Transcript Blue Compact Disk Template

1
Rediscovering
Market Segmentation
By Daniel Yankelovich and David Meer
Harvard Business Review – February 2006
Presented by Funball-G 5
Amir H. Taherizadeh
Lance Chua
Mina Borhani
Wilson Koh
13 August 2009
Marketing Management
CMGB6101
CGA060147
CGA090035
CGA080104
CGA070022
Presentation Outline
2










Purpose of the Article
What is Market Segmentation
Problem Statement
Historical Solutions
Aggravating the Problem, Mid-1970s
Consequences
Meaningful Segmentation
Elements of Smart Segmentation Strategy
Gravity of Decision Spectrum
Conclusion
Purpose of the Article
3
To present the elements of a smart
segmentation strategy
 To introduce a tool: “Gravity of Decision
Spectrum” based on consumer behavior
notion

What is Market Segmentation?
4

Market segmenting is the process with the
help of which a company divides the
market into distinct groups who have
distinct needs, wants, behavior or who
might want different products & services
(Aminjonov Mirhabibjon, "Marketing Introduction"(2009))
Market Segmentation
5
Mark McCrindle, Social Researcher, McCrindle Research, www.ceoonline.com.au
Market Segmentation
6
An Appropriate Market Segmentation …





Has Internal Homogeneity, i.e. the same needs within the
segment
Has External Heterogeneity, i.e. different needs vis-à-vis other
segments
Elicits the same Response to a market stimulus
Can be reached with market intervention
Identifies the groups most worth pursuing- the underserved, the
satisfied, and those likely to make a first time purchase
Problem Statement
7


Segmentation has drifted away from its
original purpose and potency!
Root Causes:



Market segmentation has become narrowly
focused on the needs of advertising.
The Failings of Psychographics
Relationship of Consumers to a
Product/Product Strategy Vs. to Their Jobs,
friends, family, community (psychographics)
Problem Statement
8
World War II vs. Early 1960s- less
predictable consumers regarding buying
habits.
 Affluent uneducated consumers, very price
conscious sophisticated consumers.
 Tastes and purchasing patterns no longer
neatly aligned with age, and income.
 Purely demographic segmentations lost their
ability to guide companies' decisions.

Ineffective Solutions to the Problem
9



Refinements of existing offerings vs.
Original Real Customer Needs
Advertising Focus vs. Consumer Focus
Emotional Benefits vs. Functional
Benefits
 Intense
Unmet Need:
Antidandruff Shampoo
 Emotional Benefit: Add fresh
eggs to cake
Aggravating the Problem, Mid-1970s
10

Using Power of Imagery to stimulate sales
of dull items vs. Coming Up with
Genuinely Innovative Technology n Fresh
Design
Belief in Power
of Imagery
Genuinely
Innovative
Product
Aggravating the Problem, Mid-1970s
11
Applying
Social
Sciences to
Business
The Rise of
Psychographics
Confused
Business
Executives
Consequences….
12





VALS classified individuals according to 9
psychological types
Psychographics became the most accepted mode
of segmentation.
It was embraced by ad dept. and agencies.
Pros: Psychographics is effective at brand
reinforcement and positioning.
Cons: Psychographics are not drivers of
commercial activity.
Different Segmentation for Different Purposes
13
Insert Table Here
Meaningful Segmentation
14

Type of Data to Collect
 Emerging
social, economic and technological
trends which may alter purchasing and usage
patterns
 Which benefits and features matter to your
customers?
 Which customers are willing to pay higher
prices or demand lower ones?
Meaningful Segmentation
15

How to Collect?
 Qualitative
Research
 To
explore underlying motives and needs propelling
current purchases
 Quantitative
 To
understand competitive strengths and vulnerabilities
 Reexamine

Research
the sales data
To reveal the hidden patterns in consumers’ behavior
 Retain
trend-tracking services
Elements of
Smart Segmentation Strategy
16






Reflects Company’s Strategy
Indicates Sources of Revenue
Identifies Customers’ Values, Attitudes, etc in Relation to
Product/Service
Focuses on Actual Customer Behavior
Makes Sense to Top Executives
Accommodate/Anticipates Changes in
Markets/Customer Behavior
Elements of
Smart Segmentation Strategy
17
What are we trying to do?
 CMO often uses the segmentation exercise in an
organisation without knowing the alignment of
company’s strategic decision would benefit from
the guidance of a segmentation.
 No longer explore the personalities of customer.
 Identify groups of potentially interested or
susceptible customers sufficiently numerous and
lucrative to justify pursuit.
Elements of
Smart Segmentation Strategy
Example: Organisation applying different strategies based
on the nature of the business
Nature of Business
Traditional Brokerage
Strategy Applied
Reduce customer defection
Personal Care Products Extend a strong Soap brand into
Company
Deodorants
Fast-Food Chain
Produce healthier menu alternatives
Elements of
Smart Segmentation Strategy
Segment #1:
No retention Strategy
(Do nothing)
Segment #2:
Retention
Strategy A
Segment #3:
Retention
Strategy B
Segment #4:
Retention
Strategy C
Customer who are
Not Profitable to retain
Customer who are
Profitable to retain
Segment (Seg)
Predicted Profit for Customer
Seg #1: Do Nothing
N/A
Seg #2: Strategy A
($27)
Seg #3: Strategy B
$3
Seg #4: Strategy C
$23
McDonald, Malcolm & Dunbar, Ian (2004). Market Segmentation: How to do it, how to
profit from it. Butterworth-Heinemann, 2004.
Elements of
Smart Segmentation Strategy
20




Which customer drive profits?
Rank the customers by the profitability towards the
organisation and giving the right attention to them
Understand what make its best customers as
profitability as they are and than seek new
customer who share similar characteristic
Example: A bank is concerning its overall business
was suffering from low rates of growth and
stagnant market share
Elements of
Smart Segmentation Strategy
21
Existing Segmentation
Relationship
Manager
Senior Branch
Personnel
CUSTOMER
Based on Customer
Assets & Incomes
Junior Branch
Personnel
Serve
Rediscovering Market Segmentation, Daniel Yankelovich and David Meer (2006)
Elements of
Smart Segmentation Strategy
22
Marketing research on the lifetime value of Wealthy Prospects
Demographic
Behavioral
Attitudinal
Age
Which service customer already in used?
Financial
sophistication
Occupation
How many institutions they did business with?
Time spent on
investment
Assets
How many transactions they made in a
month?
Risk Tolerance
- New segment identified as “Young Families” has variations in
Profitability even in the existing high- profit segment.
Elements of
Smart Segmentation Strategy
23
Segments that contribute almost no profit after research has
been conducted
On Their
Way
Established
Families
Contribute
almost
NO PROFIT
50% of the Customer based
Retirement
Planners
Rediscovering Market Segmentation, Daniel Yankelovich and David Meer (2006)
Elements of
Smart Segmentation Strategy
24
Which attitudes matter to buyer decision?
 Examining people’s lifestyle, attitudes, selfimage and aspirations would be crucial as
these characteristic are expected to change
along with customer’s value and environment.
Elements of
Smart Segmentation Strategy
25
What are my customers actually doing?
 Considering relevant attitudes, values and
expressed preferences in segmentation, is not
enough to predict customer actual purchase
behavior.
 Conjoint analysis is an analytical technique
used in market research to determine how
people value different features and attributes
that make up an individual product or service.
Elements of
Smart Segmentation Strategy
26
Will this segmentation make sense to senior management?
 Marketers have increasingly turned to advanced
statistical techniques for dissecting segments into ever
finer slice.
 Not only focus on external parties, but also consider
internal constituency!
 No matter how scientific and technical you’ve
performed the segmentation, if the segments seem
unmeaning to the management or inconsistent with
manager’s experience, the research is unlikely to be
accepted and applied.
Elements of Smart Segmentation
Strategy
Can our segmentation
register change?
market
conditions
(fluctuating
economics,
emerging
consumer niches,
new technologies)
Market
Segmentation
27
Elements of
Smart Segmentation Strategy
28
Relevance of market
segmentation should be
monitored regularly and be
updated as needed
Gravity of
Decision Spectrum
29


Start with consumer expectation
Then you probe consumers’ Motives,
Concerns, and Psyches.
Shallow
Middle
Deep
• Save Time, Effort, Money
• STIs, e.g. Toiletries and Snacks
• Concerned about Quality, Design,
Complexity, Status
• BTIs, e.g. Cars, & Electronic Devices
• Great Emotional Investments, Their Core
Values are engaged
• Health Treatments, e.g. Cancer
Gravity of Decision Spectrum
30
Concluding Remarks….
31

Segmentations failures are mainly due to
 Excessive interest in consumers' identity rather
than the focus on Product Features that matter
most to current and potential customers.
 Too little emphasis on actual consumer
behavior which reveals their attitudes
 Undue absorption in the technical details of
devising segmentation which estranges
marketers from the decision makers on whose
support their initiatives depend
32
References
McCrindle, M. Social Researcher, McCrindle Research,
Retrieved at: www.ceoonline.com.au
McDonald, Malcolm & Dunbar, Ian (2004). Market
Segmentation: How to do it, how to profit from it.
Butterworth-Heinemann, 2004.
Yankelovich, D, & Meer, D. (2006). Rediscovering Market
Segmentation, Harvard Business review.
33
Finito!
Thanks for Your Attention!
The Floor Is Open to Your Comments…