Post on 18-Jan-2015
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Market Segmentation, Targeting for Competitive Advantage
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What is Market Segmentation?
Market segmentation: The act of dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who might require separate products and/or marketing mixes.
How does market segmentation differ form product differentiation?
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The Steps in Segmenting a Market Goal: Identify marketing opportunities 6 steps
Choose a basis or bases for segmenting the market
Develop Segment Profiles
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Steps in Segmentation cont’d
Step 3: Develop measure of segment attractiveness Size, growth, purchase frequency, current brand usage,
loyalty and long-term sales/profit potential
Step 4: Select a target segment Review definition (most likely to buy…) Major decision that determines the marketing mix
Step 5: Develop positioning for target segment
Step 6: Design, implement, and maintain appropriate marketing mix
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Levels of Market Segmentation
Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller
Segments that Can be Reached More Efficiently And Effectively With Products and Services That Match
Their Unique Needs.Mass Marketing
Same product to all consumers (no segmentation, i.e Coca-Cola)
Segment MarketingDifferent products to one or more segments
(some segmentation, i.e. Marriott)
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Niche MarketingDifferent products to subgroups within segments
(more segmentation, i.e. Standard or Luxury SUV’s)
MicromarketingProducts to suit the tastes of individuals and locations
(complete segmentation)
Levels of Market Segmentation
Local Marketing
Tailoring brands/ promotions to local customer groups, i.e
Sears
Individual Marketing
Tailoring products and programs to the needs of
individual customers, i.e. Dell
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Basic Market-Preference Patterns(a) Homogeneous(a) Homogeneous
preferencespreferences
SweetnessSweetness
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(c) Clustered(c) Clusteredpreferencespreferences
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SweetnessSweetness
(b) Diffused(b) Diffusedpreferencespreferences
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SweetnessSweetness
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The Segmentation Variables
Geographic Segmentation Define– Market is divided into geographical units
like nations, counties, states, cities, regions etc. Four good reasons to use region:
Adapt better to sluggish or competitive marketsData (via scanners, etc.) tells us what sells in a
regionRegional brand preference dataFaster to react to competition in a given region
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Demographic Segmentation
Define– Market is divided into groups on the basis of variables such as age, gender, income, ethnic background, education, occupation, religion,race etc.
Age segmentation (know key characteristics) Importance of 38 million children < 9 Teens- have allowances, specific preferences Young adults Baby Boomers Seniors
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Demographic Segmentation cont’d Gender segmentation
Clothing, cosmetics, personal care items, magazines and footwear make heavy use of gender segmentation
Income segmentation Housing, clothing, cars, and food
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Psychographic Segmentation
Buyers are divided into groups based on the following variables
Personality – habits, traits and attitudes Motives- economy, reliability, dependability–
status-related vs. rational motives Lifestyles- how do you spend your time and what
things do you have (i.e. H-D segments)
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Behavioral Segmentation
Dividing the market into groups based on variables such as: Occasions Benefits User status Usage rate Loyalty status Readiness stage Attitude toward product
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Usage Rate
Dividing the market by the amount of product bought or consumed Heavy users, former, potential, first-time, light or irregular,
or medium Heavy users account for large % of product sales, so the
marketing mix… 80/20 principle– 20 % of all customers generate 80% of
the demand Goal: create a heavy user (frequency/loyalty programs) Reward and retain heavy users
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Measurable Measurable
AccessibleAccessible
SubstantialSubstantial
DifferentialDifferential
• Segments must be large or profitable enough to serve.
• Segments can be effectively reached and served.
ActionableActionable
• Size, purchasing power, profiles of segments can be measured.
• Segments must respond differently to
different marketing mix elements & actions.
• Must be able to attract and serve
the segments.
Effective Segmentation
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DemographicsDemographics
Operating VariablesOperating Variables
Purchasing ApproachesPurchasing Approaches
Situational FactorsSituational Factors
Personal CharacteristicsPersonal Characteristics
Segmenting Business Markets
Business Marketers Use Many of the
Same Consumer Variables, Plus:
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Table 10-3: Major Segmentation Variables for Business Markets
Demographic1. Industry: Which industries should we serve?2. Company size: What size companies should we serve?3. Location: What geographical areas should we serve?Operating Variables4. 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 Approaches7. 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 so on?
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Segmenting Consumer and Business Markets
Business buyers seek different benefit bundles based on their stage in the purchase decision process.
1. First-time prospects
2. Novices
3. Sophisticates
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Segmenting Consumer and Business Markets
Rackman and Vincentis proposed a segmentation scheme that classifies business buyers into three groups
Price-oriented customers (transactional selling)
Solution-oriented customers (consultative selling)
Strategic-value customers (enterprise selling)
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Segmenting International Markets
Factors Used to Segment
International Markets
Geographic Location
EconomicFactors
Political and Legal Factors
Cultural Factors
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Target Market:
Target market: the group of people for whom your company is designing, implementing and maintaining a marketing mix in order to meet the needs of that group (who is most likely to buy your product)
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Five Patterns of Target Market Selection
Single-segmentSingle-segmentconcentrationconcentration
ProductProductspecializationspecialization
M1 M2 M3 P1
P2
P3
SelectiveSelectivespecializationspecialization
M1 M2 M3 P1
P2
P3
M1 M2 M3
Full marketFull marketcoveragecoverage
P1
P2
P3
MarketMarketspecializationspecialization
M1 M2 M3 P1
P2
P3
P1
P2
P3
M1 M2 M3
P = ProductP = ProductM =M = MarketMarket
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Segment-by-SegmentInvasion Plan
Customer GroupsCustomer GroupsTruckersTruckersRailroadsRailroadsAirlinesAirlines
LargeLargecomputerscomputers
Pro
du
ct V
arie
ties
Pro
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ct V
arie
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PersonalPersonalcomputerscomputers
Mid-sizeMid-sizecomputerscomputers
Company BCompany B Company CCompany CCompany ACompany A
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Evaluating Market Segments Segment Size and Growth
Analyze current sales, growth rates and expected profitability for various segments.
Segment Structural Attractiveness Consider effects of: competitors, availability of
substitute products and, the power of buyers & suppliers.
Company Objectives and Resources Company skills & resources needed to succeed in that
segment(s). Look for Competitive Advantages.
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Socially Responsible Target Marketing Smart targeting helps companies and consumers alike.
Target marketing sometimes generates controversy and concern. Disadvantaged and vulnerable can be targeted. Cigarette, beer, and fast-food marketers have
received criticism in the past. Internet has come under attack because of the loose
boundaries and lack of control in marketing practices.
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