1. TIØ4165 Marketing Management
Segmentation and Targets
Arild Aspelund
IØT, NTNU

2. Emerging Trends in Consumer Behavior
Metrosexual –
Straight urban man
who enjoys shopping
and using grooming
products

3. Outline The purpose of segmentation Levels of segmentation
Categories of segmentation variables
Segmentation process and criteria
Cost considerations

4. Why Segmentation?
Properties of ”mass markets” makes it hard to earn above-average rent on merely selling products to customers
This is due to the unfortunate economic postulate that prices in the long run tend to equal marginal costs of production in perfect markets; that is…
Homogeneous products
Perfect information symmetry
Perfect competition
No “friction” or switching costs
It is therefore paramount to
Clearly identify your segment – where the customer that are willing to pay a disproportional high price in sufficient volumes
Differentiate your product to offer superior value to your key segments
Monopolize your key segments through
Shade information
Create favorable customer preferences
Loyalty

5. Levels of Segmentation
Mass marketing
Volumes to the masses!
Segment marketing
Group of customers that share a similar set of needs and wants
Niche marketing
Group of customers that share the same distinctive mix of benefits
Local marketing
Tailored to meet the needs and wants of a local customer group

6. Levels of Segmentation - Mass Marketing
No customization or market adoption
Cost oriented
Volumes to the masses!
Are there any examples of this in the modern Norwegian economy?

7. Levels of Segmentation - Segment Marketing
Groups of customers that share needs and wants

8. Levels of Segmentation - Segment Marketing

9. Levels of Segmentation - Niche Marketing
Targeting a narrowly defined customer group seeking a distinctive mix of benefits
Often identified by sub-segments

10. Levels of Segmentation - Local Marketing
Tailored to meet the needs and wants of a local customer group
Endeavors to get as close and personally relevant to individual customers as possible
An increasing trend in terms of “glocalization” and “customerization”

11. Segmentation of Consumers
Geographic
Demographic
Psychographic
Behavioral

12. Geographic Segmentation
Dividing the market into multiple geographical units
Nations , states, regions, counties, cities or neighborhoods
Firms may operate in only one, a few or all, but adopts local variations
Many areas may have similarities and knowledge of such are valuable
Are there any similarities in the localization of new consumer concepts such as Lidl?

13. Demographic Segmentation
Age and life-cycle stage
People’s needs and preferences change with age and life-cycle stage
Defining the persons major concern
Gender
No, in terms of consumer behavior we are not equal…
Income
Goes without saying. Think of Maslow’s hierarchy…
Generation
Generations share experiences, and to some extent outlooks and values
Social class
A reference to Maslow again…

14. Psychographic Segmentation
The VALS Segmentation System

15. Behavioral Segmentation
Decision Roles
Initiator, Influencer, Decider, Buyer, User
Behavioral Variables
Occasions
Benefits or value orientation
User status
Nonusers, ex-users, potential users, first-time users and regular users
Usage rate
Buyer – readiness stage
Loyalty status
Hard-core loyals, split loyals, shifting loyals, and switchers
Attitude
Enthusiastics, positive, indifferent, negative, and hostile

16. Behavioral Segmentation

17. Segmentation Process Needs-based segmentation Segment identification
Segment attractiveness
Segment profitability
Segment positioning
Segment acid test
Marketing-Mix
Strategy

18. Effective Segmentation Criteria
Measurable
Can you measure your key variables?
Substantial
Is it large and profitable enough?
Accessible
Can they be effectively reached and served?
Differentiable
Are they conceptually different from other groups and do they respond differently to marketing actions?
Actionable
Can you design an effective targeting program for attracting attention, communicating and serving the target segment

19. Selecting Target Markets I

20. Selecting Target Markets II

21. Selecting Target Markets III

22. Cost Considerations
Segmentation and targeting most likely increase sales, but also inflict costs in terms of
Product modification costs
Manufacturing costs
Administrative costs
Inventory costs
Promotion costs
It is often nicer to think of increase of revenues per new customer, but a top manager would worry about new customer costs inflicted over the whole value chain

23. Segmentation Some typical examples of firms and their segments Volvo
Toyota
Body Shop

24. Summary and Continuation
We have established an argument of why segmentation is a valuable tool in terms of increasing profitability
We have identified categories of segmentation variables
We have also presented some features of good segmentation variables and a feasible way of conducting market segmentation
Finally, we have touched upon the concept of targeting through the process of selecting market segments
Continuation
Positioning and competition