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

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Presentation on theme: "1 TIØ4165 Marketing Management Segmentation and Targets Arild Aspelund IØT, NTNU."— Presentation transcript:

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

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

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

4 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 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 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 7 Levels of Segmentation - Segment Marketing Groups of customers that share needs and wants

8 8 Levels of Segmentation - Segment Marketing

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

10 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 11 Segmentation of Consumers Geographic Demographic Psychographic Behavioral

12 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 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 14 Psychographic Segmentation The VALS Segmentation System

15 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 16 Behavioral Segmentation

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

18 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 19 Selecting Target Markets I

20 20 Selecting Target Markets II

21 21 Selecting Target Markets III

22 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 23 Segmentation Some typical examples of firms and their segments –Volvo –Toyota –Body Shop

24 24 Summary and Continuation Summary –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

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