Transcript Market Segmentation

Dr. Close
SEGMENTATION & TARGET
MARKETING
Market Segmentation
 Dividing market into meaningful, similar groups
(or aggregating those with similar needs)
 Why is segmentation important?....
 Markets have a variety of product preferences
 Marketers can better define customer needs
 Decision makers can define objectives and allocate
resources more accurately
 Target market – Group or market segment that a company
selects to focus on
Market Segmentation
A Model of the Market Segmentation Process
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Understanding Market
Segmentation
 Delineate the firm’s current situation
 Intended to be a reminder of tasks to be performed
prior to marketing planning
 Determine consumer needs and wants
 Successful marketing strategies depend on meeting
consumer needs and wants
 Industry within which firm operates specifies
boundaries of firm’s need satisfaction activities
 At a strategic level, need and wants usually are
translated into more operational concepts
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©2009 The McGraw-Hill Companies, All Rights Reserved
Dimensions for Market Division
 Three important questions to be considered are
 Should the segmentation be a priori or a post hoc?
 How does one determine the relevant dimensions or
bases to use for segmentation?
 What are some bases for segmenting consumer and
organizational buyer markets?
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©2009 The McGraw-Hill Companies, All Rights Reserved
A Priori versus Post Hoc
Segmentation
 A priori segmentation – An approach where the
marketing manager has decided on the appropriate
basis for segmentation in advance of doing any
research on a market
 Post hoc segmentation – An approach in which
people are grouped into segments on the basis of
research findings
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©2009 The McGraw-Hill Companies, All Rights Reserved
Relevance of Segmentation
Dimensions
 At least some initial dimensions can be determined
from
 Previous research
 Purchase trends
 Managerial judgment
 Consideration and research of sought benefits are a
strongly recommended approach
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©2009 The McGraw-Hill Companies, All Rights Reserved
Bases for Segmenting Markets
Geography
• Region
• Market size
• Market
density
• Climate
Demographics
•
•
•
•
•
Age
Gender
Income
Ethnicity
Family life
cycle
Psychographics
•
•
•
•
Personality
Motives
Lifestyle
Geodemographics
Benefits
• Benefits
sought
Usage Rate
•
•
•
•
Former
Potential
1st time
Light or
irregular
• Medium
• Heavy
Bases for Segmentation
 Benefit segmentation – Focuses on benefits sought by
consumers
 Is a market-oriented approach
 Psychographic segmentation – Focuses on consumer
lifestyles
 Lifestyles are measured on the bases of activities,
interests and opinions (AIO) of consumers
 Best-known type of segmentation is VALSTM (“values
and lifestyles”)
 Product of SRI Consulting Business Intelligence
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©2009 The McGraw-Hill Companies, All Rights Reserved
Bases for Segmentation
 Geodemographic Segmentation – Identifies
households in a market by focusing on local
geography
 PRIZM NE – Potential Ranking Index by ZIP Markets – New Evolution
 Assumes that consumers in particular neighborhoods
are similar in many respects and that the best prospects
are those who actually use a product
 Classifies every U.S. neighborhood into a total of 66
distinct segments
You are where you live: PRIZM data exercise.
Is your zipcode accurate for market segmentation
purposes?
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©2009 The McGraw-Hill Companies, All Rights Reserved
Bases for Segmentation
Useful Segmentation Bases for Consumer
Markets
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies, All Rights Reserved
Bases for Segmentation
Useful Segmentation Bases for Consumer
Markets
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies, All Rights Reserved
Positioning
Developing a marketing
mix to influence potential
customers’ overall
perception of a brand,
product line, or
organization in general.
How is Wal-Mart
Positioned?
Positioning
Bases
Attribute
Price and Quality
Use or Application
Product User
Product Class
Competitor
Emotion
Develop Product Positioning
 Positioning can be achieved through any one of these
strategies
 Superiority to competitive products on one or more
product attributes
 Positioned by use or application
 Positioned in terms of particular types of users
 Positioned relative to a product class
 Positioned directly against particular competitors
 Position mapping – Visual depiction of customer
perceptions of competitive products, brands, or
models
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Positioning Map for Automobiles
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Market Segmentation Strategies
 Firm may decide to do the following
 Not to enter the market
 To segment but to be a mass marketer
 Market is so small that it is not profitable to market to one
portion of it
 Heavy users comprise such a large proportion of sales that
they are the only relevant target
 Product is a dominant brand, and targeting to a few segments
is not beneficial
 To market to one segment
 To market to more than one segment and design a
separate marketing mix for each
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©2009 The McGraw-Hill Companies, All Rights Reserved
Market Segmentation Strategies
 Criteria to base a firm’s segmentation strategy
decisions are
 Measurable – Firm must be capable of measuring its size
and characteristics
 Meaningful – Large enough to deliver sufficient sales and
growth potential
 Marketable – Can be reached and served in an efficient
manner
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©2009 The McGraw-Hill Companies, All Rights Reserved
Market Segmentation Strategies
Selecting Target Markets: Some Questions Marketing Managers
Should Answer
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies, All Rights Reserved
Market Segmentation Strategies
Selecting Target Markets: Some Questions Marketing Managers
Should Answer
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies, All Rights Reserved
Design Marketing Mix Strategy
 Selection of target market and designing the market
should go hand in hand
 Marketing mix decisions should have already been
carefully considered
 Product positioning has many implications for
promotion and channel distribution
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©2009 The McGraw-Hill Companies, All Rights Reserved
Product
Differentiation
A positioning strategy
that some firms use to
distinguish their
products from those
of competitors.
Are distinctions real
or perceived?