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Learn the characteristics of markets, importance of segmentation, steps involved, bases for consumer and business markets, criteria for success, targeting strategies, one-to-one marketing, and global segmentation issues.
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Learning objectives • Describe the characteristics of markets and market segments • Explain the importance of market segmentation • List the steps involved in segmenting markets • Describe the bases commonly used to segment consumer markets • Describe the bases for segmenting business markets
Learning objectives (cont.) • Discuss the criteria for successful market segmentation • Discuss alternative strategies for selecting target markets • Explain one-to-one marketing • Discuss privacy issues related to one-to-one marketing • Explain how and why organisations implement positioning strategies and how product differentiation plays a role • Discuss global market segmentation and targeting issues
Learning objective 1 Describe the characteristics of markets and market segments
1 Market segmentation Market People or organisations with needs or wants and the ability and willingness to buy. Market segment A subgroup of people or organisations 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 and identifiable segments or groups.
Learning objective 2 Explain the importance of market segmentation
2 The importance of market segmentation • Nearly all markets include people with different product needs and preferences. • It helps to define needs and wants more precisely. • Decision-makers can define objectives and allocate resources more accurately. • More precise objectives = better evaluation of performance.
Learning objective 3 List the steps involved in segmenting markets
3 Steps in segmenting a market • Select a market or product for study • Choose bases for segmentation • Select descriptors • Profile and analyse segments • Select target markets • Design, implement and maintain marketing mix.
3 Two types of markets There are two basic types of markets each are discusses in turn. • Consumer products: • goods or services purchased by an ultimate consumer for personal use (see objective 4) • Business products: • goods or services purchased for use either directly or indirectly in the production of other goods and services for resale (see objective 5) • The key to classification is to identify the purchaser and the reasons for buying the goods.
Learning objective 4 Describe the bases commonly used to segment consumer markets
4 Segmentation bases • Characteristics of individuals, groups or organisations used to divide a total market into segments (variables).
4 Bases for segmentation • Geography • Demographics • Psychographics • Benefits sought • Usage rate
4 Geographic segmentation • Segmenting markets by region of the country or world, market size, market density or climate.
4 Geographic segmentation • Region of the country or world • Market size • Market density • Climate
4 Benefits of regional segmentation • New ways to generate sales in sluggish and competitive markets • Scanner data allows assessment of best-selling brands in region • Regional brands appeal to local preferences • React more quickly to competition.
4 Demographic segmentation • Segmenting markets by age, gender, income, ethnic background and family life cycle.
4 Family life cycle • A series of stages determined by a combination of: • Age • Marital status and • Children
4 Psychographic segmentation • Market segmentation on the basis of personality, motives, lifestyles and geodemographics.
4 Bases for psychographic segmentation • Personality • Motives • Lifestyles • Geodemographics
4 Lifestyle segmentation • How time is spent • Beliefs • Socioeconomic characteristics
4 Geodemographic segmentation • Segmenting potential customers into neighborhood lifestyle categories. • Combines geographic, demographic and lifestyle segmentation.
4 Benefit segmentation • The process of grouping customers into market segments according to the benefits they seek from the product.
4 Usage-rate segmentation • Dividing a market by the amount of product bought or consumed.
4 The 80/20 principle • A principle holding that: 20 per cent of all customers generate 80 per cent of the demand.
Learning objective 5 Describe the bases for segmenting business markets
5 Macrosegmentation • The process of dividing business markets into segments based on general characteristics, such as geographic location, customer type, customer size and product use.
5 Microsegmentation • The process of dividing business markets into segments based on the characteristics of decision-making units within a macrosegment.
5 Business marketing segmentation Geographic Customer type Macro- segmentation Customer size Business markets Product use Purchasing criteria Purchasing strategy Micro- segmentation Importance Personal characteristics
Learning objective 6 Discuss the criteria for successful market segmentation
6 Criteria for successful segmentation • Substantiality • Identifiability • Accessibility • Responsiveness
6 Criteria for segmentation 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.
Learning objective 7Discuss alternative strategies for selecting target markets
7 Target market • A group of people or organisations for which an organisation designs, implements and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.
7 Strategies for selectingtarget markets Undifferentiated strategy Concentrated strategy Multi-segment strategy
7 Undifferentiated targeting strategy • A marketing approach that views the market as one big market with no individual segments and; therefore, requires a single marketing mix.
7 Undifferentiated targeting strategy (cont.) • Advantages: • Potential savings on production and marketing costs • Disadvantages: • Unimaginative product offerings • Company more susceptible to competition.
7 Concentrated targeting strategy • A strategy used to select one segment of a market for targeting marketing efforts.
7 Niche • One segment of a market.
7 Concentrated targeting strategy (cont.) • Advantages: • Concentration of resources • Meets narrowly defined segment • Small firms can compete • Strong positioning • Disadvantages: • Segments too small or changing • Large competitors may market to niche segment
7 Multi-segment targeting strategy • A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.
7 Multi-segment targeting strategy(cont.) • Advantages: • greater financial success • economies of scale • Disadvantages: • high costs • cannibalisation
7 Costs of multi-segment targeting • Product design costs • Production costs • Promotion costs • Inventory costs • Marketing research costs • Management costs • Cannibalisation
Learning objective 8 Explain one-to-one marketing
8 Advantages of one-to-one marketing • To build a long-term, personalised and profitable two-way relationship with each customer • The goal is to reduce costs through customer retention and increase revenue through customer loyalty.
Learning objective 9 Discuss privacy issues related to one-to-one marketing
9 Privacy and one-to-one marketing • One-to-one marketing requires the collection of information for each customer. Masses of personal data could be collected by all businesses • The management, currency and unauthorised use of this information is of concern. • Having collected the information customers expect better service
Learning objective 10 Explain how and why organisations implement positioning strategies and how product differentiation plays a role
10 Positioning • Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line or organisation in general.
