Presentation on theme: "Content of the Lecture Definition of Market Segmentation"— Presentation transcript:
1 Content of the Lecture Definition of Market Segmentation Purpose of segmentationTypes of segmentationSegmentation processLevels of segmentation
2 What really is a market?A place where forces of demand and supply operate
3 Essentials of Segmentation / Targeting What is the size of the market?What unique need does your GENRE of product/ services meet?How much are customers willing to pay for this product/ service (top/ bottom/average)?Is this a price sensitive/ commodity product or premium product?Who are the other key players?What is the gap un-serviced by current players?What is the REAL available market for you?How is your product different from competition?What is your playing field? (premium/ general/ price warrior)What share of this can you reasonably expect to get?
4 DefinitionA market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.it is distinct from other segments (heterogeneity across segments)it is homogeneous within the segment (exhibits common attributes)it responds similarly to a market stimuliit can be reached by a Communication Channel
5 Criteria for Segmentation MeasurableEffective SegmentationThis CTR relates to the material on pp. 215.Criteria for SegmentationAccessibleSubstantialSize, purchasing power, profilesof segments can be measuredDifferentialCan be reached and servedRequirements for Effective SegmentationMeasurability . This refers to the degree to which the size and purchasing power of the segments can be measured. The accuracy and availability of measures of market potential are important.Accessibility. This refers to the degree to which a market segment can be reached and served. Identifying a segment is useless if the marketer has limited access to the customer.Substantiality. This refers to the degree to which the segments are large or profitable enough to service.Actionability. This is the degree to which an effective marketing program can be designed for attracting and serving segments. Company resource limitations figure prominently in actionability issues.Large and profitable enough to serveActionableRespond differentlyEffective programs can be developed
6 PurposeIncrease marketing efficiency by focusing marketing efforts to a particular groupMaximize scarce marketing resourcesFind a market with limited competitionSelect the most profitable segment
8 Segmentation Criteria Geographic variablesregion of the world or country: East, West, South, North, Central, coastal, hilly, etc.size: Metropolitan Cities, small cities, towns.density of area: Urban, Semi-urban, Rural.climate: Hot, Cold, Humid, Rainy.
9 Segmentation Criteria Market SegmentationThis CTR relates to Table 7-1 on p. 203 and the material on ppSegmentation CriteriaGeographicNations, states,regions or citiesDemographicBases for Segmenting Consumer MarketsGeographic Segmentation. Geographic segmentation divides the market into different geographic units based upon physical proximity. While location determines how geographic segmentation is done, it is also true that many consumer products have attribute differences associated with regional tastes.Demographic Segmentation. Dividing the market into groups based upon variables such as sex, age, family size, family life cycle, income, education, occupation, religious affiliation, or nationality are all demographic segmentations. Consumer needs often vary with demographic variables. Demographic information is also relatively easy to measure. Age and life-cycle stage, sex, and income are three major demographic bases for segmentation.Psychographic Segmentation. Psychographic Segmentation divides the market into groups based on social class, life style, or personality characteristics. Psychographic segmentation cuts across demographic differences. Social class preferences reflect values and preferences that remain constant even as income increases. Life style describes helps group markets around ideas such as health, youthful, or environmentally conscious. Personalities may transcend other differences in markets and may be transferred to products themselves.Behavioral Segmentation. Behavioral Segmentation divides markets into groups based on their knowledge, attitudes, uses, or responses to a product. Types of of behavioral segmentation are based upon occasions, benefits sought, user status, usage rates, loyalty, buyer readiness stage, and attitude.Age, gender, family size and life cycle, or incomePsychographicSocial class, lifestyle, or personalityBehavioralOccasions, benefits, uses, or responses
10 Demographic Criteria Demographic variables age gender sexual orientationfamily sizefamily life cycleeducationincomeoccupationsocioeconomic statusreligionnationality/racelanguage
13 Segmenting Business Markets Demographic segmentationIndustry, company size, locationOperating variablesTechnology, usage status, customer capabilitiesPurchasing approachesSituational factorsUrgency, specific application, size of orderPersonal characteristicsBuyer-seller similarity, attitudes toward risk, loyalty
14 Segmenting International Markets Geographic segmentationLocation or regionEconomic factorsPopulation income or level of economic developmentEmerging CountriesPolitical and legal factorsType / stability of government, monetary regulations, bureaucracy, etc.Cultural factorsLanguage, religion, values, attitudes, customs, behavioral patterns
15 Market Segmentation Process Determine the characteristics of segments in the target market & separate these segments in the market based on these characteristics.Verify the market segments size if adequate enough to support the organization's product.Develop a marketing strategy to target this market.
16 Market Segmentation Process Example minor EntrepreneurshipDesktop Computers:Home UseOffice UseGaming
17 Market Segmentation Process Steps in Segmentation, Targeting, and PositioningThis CTR corresponds to Figure 7-1 on p. 196 and relates to the material on pp. 196.Market Segmentation Process6. Develop MarketingMix for Each Target SegmentMarketPositioningSteps in Segmentation, Targeting, and PositioningMarket Segmentation. Market segmentation is the process of dividing a market into distinct groups of buyers who might require separate products or marketing mixes. All buyers have unique needs and wants. Still it is usually possible in consumer markets to identify relatively homogeneous portions or segments of the total market according to shared preferences, attitudes, or behaviors that distinguish them from the rest of the market. These segments may require different products and/or separate mixes.Market Targeting. Market targeting is the process of evaluating each market segment's attractiveness and selecting one or more segments to enter. Given effective market segmentation, the firm must choose which markets to serve and how to serve them.Discussion Note: In targeting markets to serve the firm must consider its resources and objectives in setting strategy.Market Positioning. Market positioning is the process of formulating competitive positioning for a product and a detailed marketing mix. Marketers must plan how to present the product to the consumer.Discussion Note: The product's position is defined by how consumers view it on important attributes.5. Develop Positioningfor Each Target Segment4. Select TargetSegment(s)MarketTargeting3. Develop Measuresof Segment Attractiveness2. Develop Profilesof Resulting SegmentsMarket Segmentation1. Identify Basesfor Segmenting the Market
18 Levels of Segmentation Mass MarketingSame product to all consumers(no segmentation)Segment MarketingDifferent products to one or more segments(some segmentation)Stages in Market OrientationThis CTR relates to the discussion on ppLevels of SegmentationNiche MarketingDifferent products to subgroups within segments( more segmentation)MicromarketingProducts to suit the tastes of individuals or locations(complete segmentation)Stages in Market OrientationSellers traditionally have passed through three stages of orientation or philosophy of identifying markets that lead to greater use of segmentation, targeting, and positioning strategies:Mass Marketing. In mass marketing, the seller produces, mass distributes, and mass promotes one product to all buyers. The argument for mass marketing is that it [should] lead to the lowest costs (through economies of scale) and prices and create the largest potential market.Segment Marketing. Here the seller identifies market segments, selects one or more of them, and develops products and marketing mixes tailored to meeting the needs of those selected segments. As more competitors adopt this practice, fragmentation of the market leads toNiche Marketing. Here the seller focuses on subgroups within market segments who may seek a special combination of benefits.Micromarketing. This is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.
19 Target MarketingConsists of a set of buyers who share common needs or characteristics that the company decides to serve
20 Target Marketing Evaluating Market Segments Segment size and growth Segment structural attractivenessLevel of competitionSubstitute productsPower of buyersPowerful suppliersCompany objectives and resources
21 Target Marketing Selecting Target Market Segments Shampoo Undifferentiated (mass) marketingDifferentiated (segmented) marketingConcentrated (niche) marketingMicromarketing (local or individual)ShampooShampoo for dry hair, long hair etcShampoo with natural ingredientsShampoo for Hair salonsCompany
22 Choosing a Target Marketing Strategy Considerations include:Company resourcesThe degree of product variabilityProduct’s life-cycle stageMarket variabilityCompetitors’ marketing strategiesReferences, experience with the market
23 PositioningThe term 'positioning' refers to the consumer's perception of a product or service in relation to its competitors.Positioning is all about 'perception'.Perception differs from person to person, market to markete.g what you perceive as quality, value for money, etc, is different to my perception
25 Essentials of Segmentation / Targeting What is the size of your market?What unique need does your product/ services meet?How much are customers willing to pay for your product/ service (top/ bottom/average)?Is this a price sensitive/ commodity product or premium product?Who are the other key players?What is the gap un-serviced by current players?What is the REAL available market for you?How is your product different from competition?What is your playing field? (premium/ general/ price warrior)What share of this can you reasonably expect to get?