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Chapter-5 RETAIL MARKET SEGMENTATION. What is a market? A market is a group of potential customers with similar needs who are willing to exchange something.

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Presentation on theme: "Chapter-5 RETAIL MARKET SEGMENTATION. What is a market? A market is a group of potential customers with similar needs who are willing to exchange something."— Presentation transcript:

1 Chapter-5 RETAIL MARKET SEGMENTATION

2 What is a market? A market is a group of potential customers with similar needs who are willing to exchange something of value with sellers offering various goods and services that can satisfy these needs A market is a group of potential customers with similar needs who are willing to exchange something of value with sellers offering various goods and services that can satisfy these needs Mass marketing approach: Mass marketing approach: - approaching the entire set of customers with a - approaching the entire set of customers with a uniform marketing approach thereby creating the uniform marketing approach thereby creating the largest potential market (sale of staple food items like largest potential market (sale of staple food items like rice and bread) rice and bread) Differentiated Approach Differentiated Approach - strategy of market segmentation - marketer selects one or more of the segments as the target market and positions his outlet as per the profile of the targeted segment (Diet Coke sold to market segment of health conscious adults)

3 What is market segmentation The process of dividing the heterogeneous total market into small groups of customers who share a similar set of wants The process of dividing the heterogeneous total market into small groups of customers who share a similar set of wants Major characteristics Major characteristics - is an aggregating process: clustering people with similar or homogenous needs and respond to the marketing mix in the same way - different kind of promotional activities are developed for serving different market segments - identifying niche segments - customized products and services are provided to customer groups (Whirlpool automatic washing machines in urban Mumbai with large groups of working women can be segmented)

4 Benefits of segmentation

5 Development of marketing mixDevelopment of marketing mix - helps to identify target audience - customize marketing strategies in terms of product, price and promotion for customers Store location decisionStore location decision - to concentrate stores where target population are found Understanding customer behaviorUnderstanding customer behavior - how and why the target group behaves and acts - determining the buying behavior after segmenting the market

6 Benefits of segmentation contd Merchandising decisionsMerchandising decisions - deciding on which items will occupy the store shelves for display - understanding the preference of target groups Promotional campaignsPromotional campaigns - effective and accurate promotional campaigns PositioningPositioning - major feature of segmentation. Sarvanna stores are positioned for lower middle class consumers where as the clientele of Lifestyle and Shoppers Stop are for the upper income class and the elite

7 Segmenting, targeting and positioning

8 Criteria for effective market segmentation

9 Criteria for effective market segmentation contd Homogeneous within:Homogeneous within: - similar needs, wants and buying behavior - an effective marketing programme can be developed (Gillette Mach 3 for young male adults) (Gillette Mach 3 for young male adults) Heterogeneous withinHeterogeneous within - customers between segments stay different for better - customers between segments stay different for better focus from retailers focus from retailers SubstantialSubstantial -should have sufficient discretionary income (Ebony must ensure high income groups exist in their trade area) (Ebony must ensure high income groups exist in their trade area)

10 Criteria for effective market segmentation contd ActionableActionable - useful for identifying target groups and deciding on marketing mix variables (Café Coffee Day attracts college goers and young working executives to enjoy coffee in a fashionable outlet) AccessibleAccessible - reachable target market and accessible to target consumer groups (Crossroads is readily accessible with parking facilities) MeasurableMeasurable - size, purchasing power and characteristics of market segment should be measurable - size, purchasing power and characteristics of market segment should be measurable

11 Kinds of markets Consumer marketsConsumer markets - individuals and households purchasing goods for self consumption (groceries like milk,poultry etc.) Industrial markets Industrial markets - individuals, groups and organizations purchasing goods for reproductions of other products

12 Kinds of markets contd Re-seller MarketRe-seller Market -market of the middlemen like wholesalers and retailers who buy goods for resale -main focus of retailing is on consumer products -convenience products: purchased frequently like packaged foods, milk,medicines etc -shopping products: furniture, clothing apparels etc -specialty items: special effort to purchase branded jewellery of DeBeers -unsought items: potential customers have yet to know or know through promotions (ICICI PRUDENTIAL LIFE INSURANCE, HUTCHINSON etc.)

13 Bases of segmentation Geographic segmentationGeographic segmentation – divided on the basis of geographic units like regions and districts (Subhiksha Stores in Chennai) and districts (Subhiksha Stores in Chennai) Demographic segmentationDemographic segmentation - division on the basis of variables like age, gender, income level, family size, occupation, education, and income level, family size, occupation, education, and marital status (Life Style may segment the market by marital status (Life Style may segment the market by income class) income class) Psychographic segmentationPsychographic segmentation -based on lifestyle, personality, values, and -based on lifestyle, personality, values, and interests interests - value and lifestyle segmentation (VALS) - value and lifestyle segmentation (VALS) - e ach consumer is targeted with a unique style of - e ach consumer is targeted with a unique style of living based on the VALS concept living based on the VALS concept

14 Bases of segmentation contd Behavioural segmentation Behavioural segmentation -based on consumer responses or use of product (i.e. use related and usage related segmentation) Behavioural variablesBehavioural variables - reason/occasion to purchase (Diwali sees higher sale of paints) - frequency and quantity of purchase (buying vegetables or meat on a weekly basis) - product usage (heavy beer drinkers and occasional drinkers) - loyalty status (loyal customers to Subhiksha stores) - buyer readiness stage (stages like innovators, early adopters or laggards for cellphone handsets) - source of purchase: choice of shopping locations (local kirana stores or the neighboring mall)

15 Choice of segments to target the market measure the attractiveness and capacity of the segment estimate its size, purchasing power, growth rate, presence of competition, etc. opt for an untapped segment choose to operate in a segment where there are already existing players e.g. CROSSROADS targets clientele from upper middle-class customers devoted to each of the four shopping categorieswomen, kids, men, and home furnishings

16 Profiling of customers Customer DemographicsCustomer Demographics -age, sex, income levels, educational background, and professional background -Family decision-making (a CTV or a 2-wheeler purchase) (a CTV or a 2-wheeler purchase) Customer PsychographicsCustomer Psychographics –purchasing behaviour of the target population –purchase motivation –purchasing process –source of purchase –time and place utility

17 Buyers intentions survey Frequency of customer visits to store Frequency of customer visits to store Weekday/weekend shopping patterns Weekday/weekend shopping patterns Store selection criteria: how buyers go about selecting the store Store selection criteria: how buyers go about selecting the store Spending per visit:. how much the customer spends on an average during each visit Spending per visit:. how much the customer spends on an average during each visit Planned vs unplanned shopping: items purchased in a planned way and impulse purchases Planned vs unplanned shopping: items purchased in a planned way and impulse purchases Store loyalty: do they patronize a few stores or shop around for bargains Store loyalty: do they patronize a few stores or shop around for bargains

18 Market segmentation in India Marketer uses segmentation models based on demographics, geo-demographics, SEC data, and benefits and usage Marketer uses segmentation models based on demographics, geo-demographics, SEC data, and benefits and usage Prominent examples are McDonalds, Nescafe, Café Coffee Day, Benetton Prominent examples are McDonalds, Nescafe, Café Coffee Day, Benetton


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