similar to ours?
? Attitudes toward risk : Should we focus on risk taking
or risk – avoiding customers? Risk avoiders normally do not look for new suppliers
? Loyalty : Should we focus on companies that show
high loyalty to their suppliers? Some customers depend on their existing suppliers and are loyal to them
Effective Segmentation
? Measurable : Measurable to be effective ? Substantial : enough to make economic sense ? Accessible : coverage ? Differentiable : needs and wants
? Actionable : help marketer to develop marketing
programs to attract and serve potential customers effectively
What is target market
A set of buyers sharing common needs or characteristics that the company decides to serve. The firm can adopt one of three market-coverage strategies : undifferentiated marketing, differentiated marketing and concentrated marketing
Undifferentiated Marketing
Company Marketing Mix
Market
In an undifferentiated marketing (or mass marketing) strategy, a firm might decide to ignore market segment difference and go after the whole market with one offer . E.g. Hewlett Packard targets the full market for its printers. It range starts from Rs. 3000/- for home and small office to heavy duty color printer costing more than 1,00,000
Differentiated Marketing
Company Marketing Mix 1 Company Marketing Mix 2
Segment 1 Segment 2 Segment 3
Company Marketing Mix 3
A market coverage strategy in which a firm decides to target several market segments and designs separate offers for each. E.g. Hyundai manufactures different models like Santro, Accent, Sonata to cater different segments with different levels of income. In this case company specializes in cars but targets few segments
Concentrated Marketing
Segment 1 Company Marketing Mix Segment 2 Segment 3
? A market coverage strategy in which a firm goes after a large
share of one or a few submarkets . This is also called as niche market. e.g. Southwest Airlines, walmart, Mercedes
Product Positioning
? The way the product is defined by consumers on
important attributes – the place the product occupies in consumers minds relative to competing products
? The positioning task consist of three steps : identifying
a set of possible competitive advantages upon which to build a position, choosing the right competitive advantages and selecting an overall positioning strategy. The company must then effectively communicate and deliver the chosen position to the market
Positioning strategies
? Product Differentiation ? Services Differentiation ? Channel Differentiation ? People Differentiation
? Brand Image Differentiation
Product Differentiation
? Products
can be differentiated performance or style and design.
on
features,
At one extreme there are products which allow little variation like Chicken, steel, aspirin (yet we find branded chicken)
At other extremes there are products that can be highly differentiated such as automobiles, commercial machinery and furniture
Services Differentiation
? Some companies gain services differentiation through
speedy, convenient, careful delivery, installation, repair, customer training service or consulting service. E.g. BancOne has opened full service branches in supermarkets to provide location convenience along with Saturday, Sunday and weekday evening hours. Installation can installation also differentiate. E.g. systems
Channel Differentiation
? Firms gain competitive advantage through the way
they design their channel coverage, expertise and performance
E.g. Dell Computers and Avon distinguish themselves by their high quality direct channels. Iams pet food achieves success by going against tradition, distributing its products only through veterinarians and pet stores
People Differentiation
? Hiring
and training better people than their competitors do. People differentiation requires that a company select its customer contact people carefully and train them well
? Singapore Airlines enjoys an excellent reputation
largely because of the grace of its flight attendants
Brand Image Differentiation
? A company or brand image should convey the product
distinctive benefits and positioning. Developing a strong and distinctive image calls for creativity and hard work
? Sources : Advertisements, Symbols, colours can
provide strong company brand recognition and image differentiation
Niche Marketing
? A niche is more narrowly defined customer group
seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub segments
? E.g. Progressor a Cleveland insurer sells non standard
auto insurance to risky drivers with a record of auto accidents charges a high price for coverage and makes a lot of money in the process
Niche Marketing
An attractive niche is characterized as follows : The customers in the niche have a distinct set of needs they will pay a premium to the firm that 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 and normally attract several competitors niches are fairly small and attract only one or two
Local Marketing
? Target marketing is leading to the marketing programs
tailored to the needs and the wants of the local customer groups (trading areas, neighborhoods, even individual stores ) ? Local Marketing reflects a growing trend called grass roots marketing. Marketing activities concentrate on getting as close and personally relevant to individual customers as possible E.g. Much of Nike’s initial success has been attributed to the ability to engage target consumers through grassroots marketing such as sponsorship of local school teams, expert conducted clinics and provision of shoes, clothing and equipment Many banks in India have specialized branches that exclusively cater to corporate customers. The services in those branches are customized to serve the needs of business customers
doc_298075943.pptx