PowerPoint Presentation

Market Segmentation and TargetingWhat is a market?A set up where two or more parties engage in exchange of goods, services and information is called a market. Ideally a market is a place where two or more parties are involved in buying and selling.The two parties involved in a transaction are called seller and buyer.The seller sells goods and services to the buyer in exchange of money. There has to be more than one buyer and seller for the market to be competitive.

Monopoly - Monopoly is a condition where there is a single seller and many buyers at the market place. In such a condition, the seller has a monopoly with no competition from others and has complete control over the products and services.In a monopoly market, the seller decides the price of the product or service and can change it on his own.

Monopsony - A market form where there are many sellers but a single buyer is called monopsony. In such a set up, since there is a single buyer against many sellers; the buyer can exert his control on the sellers. The buyer in such a form has an upper edge over the sellers.Types of marketPhysical Markets - Physical market is a set up where buyers can physically meet the sellers and purchase the desired merchandise from them in exchange of money. Shopping malls, department stores, retail stores are examples of physical markets. Non Physical Markets/Virtual markets - In such markets, buyers purchase goods and services through internet. In such a market the buyers and sellers do not meet or interact physically, instead the transaction is done through internet. Auction Market - In an auction market the seller sells his goods to one who is the highest bidder. Market for Intermediate Goods - Such markets sell raw materials (goods) required for the final production of other goods. Black Market - A black market is a setup where illegal goods like drugs and weapons are sold. Knowledge Market - Knowledge market is a set up which deals in the exchange of information and knowledge based products. Financial Market - Market dealing with the exchange of liquid assets (money) is called a financial market.

Financial markets are of following types:Stock Market - A form of market where sellers and buyers exchange shares is called a stock market. Bond Market - A market place where buyers and sellers are engaged in the exchange of debt securities, usually in the form of bonds is called a bond market. A bond is a contract signed by both the parties where one party promises to return money with interest at fixed intervals. Foreign Exchange Market - In such type of market, parties are involved in trading of currency. In a foreign exchange market (also called currency market), one party exchanges one countrys currency with equivalent quantity of another currency. Predictive Markets - Predictive market is a set up where exchange of good or service takes place for future. The buyer benefits when the market goes up and is at a loss when the market crashes.

What is Segmentation ?

Segmentation refers to a process of bifurcating or dividing a large unit into various small units which have more or less similar or related characteristics.

Market SegmentationMarket segmentation is a marketing concept which divides the complete market set up into smaller subsets comprising of consumers with a similar taste, demand and preference. A market segment is a small unit within a large market comprising of like minded individuals. One market segment is totally distinct from the other segment. A market segment comprises of individuals who think on the same lines and have similar interests. The individuals from the same segment respond in a similar way to the fluctuations in the market.

Market SegmentationGeographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or citiesMarket SegmentationDemographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality

Demographic segmentation is the most popular segmentation method because consumer needs, wants, and usage often vary closely with demographic variables and are easier to measure than other types of variables

Market SegmentationAge and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups

Gender segmentation divides the market based on sex (male or female)

Income segmentation divides the market into affluent or low-income consumers

Market SegmentationPsychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traitsMarket SegmentationBehavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a productOccasionBenefits soughtUser statusUsage rateLoyalty status

Market SegmentationOccasion segmentation divides buyers into groups according to occasions when they get the idea to buy, actually make purchases, or respond to a product

Benefit segmentation requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit

Market SegmentationUser status divides buyers into ex-users, potential users, first-time users, and regular users of a product

Usage rate divides buyers into light, medium, and heavy product users

Loyalty status divides buyers into groups according to their degree of loyalty

The process of Segmenting MarketsStep 1: Identify segmented marketsThe first step of the market segmentation process is to identify the segmented markets. It is important to select the segmenting strategy that most accurately categorizes consumers according to your product or service.For example, suppose that your company manufactures infant safety seats. The decision to use the age-oriented strategy to segment the market may not be effective because people become parents at different ages. Promotions and advertising directed toward twenty-something parents may not appeal to older couples with children.

The process of Segmenting MarketsStep 2: Analyze each segmentStep two of the market segmentation process is to analyze each segment. After identifying potential market segments, it is important to research and analyze the consumers that comprise each segment. You must determine the similarities that connect the members of each segment, and identify the differences that separate one segment from another.During the analyzing step, you should outline the buying habits, product usage rates, attitudes, and lifestyle choices that represent a typical customer in each segment. Demographic and geographic information will provide a clear customer profile to help you determine the market segment best suited for your product or service.

The process of Segmenting MarketsStep 3: Evaluate market opportunitiesThe third step of the process is to evaluate your market opportunities. The customer profiles you create help you identify the market segments that offer the sufficient benefits you need to achieve company goals and objectives.When evaluating each segment, you should consider your ability to reach the targeted consumer, the number of potential customers within the segment, your ability to measure the segment's progress, and the segment's compatibility with your company's mission.During this step, you must also forecast your company's market share possibility in each segment. By defining the sales potential, you can justify the need to secure the necessary resources to implement your marketing strategy.

The process of Segmenting MarketsStep 4: Select target segmentsThe fourth step of the market segmentation process is to select the appropriate target segments. The research, examination, and evaluation of the market segments allow you to evaluate the profit potential of each segment. Once you select one or more target segments, you can develop products and marketing strategies to satisfy your customers' needs

Requirements for effective segmentationTo be useful, a market segment must be:MeasurableAccessibleSubstantialDifferentiableActionable

Requirements for effective segmentationMeasurable examples include the size, purchasing power, and profiles of the segments

Accessible refers to the fact that the market can be effectively reached and served

Requirements for effective segmentationSubstantial refers to the fact that the markets are large and profitable enough to serve

Differentiable refers to the fact that the markets are conceptually distinguishable and respond differently to marketing mix elements and programs

Actionable refers to the fact that effective programs can be designed for attracting and serving the segments

Selecting target marketsUndifferentiated marketingDifferentiated marketingConcentrated marketingMicromarketing

Selecting target marketsUndifferentiated marketing targets the whole market with one offerMass marketingFocuses on common needs rather than whats different

Differentiated marketing targets several different market segments and designs separate offers for eachGoal is to achieve higher sales and stronger positionMore expensive than undifferentiated marketing

Selecting target marketsConcentrated marketing targets a small share of a large marketLimited company resourcesKnowledge of the marketMore effective and efficient

Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locationsLocal marketingIndividual marketing

Selecting target marketsLocal marketing involves tailoring brands and promotion to the needs and wants of local customer groupsCitiesNeighborhoodsStores

Selecting target marketsLocal MarketingBenefits:Increased marketing effectiveness in competitive marketsMore customer-specific offerings

Local marketingChallenges:Increased manufacturing and marketing costsLess economy of scaleLogistics Dilution of company image

Selecting target marketsIndividual marketing involves tailoring products and marketing programs to the needs and preferences of individual customersAlso known as:One-to-one marketingMass customizationMarkets-of-one marketing

Selecting target marketsMass customization is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to meet individual needs. Has made relationships with customers important in the new economy.Provides a way to distinguish the company against competitors