MARKET SEGMENTATION

1. MARKET SEGMENTATION Agenda Barco Presentation and discussion BIO-BREAK What is market segmentation? Segmentation Strategy Alternatives BIO-BREAK Basis for segmentation Market Segment evaluation

2. MARKET SEGMENTATION Market segmentation What is it? Divide a market into separate groups Tailor a marketing strategy for each group Demand Differential Why segment? Identifies opportunities and needs. Allows firm to focus on specific needs. Improves marketing mix for each segment. Allows small firm to exist. Segmentation Developmental Stages Mass Markets Product Differentiation Target Marketing

3. MARKET SEGMENTATION Buyer Preference Patterns descriptive, not normative homogeneous preference diffused preference clustered preference

7. MARKET SEGMENTATION Market Coverage Strategies Undifferentiated (unsegmented) marketing strategy market aggregation one strategy for entire market opposite of segmentation Examples of firms who could benefit from this strategy?

8. MARKET SEGMENTATION Market Coverage Strategies Differentiated (segmented) marketing different marketing strategies for multiple segments increased penetration into each segment higher sales and higher costs Examples of firms who could benefit from this strategy?

9. MARKET SEGMENTATION Market Coverage Strategies Concentrated (niche)marketing strategy target a small market go after a large share small firm survival strategy Examples of firms who could benefit from this strategy?

10. MARKET SEGMENTATION Surrogate (or segmentation) Variables Why surrogate variables? Customer Characteristics State of Being Demographic variables Geographic State of mind Psychographics Perceptions, Preferences

11. MARKET SEGMENTATION Using Preference to Segment the Market Preference Mapping – Brands Can multiple maps be present? Do they meet the criteria for segmentation?

12. MARKET SEGMENTATION Surrogate (or segmentation) Variables Customer Response Product Usage Volume Loyalty Market Factors Benefit Received

13. MARKET SEGMENTATION Determine Demand Patterns Establish Possible Bases of Segmentation Identify Potential Market Segments Choose a Target Market Approach Select the Target Market(s) Position the Firm’s Offering in Relation to the Competition Develop the Appropriate Marketing Mix(es)

14. MARKET SEGMENTATION Evaluation of Segmenting Variable Measureable Stable over time Produce behavioral differences among the groups

15. MARKET SEGMENTATION Evaluation of Market Segments Sizeable How Many? How Much Money? Propensity to Buy? Reachable by your marketing strategy Demonstrate Behavior Differences among the groups

16. MARKET SEGMENTATION 1 to 1 (Customized) Marketing Logical end of segmentation Focus Relationship with buyer rather than on product development Customer Satisfaction Customization See Amazon for example

17. MARKET SEGMENTATION Wrap-up We have discussed market segmentation Key Takeaways Focus on behavior Be able to judge if you have a good segmentation variable Be able to choose a market segment Next Time The Kodak Case – Market Segmentation Behavioral Inputs into Marketing Management Please Read Chapters 4 and 5