MARKET SEGMENTATION

If you went out of business would anyone miss you?

SEGMENTATION
A company cannot serve all customers in a broad market such as computers and soft drinks. The consumers are too much numerous and diverse in their buying requirements. The company needs to identify the market segments that it can serve more effectively. The market is divided into homogenous groups to serve each customer segment effectively.

SEGMENTATION
Market segmentation is the process of dividing a heterogeneous market into a homogeneous sub units. Market segmentation helps a firm to compete in a highly competitive market. For competitive advantage of a firm lies in being everything to a select few. To be everything to everyone is a sure recipe for a strategic failure. A market segment consists of a large identifiable group within a market with similar wants, purchasing power, geographical location, buying attitudes, or buying habits.

NICHE MARKETING
A niche is a more narrowly defined group, typically a small market whose needs are not well served. Marketers usually identify niches by dividing a segment into sub segments or by defining a group seeking a distinctive mix of benefits. For example, the segments of heavy smokers include those who are trying to stop smoking and those who dont care.

LOCAL MARKETING
Target marketing is leading to marketing programs being tailored to the needs and wants of local customer group.

INDIVIDUAL MARKETING
The ultimate level of segmentation leads to segment of one, customized knowledge, or onetoone marketing.

PATTERNS OF MARKET SEGMENTATION Homogenous Preferences-Here consumers have roughly the same preference. The market has no natural segment. Diffused Preferences-Consumer preferences may be scattered through out, indicating that consumers vary greatly in their preferences. Clustered Preferences-The markets may reveal distinct preference clusters, called natural market segments.

Clustered Preferences

Diffused Preferences

Homogenous Preferences

BASIC MARKET- PREFERRED PATTERN

MARKET SEGMENTATION PROCEDURE Survey stage Analysis stage Profiling stage

MARKET SEGMENTATION WITH SELECTIVE VARIABLES

1. Geographic Segmentation Region East, West, North, South Density

Urban, Rural
Climate

Hot, Humid, Extreme, Cold

MARKET SEGMENTATION WITH SELECTIVE VARIABLES cont.

2. Demographic Segmentation
Age Below 6, 6-11, 12-19,20-34, 35-49, 50-64, 65+ Sex Male, Female Marital status Single, Married, Divorced, Widowed Religion Hindu, Muslim, Christian, Sikh, Parsi, Jain Income Level Lower Level, Middle Income, higher Level
.

MARKET SEGMENTATION WITH SELECTIVE VARIABLES cont.

2. Demographic Segmentation

Education
Illiterate, School, Secondary School, Diploma, Graduate, Post graduate, Professional graduate

Occupation
Un employed, Housewife, Student, Agricultural, Skilled/ Semi skilled/ Un skilled Workers, Clerk, Sales Person, Officers/ Executive/ Managers, Proprietors, teachers, Professional & Technical.

MARKET SEGMENTATION WITH SELECTIVE VARIABLES cont.

3. Psychographic Segmentation

Social Class
Lower Class, Middle Class, Upper Class

Life Style
Economy Minded, Status Conscious, Extrovert-Enthusiast.

Personality
Gregarious, Ambitious, etc.

MARKET SEGMENTATION WITH SELECTIVE VARIABLES cont.

4. Use-Related Segmentation
User Rate
Light User, Medium User, Heavy User

User Status
Non-User, Ex-User, Potential User, First time User, Regular User.

Brand Loyalty
Absolute, Strong, Medium, None.

Occasion
Regular, Special

MARKET SEGMENTATION WITH SELECTIVE VARIABLES cont.

5. Benefit Segmentation Benefit Sought

Quality, Price/ Economy, Service, etc.

MARKET SEGMENTATION WITH SELECTIVE VARIABLES cont.

6. Behavior Segmentation User Readiness Stage

Unaware, Aware, Informed, Interested, Desirous, Positive intention to buy.

TOOTHPASTE MARKET SEGMENT DESCRIPTION

SEGMENT NAME Principle benefit sought Demographic strengths Social behavioural characteristics THE SENSORY SEGMENT Flavour, product appearance Children Users of spearmint flavoured toothpaste Colgate, Aim THE SOCIABLES Bright teeth Teens, young people Smokers THE WORRIERS Decay prevention Large families Heavy users THE INDEPENDENT SEGMENT Price Men Heavy users

Brands disproportionately favoured Personality characteristics

Close-Up

Crest

Brands on sale

High selfinvolvement

High sociability

High hypochondriasis

High autonomy

Lifestyle characteristics

Hedonistic

Active

Conservative

Value-oriented

EFFECTIVE SEGMENTATION

Measurable Substantial & Viable Accessible Differentiable Actionable

SEGMENTING BUSINESS MARKETS

Demographic Industry Which industry should we serve? Company What size company should we serve? Location What geographical areas should we serve?
Source- Bonoma and Shapiro

SEGMENTING BUSINESS MARKETS Operating Variables Technology What customers technology should we focus on? User or non seller status Should we serve heavy users, medium users, light users or non users Customer capabilities Should we serve customers needing many or few services?
Source- Bonoma and Shapiro

SEGMENTING BUSINESS MARKETS

Purchasing Approaches Purchasing function organization Should we serve companies with highly centralized or decentralized purchasing organization? Power structure Should we serve companies that are engineering dominated, financially dominated and so on? Nature of existing relationship Should we serve companies that have strong relationships or simply go after the most desirable companies? General purchase policies Should we prefer companies that want leasing? Service contracts? Systems purchase? Sealed bidding? Purchasing criteria Should we serve companies that prefer quality? Service? Price?
Source- Bonoma and Shapiro

SEGMENTING BUSINESS MARKETS Situational Factors Urgency Should we serve companies that need quick and sudden delivery or service? Specific application Should we focus on specific application of our product rather than all companies? Size of order Should we focus on large or small orders?
Source- Bonoma and Shapiro

SEGMENTING BUSINESS MARKETS Personal Characteristics Buyer seller similarity Should we serve companies whose people and values are similar to ours? Attitude towards risk Should we serve risk taking or risk avoiding customers? Loyalty Should we serve customers that show high loyalty to their suppliers?
Source- Bonoma and Shapiro

SEGMENTING BUSINESS MARKETS

Buyers can also be segmented on the basis of benefits they sought on their stages in the purchase decision process. First time prospects Customers who have not yet purchased want to buy from a vendor who understands their business, who explains things well, and whom they can trust. Novices Customers who are starting their purchasing relationship want easy to read manuals, hot lines, a high level of training, and knowledgeable sales representatives. Sophisticates Established customers want speed in maintenance and repair, product customization, and high technical support.

SEGMENTING BUSINESS MARKETS

Industrial Markets Segmentation Programmed Buyers Relationship Buyers Transaction Buyers Bargain Hunters

Source- Rangan, Moriarty, and Swatz

Common market segment variables

Identifier variables
Who they are Consumer markets Demographics (age, sex, lifecycle stage, ethnicity, religion) Socioeconomic factors (income, occupation, education) Psychographics (beliefs, opinions, activities, interest) Business Markets Size of customer Industry Geography location

Response variables
What they want Benefits Desired Price, reliability, service Application or usage situation Scheduled verses unplanned maintenance (trucks, factories) Sensitivity to marketing mix Price, promotion, product features Purchasing Behaviour Buying volume & frequency Switching among brands Purchasing approach Channel used

TARGET MARKETS

Customer buy holes, not drills

MARKET
Market is an aggregate of people who have needs for products in a product class and who have the ability, willingness, and authority to purchase the products.

TARGET MARKET SELECTION PROCESS 1. 2. 3. 4. 5. Identify the Appropriate Targeting Strategy Determine which segmentation variables to use Develop Market Segment Profiles Evaluate relevant Market Segment Select Specific Target Markets

1.

3.

Identify the appropriate Target Strategy

Develop Market Segment profiles 4.

5. Select specific Target Market

2. Determine which Segment variable to use

Evaluate relevant Market Segments

TARGET MARKET SELECTION PROCESS

Identify the Appropriate Targeting Strategy

Undifferentiated Strategy Concentrated Strategy Differentiated Strategy

Product Price Place

Promotion

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ORGANIZATION

SINGLE MARKETING MIX

TARGET MARKET

UNDIFFERENTIATED MARKETING STRATEGY

Product Price Place

Promotion

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ORGANIZATION

SINGLE MARKETING MIX

TARGET MARKET

CONCENTRATED MARKETING STRATEGY

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Promotion
MARKETING MIX 1

Product
ORGANIZATION Price Place

Promotion MARKETING MIX 2

DIFFERENTIATED STRATEGY

TARGET MARKET SELECTION PROCESS

Determine which segmentation variables to use

Characteristics of groups, individuals or Organizations

TARGET MARKET SELECTION PROCESS

Develop Market Segment Profiles

Describes the similarities among potential customers within a segment Explains the differences among people and organizations in different segments Provide marketers with an understanding of how an organization can use its capabilities to serve potential customer groups.

TARGET MARKET SELECTION PROCESS

Evaluate relevant Market Segment

Cost estimates Competitive assessment Sales estimates

TARGET MARKET SELECTION PROCESS

Select Specific Target Markets

Ordinary information Financial resources Managerial skills Labour expertise Firms overall objectives

POSITIONING

Dont advertise the brand live it.

POSITIONING Positioning is an act of communicating companys offer so that it occupies a distinct and valued place in the consumers mind

POSITIONING
various ways to position the brand are Use situations Emphasizing tangible benefits Linking to users Head on competitive positioning Lifestyle positioning

POSITIONING
various ways to position the brand are Use situations Emphasizing tangible benefits Linking to users Head on competitive positioning Lifestyle positioning

POSITIONING

Positioning ErrorsUnder Positioning Over Positioning Irrelevant Positioning Confused Positioning Doubtful Positioning

POSITIONING

Positioning a Brand- PERCEPTUAL MAPPING Studying the ideal product perception. Get the customers to rank these attributes in the order of importance to them. Customers knowledge of competitors brand. Customers are asked to assess competitors brands and specify how close or far they are on each attribute to the ideal product. Based on customers assessment of competitors brands on the ideal product map, product managers identify vacant slots and then build the positioning strategy by filling these.