Chapter 10 Market Segmentation

1. Chapter 10Market Segmentation Chapter 10 slides for Marketingfor Pharmacists, 2nd Edition

2. Learning Objectives • Define market segmentation, targeting, and positioning. • Discuss the purpose of market segmentation. • List characteristics of desirable market segments. • List ways in which pharmacists can segment their markets, and give examples of each. • Suggest several ways in which practicing pharmacists can conduct market research. • Discuss the steps involved in segmenting markets.

3. Market segmentation consists of • Segmenting • Targeting • Positioning

4. Segmenting Markets • Marketers who target segments of a market can better meet the needs of those targeted. • Marketing segmentation defined: • Process of dividing a market • Forming smaller subgroups • Based upon common characteristics.

5. Segmenting (e.g., diabetes)

6. Target Marketing • Marketers target attractive markets with a unique marketing mix (i.e., price, product, promotion, place). • The challenge is to determine important similarities and differences that help • Spot market opportunities • Offer a product more finely tuned to the needs of target customers • Refine marketing messages • Command premium prices.

7. Targeting

8. Positioning

9. Desirable market segments • Identifiable • Accessible • Sizable • Responsive to your targeted marketing mix

10. Selecting segmentation variables • Through experience and intuition • By adopting the ideas of others • By analyzing customer data

11. Marketing strategies associated with segmentation

12. Common Market Segments in Pharmacy

13. Demographic/Geographic Segmentation TIP Useful because Behavior is often related Most common and easiest to use

14. Age Sex Race Income Social class Education Health insurance Job Residence Place of birth Demographic/geographic segmentation

15. U.S. Bureau of Labor Statistics U.S. Census Bureau U.S. Department of Commerce U.S. Internal Revenue Service U.S. Social Security Administration National Center for Health Statistics Individual state and local government sources Small Business Administration Professional and trade associations and journals American Demographics magazine Prevention magazine Local chambers of commerce Local libraries Sources of geographic/demographic data

16. Seniorsubsegments • Available discretionary income • A senior’s general level of health • General activity level of seniors • Amount of discretionary time not taken up with family, job, and social activities • Degree of social interaction with others

17. Cohort Segmentation Swing Generation, Greatest Generation, Boomers, Generation Jones, Baby Busters, Echo Boomers, Generation X, Generation Y, Millennials

18. Psychographic Segmentation TIP Useful in crafting promotional messages Helps explain why people act in certain ways

19. Psychographic segmentation • Personality (e.g., conservative, control freak) • Lifestyle (e.g., soccer moms, cocooners) • Values (e.g., self-respect)

20. Healthstyles • Disciples – Obedient, trusting, highly compliant • Medical buffs – Engaged, adherent, trusting of physicians but feel in control of own health • Naturalists – Shun pharmaceuticals in favor of holistic remedies • Immortals – Devil-may-care types, disregard physician’s recommendations • Fatalists – Feel health is out of control. Often noncompliant Source: Consumer Health Sciences

22. Behavioral Segments Based on the Pareto principle (80/20 rule)

23. Behavioral segmentation • Usage(e.g., heavy, medium, light) • Occasion (e.g., major/minor illnesses, home or vacation, self or family member) • User status and loyalty (e.g., first time, repeat, potential users) • Potential behavior (e.g., readiness to act)

24. Opinion Leaders Early Adopters Early Majority Late Majority Innovators Laggards Early Rate of Adoption Average Rate of Adoption Late Rate of Adoption Willingness to adopt innovations

25. Special cases of behavioral segmentation • Disease management • Case management

26. Benefits Segmentation TIP Related to total product concept (Chapter 2) Behavior is linked to benefits sought.

27. Benefits segmentation • Quality buyers – best without regard to cost • Service buyers – personal caring and service • Value buyers – best value for the money. Quality should match price. • Economy buyers – cheapest alternative that will minimize cost Luxury

28. It’s Not Only About Price at Wal-Mart March 2, 2007 NYTimes • “Brand aspirationals” (people with low incomes who are obsessed with names like KitchenAid) • “Price-sensitive affluents” (wealthier shoppers who love deals) • “Value-price shoppers” (who like low prices and cannot afford much more)

29. Food Entertainment Apparel Home goods Pharmacy Wal-Mart’s “Power” Product Categories

30. High Quality Value Buyers Luxury Buyers OTCMarket Low Price High Price Economy Buyers Low Quality

31. Empirical v. Hypothesis-Driven Approaches TIP The world is becoming too complex to rely solely on experience. Experience versus experimentation

32. Segmentation for Practicing Pharmacists TIP Segmentation is a tool to help serve patients. All pharmacists should segment and target patients.

33. Researching the market • Talk with patients. • Invite a group of patients to chat. • Conduct surveys. • Read. • Use the Internet. • Mine patient data files. • Observe how customers shop. • Test market ideas.

34. Using segmentation in practice Step 1: Identify key market segments. Step 2: Learn as much as you can about the segments in which you are interested. Step 3: Describe a typical person in a segment. Step 4: Determine the desirability of segment. Step 5: Select segments and create written plans. Step 6: Establish a budget. Step 7: Develop measures for the success of targeting efforts, e.g., sales volume, number of repeat visits. Step 8: Choose a future date when you will reassess your marketing efforts.

35. Conclusion • People do not always fall into neat segments. • Those who do often act differently from others in their segment. • Segmentation is only a tool. Never stop observing and questioning.

36. Questions?