Market Segmentation

1. Market Segmentation The process of dividing a potential market into distinct subsets of consumers and selecting one or more segments as a target market to be reached with a distinct marketing mix.

2. Market segmentation More precise definition of customers needs and wants More accurate marketing objectives Improved resource allocation Better marketing results Why Segment?

3. Market Segments

4. Market Segmentation The process of dividing a potential market into distinct subsets of consumers and selecting one or more segments as a target market to be reached with a distinct marketing mix.

5. Market People or organizations with needs or wants and the ability and willingness to buy Market Segment A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. Market Segmentation The process of dividing a market into meaningful, relatively similar, identifiable segments or groups. Market Segmentation

6. Indian car market Segmentation

7. creaminess sweetness Homogeneous Preference -no natural segments -all buyers have same preference

8. creaminess sweetness Diffused Preference -no pattern (…or poor research) -take center position

9. creaminess sweetness Clustered Preference -natural segments -increases as number of competitors increases

10. Substantiality Segment must be large enough to warrant a special marketing mix. Identifiability Measurability Segments must be identifiable and their size measurable. Accessibility Members of targeted segments must be reachable with marketing mix. Responsiveness Unless segment responds to a marketing mix differently, no separate treatment is needed. Criteria for Segmentation

11. Consumer Markets STATE OF BEING STATE OF MIND Geographic Demographic Psychographic Behavioral

12. Geographic Segmentation The division of a total potential market into smaller subgroups on the basis of geographic variables (e.g., region, state, or city).

13. Geographic Variables Pacific, Mountain, West North Central, West South Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New England Region City ormetro size Under 4,999; 5,000-19,999; 20,000-49,999 . . . 1,000,000-3,999,999; 4,000,000 and over Density Urban, rural, suburban Climate Northern, southern

14. Demographic Variables Age Gender Occupation Family size Education Nationality Religion Income Ethnicity

15. Marital Status • Households as a consuming unit • Singles • Divorced • Single parents • Dual-income married

16. Sociocultural Segmentation • Family Life Cycle • Social Class • Culture, Subculture, and Cross-Culture

17. Family Life Cycle • Phases a family goes through in their formation, growth, and final dissolution • Bachelorhood • Honeymooners • Parenthood • Post-parenthood • Dissolution • Explicit basis: marital status, family status • Implicit basis: age, income, employment

18. Psychographic Variables Lifestyle Personality Hobbies Compulsive TV viewing habits Outgoing Social activities Authoritarian Club memberships Ambitious Vacation preferences

19. Behavioral Variables Occasions Regular occasion, special occasion Quality, service, economy, speed Benefits Nonuser, ex-user, potential, first-time, regular User status Light user, medium user, heavy user Usage rate Loyalty status None, medium, strong, absolute Readiness stage Unaware, aware, informed, interested, intends to buy Attitude toward product Enthusiastic, positive, indifferent, negative, hostile

20. THE TOOTHPASTE MARKETThe package of benefits sought • WHITENESS • FRESHNESS • GOOD TASTING • PRODUCT APPEARANCE • DECAY PREVENTION • GUMS PROTECTION • TEETH SENSITIVITY • ECONOMY

21. Use-Related Segmentation • Rate of Usage • Heavy vs. Light • Awareness Status • Aware vs. Unaware • Brand Loyalty • Brand Loyal vs. Brand Switchers

22. Usage-Situation Segmentation • Segmenting on the basis of special occasions or situations • Example Statements: • Whenever our daughter, Jamie, gets a raise, we always take her out to dinner. • When I’m away on business, I try to stay at a suites hotel. • I always buy my wife flowers on Valentine’s Day.

23. Submarket 1 (Exercisers) Submarket 3 (Transportation riders) Submarket 4 (Socializers) Submarket 2 (Off-road adventurers) Submarket 5 (Environmentalists) Market SegmentationThe bicycle-riders product-market 3-8

24. Generic vs Product Market

25. Narrowing Down to Target Markets

26. Market Segmentation SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Geographic Segmentation Region Southwest, Mountain States, Alaska, Hawaii City Size Major metropolitan areas, small cities, towns Density of area Urban, suburban, exurban, rural Climate Temperate, hot, humid, rainy Demographic Segmentation Age Under 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+ Sex Male, female Marital status Single, married, divorced, living together, widowed Income Under $25,000, $25,000-$34,999, $35,000-$49,999, $50,000-$74,999, $75,000-$99,999, $100,000 and over Education Some high school, high school graduate, some college, college graduate, postgraduate Occupation Professional, blue-collar, white-collar, agricultural, military

27. continued SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Psychological Segmentation Needs-motivation Shelter, safety, security, affection, sense of self-worth Personality Extroverts, novelty seeker, aggressives, low dogmatics Perception Low-risk, moderate-risk, high-risk Learning-involvement Low-involvement, high-involvement Attitudes Positive attitude, negative attitude Psychographic (Lifestyle) Segmentation Economy-minded, outdoors enthusiasts, status seekers Sociocultural Segmentation Cultures American, Italian, Chinese, Mexican, French, Pakistani Religion Catholic, Protestant, Jewish, Moslem, other Subcultures (Race/ethnic) African-American, Caucasian, Asian, Hispanic Social class Lower, middle, upper Family life cycle Bachelors, young married, full nesters, empty nesters

28. SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Use-Related Segmentation Usage rate Heavy users, medium users, light users, non users Awareness status Unaware, aware, interested, enthusiastic Brand loyalty None, some, strong Use-Situation Segmentation Time Leisure, work, rush, morning, night Objective Personal, gift, snack, fun, achievement Hybrid Segmentation Location Home, work, friend’s home, in-store Demographic/ Psychographics Combination of demographic and psychographic profiles of consumer segments profiles Person Self, family members, friends, boss, peers Geodemographics “Money and Brains,” “Black Enterprise,” “Old Yankee Rows,” “Downtown Dixie-Style” Benefit Segmentation Convenience, social acceptance, long lasting, economy, value-for-the-money SRI VALSTM Actualizer, fulfilled, believer, achiever, striver, experiencer, maker, struggler

29. Steps in Segmentation, Targeting, and Positioning 6. Develop Marketing Mix for Each Target Segment Market Positioning 5. Develop Positioning for Each Target Segment 4. Select Target Segment(s) Market Targeting 3. Develop Selection Criteria 2. Develop Profiles of Resulting Segments Market Segmentation 1. Identify Bases for Segmenting the Market

30. Segment Size and Growth Analyze 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 relative to the segment(s). Look for Competitive Advantages. Step 2. Market TargetingEvaluating Market Segments (developing selection criteria)

31. Step 2. Market TargetingMarket Coverage Strategies Market Company Marketing Mix Company Marketing Mix 1 Segment 1 Company Marketing Mix 2 Segment 2 A. Undifferentiated Marketing Segment 3 Company Marketing Mix 3 Segment 1 Company Marketing Mix Segment 2 B. Differentiated Marketing Segment 3 C. Concentrated Marketing

32. Step 2. Market TargetingChoosing a Market-Coverage Strategy Company Resources Product Variability Product’s Life-Cycle Stage Market Variability Competitors’ Marketing Strategies

33. Linking the Concepts • At the last ‘linking the concepts’, you segmented the Irish clothing market. • Now, pick two companies that serve this market and describe their segmentation and targeting strategies. • Can you come up with one that targets many different segments versus another that focuses on only one or a few segments? • How does each company you choose differentiate its marketing offer and image? • How has each done a good job of establishing this differentiation in the minds of targeted consumers?

34. Product’s Position - the way the product is defined by consumers on important attributes - the place the product occupies in consumers’ minds relative to competing products. Marketers must: Plan positions to give their products the greatest advantage in selected target markets, Design marketing mixes to create these planned positions. Step 3. Positioning for Competitive Advantage

35. G H C A D E B F Step 3. Positioning for Competitive Advantage: Strategies Product Class Product Attributes Away from Competitors Benefits Offered Usage Occasions Against a Competitor User Class

36. Step 1. Identifying Possible Competitive Advantages: Competitive Differentiation. Step 2.Selecting the Right Competitive Advantage: Unique Selling Proposition (USP). Step 3.Communicating and Delivering the Chosen Position. Step 4.Support the positioning strategy with a unique marketing mix Steps to Choosing and Implementing a Positioning Strategy

37. Product Service Areas for Competitive Differentiation Developing Competitive Differentiation Image People

38. Selecting the Right CompetitiveAdvantages Important Profitable Distinctive Criteria for Determining Which Differences to Promote Affordable Superior Communicable Preemptive

39. At this stage the company has decided on its positioning strategy and must now design a marketing mix to support this strategy. The next part of the course looks at ‘Developing the Marketing Mix’ Step 4 – Supporting the positioning strategy

40. Reviewing the Concepts • Define the three steps of target marketing: market segmentation, market targeting, and market positioning. • List and discuss the major levels of market segmentation and bases for segmenting consumer and business markets. • Explain how companies identify attractive market segments and choose a market coverage strategy. • Discuss how companies position their products for maximum competitive advantage in the marketplace.