Transcript Market segmentation

Slides 1-14
Precursor to Segmentation
( Topic 4)
What is a Business Market?
• Business Buyer Behaviour refers to the buying
behaviour of:
• all the organizations that
• buy goods and services
• for use in the production of other products and
services
• that are sold, rented, or supplied to others.
• The business market is huge and involves many
more dollars and items than consumer markets.
ORGANISATIONAL BUYING
BEHAVIOUR
• How does BT’s appeal to business
customers differ from its appeal to
domestic customers?
Some Examples of Organizational
Buying
Paper cups by McDonald's
Computer chips by Toshiba
Concrete by Local Authorities
Oil by Electricity Generators
Fertiliser by Farmers
Accountancy services by Ltd. Companies
TV’s by Comet or Dixons
Stages of the Business
Buying Process
Problem Recognition
General Need Description
Product Specification
Supplier Search
Proposal Solicitation
Supplier Selection
Order Routine Specification
Performance Review
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B2B and Consumer Markets_1
B2B customers
Consumer customers
• Purchase products to
meet specific
business needs
• Purchase products to
meet individual or
family needs
• Emphasize economic
benefits
• Emphasize
psychological benefits
• Use formal, lengthy
purchasing policies
and processes
• Buy on impulse or with
minimal processes
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B2B and Consumer Markets_4
B2B customers
Consumer customers
• Purchase direct from
suppliers
• Purchase from
intermediaries
• Justify an emphasis
on personal selling
• Justify an emphasis
on mass media
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B2B and Consumer Markets_2
B2B customers
Consumer customers
• Involve large groups
in purchasing
decisions
• Purchase as
individuals or as a
family unit
• Buy large quantities
infrequently
• Buy small quantities
frequently
• Want a customised
product package
• Are content with
standardised product
packages
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B2B and Consumer Markets_3
B2B customers
Consumer customers
• Experience major
problems if supply
fails
• Experience minor
irritation is supply
fails
• Find switching
suppliers difficult
• Find switching
suppliers easy
• Negotiate on price
• Accept stated price
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B2B and Consumer Markets_4
B2B customers
Consumer customers
• Purchase direct from
suppliers
• Purchase from
intermediaries
• Justify an emphasis
on personal selling
• Justify an emphasis
on mass media
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Types of B2B Customers
• Commercial enterprises
• Government bodies
• Institutions
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Figure 3.5 Family as a
Decision-Making Unit (See Topic 3)
Initiator
Influencer
User
Purchasing
Decision
Purchaser
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Decider
Participants in the Business Buying
Process: The Buying Centre
Gatekeepers
Users
Buying Center
Buyers
Deciders
Influencers
Decision-making Unit
Initiator
Gatekeeper
Buyer
Decider
(Decision
Maker)
Influencer
User
Decider
Decision-making Unit
Buyers
choose suppliers
and negotiate purchase
terms often reducing
the actual purchase
to a clerical task.
Users
actually use the
product. They may
be the one who initiates
the purchase process
and may develop the
product
specification.
Initiators
begin the purchase
Process.
Deciders
(Decision Makers)
have the authority
to approve
the purchase.
Deciders
have the authority
to select the
supplier or model.
Gatekeepers
control the flow
of information to the
buying centre. Purchasing
department Staff frequently
fill the role but it could be
any member
of the
organization.
Influencers
supply information
and advice. Outsiders
such as consultants
sometimes perform
the role.
Choice Criteria
Types.
 Economic.
e.g. price, return on investment.
 Technical.
e.g. reliability, delivery.
 Social (Organizational).
e.g. status, office politics.
 Personal.
e.g. personal risk reduction, liking/disliking.
In all cases PERCEPTION is critical.
Buying Criteria:
Economic Influences
Appropriate
prices
Product
specification
Quality
consistency
Supply reliability
and continuity
Customer
service
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Buying Criteria:
Non-Economic Influences
Prestige
Career security
Friendship
Other
personal needs
Trust
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Topic 4
segmenting
markets
learning objectives_1
• Define the concept of
Segmentation.
• Explain how both B2B and
consumer markets can be broken
down into smaller, more
manageable groups of similar
customers
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learning objectives_2
• Understand the effects on the
marketing mix of pursuing specific
segments
• Understand the potential benefits
and risks of segmentation
• Appreciate the role of segmentation
in strategic marketing thinking
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Segmentation Defined
Segmentation is the art of
discerning and defining meaningful
differences between groups of
customers to form the foundations of
a more focused marketing effort.
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The need for market
segmentation
• Marketers understand that they
cannot be all things to all people, all
of the time. Buyers and markets are
too complex and diverse for one
simple marketing formula to
adequately address the needs of all.
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WHAT IS SEGMENTATION
ABOUT?
• “The identification of
sub-sets of buyers
within a market who
share similar needs
and who have similar
buying processes”
• Companies aim to
satisfy the needs of
specific market
segments better than
anybody else
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Segmentation the Concept
•
Customer orientated concept - based on understanding
customers.
•
Practical - breaking large markets down into
manageable parts or groups.
•
Proactive part of developing a marketing strategy.
•
Consumer markets and B2B markets segmented
differently.
Segmentation Process
•
Defining the boundaries of the market - what business
are we in?, and looking at the world through the
customers’ eyes.
•
Targeting customers.
eg business and consumer
travel markets
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The Segmentation Process
Source: Kotler et al, 2003.
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B2B Segmentation Bases
Macro
Micro
• Size
• Product
• Location
• Applications
• Usage rate
• Technology
• Purchasing and decisionmaking processes
• Buyer-seller relationships
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Consumer Segmentation
• Similar to B2B segmentation, except
– Consumer segments tend to be larger
– More difficult to get close to buyer
– More emphasis on lifestyle and context
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Segmenting Consumer Markets
Bases for
Segmentation
• Age, race, gender
• Income, education
• Family size
• Geographic
• Family life cycle
• Demographic
• Occupation
• Psychographic
• Religion, nationality
• Behavioral
• Generation
• Social class
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DEMOGRAPHIC SEGMENTATION
• Age
• Family life
cycle
• Gender
• Ethnicity
• Household
composition
Segmenting Consumer Markets
Bases for
Segmentation
• Geographic
• Demographic
• Psychographic
• Behavioral
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• Occasions
• Benefits
• User status
• Usage rate
• Loyalty status
• Buyer-readiness
• Attitude
Behaviour Segmentation
• End use
• Benefits sought
eg usage segmentation
in the soup market
•Dinner party starter
• Usage rate
•Warming snack
• Loyalty
•Meal replacement
• Attitude
•Recipe ingredient
• Buyer readiness
•Easy office lunch
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Loyalty Segments
• Current loyal user, continuing purchase
• Current customer, switching possible
• Occasional user, could become loyal
• Occasional user, switching possible
• Non-user, could become user
• Non-user, unlikely to become user
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Source: Kotler et al, 2003
Benefit Segmentation
The Toothpaste Market
Source: Kotler et al, 2003.
eg Cadbury’s Market Segments
• Immediate eat
• Home stock
• Kids
• Seasonal
• Gift
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Psychographic
Segmentation
• Lifestyle
segmentation
• Categories
– Activities
– Interests
Quorn targets vegetarians
with meat substitutes
Source: © Quorn http://www.quorn.co.uk
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– Opinions
– Demographics
BASES FOR
SEGMENTATION
• Main approaches:
– Demographic
– Socio-economic
– Psychographic
• Approaches overlap
• Need to trade off
measurability and
usefulness
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COMPREHENSIVE APPROACHES TO
SEGMENTATION
• In reality, multiple
bases for
segmentation are
used
simultaneously
• Combine
subjective and
objective
approaches
EVALUATION OF MARKET
SEGMENTS
• Market segments need to be evaluated and
ranked for possible targeting
• Evaluation is typically based on:
– Size of segment
– Growth prospects
– Profitability
– Competitive pressure
– Fit with company objectives
Segmentation Targeting
Strategies
Undifferentiated
Differentiated
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Concentrated
Undifferentiated Strategy
Marketing mix
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The market
Differentiated Strategy
Marketing mix 1
Segment 1
Marketing mix 2
Segment 2
Marketing mix 3
Segment 3
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Example of Differentiated
Strategy
Marketing
Mix 1
Marketing
Mix 2
LEVI’s
Utilitarian
Customer
TrendyCasual
Marketing
Mix 3
Marketing
Mix 4
Marketing
Mix 5
Price
shopper
Mainstream
Traditionalist
Concentrated Strategy
Marketing mix 2
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Segment 2
The Concentrated Targeting Strategy
•
The concentrated approach is the most focused and
involves specialising on serving one specific segment.
•
Can lead to very detailed knowledge of the target
segment’s needs and wants.
•
This strategy can help keep costs down as there is only
one marketing mix to manage.
•
Helps to develop a niche market.
The Differentiated Targeting Strategy
•
Involves the development of a number of different
marketing mixes for different segments.
•
Allows a business to tailor its offerings to suit different
segments.
•
Spreads risk across market segments.
•
Requires a detailed overview of the market and its
development potential.
•
Can dilute a company’s efforts.
The Undifferentiated Targeting
Strategy
•
Least demanding targeting strategy.
•
Assumes that the market is one homogeneous unit with
no significant differences.
•
One single marketing mix serving all needs.
•
Relatively inexpensive.
Segmentation – the Benefits
•
Customers can find products/services that fit more
closely to what they want.
•
Customers can feel more responsive and loyal to
organisations that speak directly to them and tailor their
products accordingly.
•
Enables organisations to target its marketing mix more
closely on potential customers thus matching their needs
more accurately.
Segmentation – the Benefits
•
Enables organisations to define shopping habits.
•
Places the customer at the core of all decisions.
•
Enables the organisation to achieve a better
understanding of itself and its environment.
Segmentation - the Dangers
•
Risk of poor definition and implementation of
psychographic segmentation.
•
Knowing where to stop.
•
Fragmentation of the market.
•
Customer confusion.
Criteria for Successful
Segmentation
Distinctiveness
Tangibility
Accessibility
Defendability
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Bang & Olufsen
Bang &
Olufsen
targets
upmarket
consumers.
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Segmentation and
positioning
• Target marketing
– Identifies market segments that are bite sized chunks
that organisations can manage.
• Market segmentation
– Identifies markets with common traits.
• Market targeting
– Process of evaluation of the selected segments and
then deciding which market segments to operate
within.
• Market positioning
– Process whereby marketers position the product to
occupy a clear and distinctive position relative to other
competing products.
Positioning strategies
•
Product attributes
– Nokia’s 6600 ‘Zoom in’.
•
Technical items
– BMW breathable fresh air filters.
•
Benefits offered
– Crest toothpaste reduces cavities.
•
Usage occasions
– Kit Kat, ‘have a break’.
•
Users
– Johnson & Johnson changing focus to incorporate adults as
frequent users of their gentle Baby Shampoo.
•
Activities
– Omega, the ‘first and only watch on the moon’.
•
Personalities
– Tiger Woods for Nike
Positioning strategies
• Origin
– Perrier ‘bottled at source’.
• Positioned against competitors
– Dell and Compaq versus IBM
• Positioned away from competitors
– 7-Up the number 1 ‘Un-cola’.
• Product class membership
– ‘I can’t believe it’s not butter’, the vegetable fat spread,
is clearly positioned against butter.
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