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Market Segmentation

Market Segmentation. Special Topic Mktg 633. Objectives. Definition Reasons for segmentation Bases of segmentation Applications Product Positioning. Definition. The process of dividing all possible users of a product into groups that have similar needs the products might satisfy.

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Market Segmentation

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  1. Market Segmentation Special Topic Mktg 633

  2. Objectives • Definition • Reasons for segmentation • Bases of segmentation • Applications • Product Positioning

  3. Definition • The process of dividing all possible users of a product into groups that have similar needs the products might satisfy.

  4. Historical Development • 50s & 60s: Mass Marketing • 90s: Breaking Up Into Smaller Groups • Extensive Segmentation and targeting smaller consumer groups necessarily produces higher marketing costs

  5. Criteria for Segmentation • Know Your Customers (Scanner Data) • Make What Customers Want. Offer many variations on a single product. • Reach Target Customers. Ex: “smart” cash registers.

  6. Segmentation Approaches • A Priori Approach • Post Hoc Approach

  7. Market Segmentation • Analyze the Consumer/Product Relationship • Essence of developing effective marketing strategies is understanding the special relationship that consumers have with products and/or brands. Concerns how consumers perceive a product as relevant for their lifestyle, salient consequences and values, and self-concepts.

  8. Market Segmentation • Determine Segmentation Bases • Geographic • Demographic • Sociocultural • Affective and Cognitive • Behavioral

  9. Using VALS 2 in Marketing • Who your consumers are? • What are they buying? • Where are they? (geodemographic) • How to effectively communicate with customers? • Why? Relate consumers underlying psychological values to their lifestyles and buying behavior • http://www.sric-bi.com/VALS/l

  10. Sample Questions from VALS 2 • I am often interested in theories • I like outrageous people and things • I like a lot of variety in my life • I love to make things I can use everyday • I follow the latest trends and fashions • Just as the Bible says, the world literally was created in six days • I like being in charge of a group • I have more ability than most people • I must admit that I like to show off • I like trying new things Measured on a 4-point scale from Mostly Disagree to Mostly Agree.

  11. VALS I Typology

  12. VALS 1 • Classifies the American population into 4 general consumer groups • Need-Driven (Sustainers and Survivors) • The poor and uneducated (11%) • Outer-Directed (Achievers, Emulators and Belongers) • Lifestyles directed by external criteria (67%) • Inner-Directed (Societally Conscious, Exeriential and I-Am-Me) • Motivated by personal needs than by expectations of others (20%) • Integrated • Those who are able to combine the best of both outer- and inner-directed values (2%)

  13. VALS 2 • Classifies the American population into 3 general consumer groups and then subdivides into 8 distinctive subgroups • Principle-Oriented • motivated in their choice by their beliefs, rather than by desire for approval • Status-Oriented • guided by actions, approval, and opinions of others • Action-Oriented • propelled by a desire for social or physical, variety, and risk-taking

  14. Example of VALS 2 Segment: Principled • 35-64 years, Married • College graduate • 11% of U.S. adult • Well informed, “info junkie” • Value education and travel • Practical consumers • Prestige, image unimportant • Watch TV news

  15. Market Segmentation • Select Segmentation Strategy • Do not enter • Mass market (mass market strategy) • One segment (concentrated strategy • More than one segment, separate marketing mix for each (differentiated strategy)

  16. Product Positioning • Determining how to differentiate one’s product from those of competitors in the minds of consumers • 1. Position on product attributes • Ex: price (Budget Car Rental) • 2. Position on benefits • Ex: Close-Up’s benefit of fresh breath • 3. Position on usage • Ex: Michelob: special occasion beer • 4. Position on user category • Ex: Wheaties as the “breakfast of champions”

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