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Ken Nash

Segmentation Strategic Marketing for Nonprofit Organizations Strategic Marketing for Nonprofit Organizations Alan R. Andreasen & Philip Kotler Chapter 6 (p. 142-160). Ken Nash.

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Ken Nash

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  1. SegmentationStrategic Marketing for Nonprofit OrganizationsStrategic Marketing for Nonprofit OrganizationsAlan R. Andreasen & Philip Kotler Chapter 6 (p. 142-160) Ken Nash Segmentation

  2. The First Element of Marketing Strategy:Approach toward market targets or Market Segmentation(Andreasen & Kotler, p.143) 2 Fundamental Challenges of Nonprofit Marketers: 1. Choose Audiences – the segmentation problem 2. Choose Behavior – the positioning problem Segmentation

  3. THE GOOD NEWS:“Technology has made individualized approaches fostered by target marketing or segmentation to be much more cost effective – e.g. Internet, direct mail and sophisticated software.”(Andreasen & Kotler, p.143) The Marketing Choice: Economy of Scale - OR - Diversity One Size Fits All - OR - Segmentation Segmentation

  4. Two Stages of Segmentation Strategy: (See Figure 6-1 Andreasen & Kotler p. 144) • DEVELOPING MARKET SEGMENTS 1. Bases for Segmenting: Profiles of resulting segments Measures of segment attractiveness 2. Conceptualization & Research Stage • TARGET MARKETING 1. Selecting – 1 or more market segments 2. Deciding – how many resources & of what kind to apply 3. Developing – positioning & marketing mix strategy for each Segmentation

  5. Three Decisions of Segmentation Strategy: • QUANTITY – resources:How much financial, human and mental resources will be devoted to targets? • QUALITY – approach:How will each segment be approached – offerings, communications, place of offering, prices? • TIMING – When will segments be targeted? Will some be targeted sooner and some later? (Andreasen & Kotler, p.144) Segmentation

  6. Characteristics of an Optimal Segmentation Base : • MUTUAL EXCLUSIVITY – Are segments able to be conceptually separated? • EXHAUSTIVENESS – Is every potential target member included? • MEASURABILITY – Are size, motivation, ability to act able to be measured? • REACHABILITY – Can segments be effectively reached and served? • SUSTAINABILITY – Are segments large enough to pursue? • DIFFERENTIAL RESPONSIVENESS – Can responses be measured and compared in terms of amounts, types and timing of strategy? (Andreasen & Kotler, p.144-145) Segmentation

  7. SegmentationBases “At the outset of a segmentation process, reachability and responsiveness often must be estimated.” (Andreasen & Kotler, p. 147) “Variables that have been used to segment markets in particular cases vary according to whether they were primarily chosen to reflect expected differences in responsiveness or differences in reachability.” (Andreasen & Kotler, p. 147) Segmentation

  8. Two-by-two Matrix Categorization of segmentation approaches (Frank, Massy & Wind in Andreasen & Kotler p.146) Segmentation

  9. Segmentation Categories • GENERAL VARIABLES – those that apply to any exchange • BEHAVIOR-SPECIFIC – those that are unique to one type or class of behaviors • OBJECTIVE MEASURES – those that are easily determined and verifiable. (Preferred - available secondary sources e.g. Census Bureau data, etc.) • INFERRED MEASURES – those that are subtle (Andreasen & Kotler, p.146) Segmentation

  10. 1. Objective General Measures A. DEMOGRAPHIC SEGMENTATION 1) Age 2) Generation 3) Sex 4) Income 5) Race and Ethnicity B. GEOGRAPHIC SEGMENTATION 1) Figure 6-2(Andreasen & Kotler p. 142) - PRIZM Cluster Categories 2) Geo-clustering (PRIZM, ACORN, Cluster Plus 2000 & Micro Vision 50) (Andreasen & Kotler, p.147-154) Segmentation

  11. Complex General Objective Measures SOCIAL CLASS – standardized divisions of society grouped according to similar values, interests and behavior. 6 Typical Social Classes(Andreasen & Kotler, p.154):1) upper uppers 2) lower uppers 3) upper middles 4) lower middles 5) upper lowers 6) lower lowers Segmentation

  12. Complex General Objective Measures(continued) FAMILY LIFE CYCLE – phases of family life (e.g. marriage, career, birth and age of children) that impoacts consumer behavior. 8 Typical Stages(Andreasen & Kotler, p. 155): 1. Young Single (under 40, unmarried, childless at home) 2. Newly Married (young, married, childless) 3. Full Nest I (young, married, youngest child under 6) 4. Full Nest II (young, married, youngest child 6 to 13) 5. Full Nest III (young, married, children 14 or older) 6. Empty Nest I (older married, no home child, head working) 7. Empty Nest II (older married, no home child, head retired) 8. Solitary survivor (older single, working or retired) Segmentation

  13. Complex General Objective Measures(continued) MULTIVARIATE SEGMENTS – statistical procedures to develop customized sets of objective predictors that, when considered together, best segment target markets. • A parsimonious subset that jointly does the best job of predicting the behavior in question. • A measure of the relative contribution of each variable to the final predictions. (Andreasen & Kotler, p.155) Segmentation

  14. Multivariate Segments Example:Multiple Discriminant Analysis Equation(Beik & Smith in Andreason & Kotler, p.156) Y1 = donate $50+ to medical charities (1=yes, 0=no). X1 = proportion of households with income > %15,000. X3 = proportion of households > 55 years of age. X4 = proportion of households in managerial, professional or entrepreneurial positions. Y1 = .5832 X1 + .53414 X3 + .31493 X4 Segmentation

  15. 2. Objective Behavior-Specific Measures • Past behavior is many times the best predictor of future responsiveness. OCCASION – when they engage in the behaviorUSER STATUS – nonusers, ex-users, potential users, first-time users and regular users.USAGE RATE – light-, medium-, heavy-user groups for the offer (volume segmentation)LOYALTY STATUS – strength of the consumer’s preference for an entity. (Andreasen & Kotler, p.156-157) Segmentation

  16. 3. Inferred General Measures • Personal predispositions many times affects consumer choice and behavior. PERSONALITY – highly subjective & unreliable VALUES – organize/evaluate individual behavioral choices 1. Instrumental Values – guide ongoing behavior to achieve certain end states 2. Terminal Values – guide choices among end states LIFESTYLES - Several Approaches: 1. AIO: activities, interests and opinions 2. Psychographics: lifestyle measures combined with demographic measurements 3. Lifestyle compatibility – possibly the more profound explanation to socioeconomic indicators. (Andreasen & Kotler, p.158-159) Segmentation

  17. 4. Inferred Behavior-Specific Measures STAGES OF CHANGE – Consumers of “high-involvement” markets within the processes of change.BENEFIT SEGMENTATION - Consumers drawn to one strong desirable benefit or to a grouping of benefits SACRIFICE SEGMENTATION - Exchange of benefits outweighing costs. (Andreasen & Kotler, p.159-160) Segmentation

  18. Inferred Behavior-Specific Measures(continued) The Extended Fishbein Attitude Model n mBehavior = BIj = (Σbijai) W1 + Σ NBkj * MCk) W2 A very useful research framework in lieu of unavailable original field data where consumer behavior is highly involving. (Andreasen & Kotler, p.159) Segmentation

  19. Inferred Behavior-Specific Measures(continued) The Extended Fishbein Attitude Model j: the exchange alternatives in the consideration seti: the criteria used to evaluate the alternativesai: the pattern of weightings applied to the criteriabij: beliefs about consequences of tasking particular action alternativesk: the significant others whose views about the behavior might influence behavioral intentions.MCk: the pattern of motivations to conform to the views of those significant others.NBkj: perceptions of the behavioral expectations of specific significant others.W1/W2: the relative weight of the person’s own attitude versus the perceived views of significant others in affecting behavioral intentions. (Andreasen & Kotler, p.159) Segmentation

  20. Conclusion A central theme of this text is that, whether a nonprofit marketer is undertaking organizational-level or campaign level planning, the central issue is – or ought to be – how to induce desired behavior from target audiences. (Andreasen & Kotler, p. 143) Segmentation is a major part of this issue. Segmentation

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