Market Segmentation and Strategic Targeting CHAPTER THREE Market Segmentation and Strategic Targeting

Why Segmentation is Necessary Consumer needs differ Differentiation helps products compete Segmentation helps identify suitable media Not all consumers are alike – different customers have different needs. By segmenting the market and choosing target markets, companies can differentiate their products to provide the benefits that the segments desire. Once a marketer has identified his segment, he can choose media that is targeted to that segment for advertising. Chapter Three Slide

Criteria for identifying segments Behaviouristic Psychographic Geographic Demographic

Geographic Segmentation In the geographic segmentation approach, markets are divided into different geographic units. It ranges from local to global. These units may include nations, cities, or even neighborhoods. Marketers can operate in one or few areas, or it can operate in all but pay attention to local variations.

Demographic Segmentation The study of human population and it comprises of parameters that can be statistically measured.

Demographic Variables Age Gender Income Occupation Education Religion Ethnicity Family Size Stage in Family cycle Demographic Variables

No Market Segmentation

Segmented by Gender

Segmented by Age

Family Life Cycle Age Marital Status Children

Family life cycle stage Family life cycle stage Life conditions that have a potential impact of product/service purchase decisions

Psychographic segmentation Market segmentation based on the psychographic variables of lifestyle, motives and personality attributes. Psychographic segmentation is based on the need to understand not who you are, but how you live your life. This is reflected in activities such as hobbies or choice of entertainment.

Behavioral Segmentation Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product. Occasion Benefits sought User status Usage rate Loyalty status

Behavioral Segmentation User status: non-users, ex-users, potential users, first time users, regular users. Blood bank (regular donors, first-time donors, ex donors), non branded oral care product users (potential). Usage Rate: light user, medium user, heavy user. Industrial marketers refer to the 80-20 rule, meaning 20% of their buyers account for 80% of their sales volume. Occasion segmentation divides buyers into groups according to occasions when they get the idea to buy, actually make purchases, or respond to a product

Behavioral Segmentation Benefit segmentation: In purchasing products, consumers are generally trying to satisfy specific needs. Hence, they are looking for products which provide specific benefits that satisfies these needs. The grouping of consumers on the basis of the benefits they are looking for in a product is known as benefit segmentation. Example: The sensitive segment (medi plus, sensodyne), the healthy segment (pepsodent, white plus, colgate), the fresheners (close up, freshgel), the economic (Magic, pepsodent), the whitening (pepsodent whitening, medi plus whitening, toothpastes which removes cigarette marks etc.)

Criteria for Effective Targeting Identifiable Sizeable Stable Accessible Congruent the company’s objectives and resources Chapter Three Slide

Criteria for Effective Targeting Target market should be: Identifiable: marketer must be able to see or find the characteristic they have chosen for segmentation. Demographics are easy to be identified, but lifestyles and benefits sought are more difficult. Sizeable: large enough to be profitable to the marketer. Stable: consumers are not “fickle” and likely to change very quickly in lifestyles or consumption patterns because a segment should be predictable. Accessible: marketer must be able to reach that market in an economical way. (media advances made in easier). Congruent: with the company’s objectives and resources. Chapter Three Slide

Target marketing strategies Target market is a set of buyer sharing common needs or characteristics that the company decides to serve. Undifferentiated (mass) marketing Differentiated (segmented) marketing Concentrated (niche) marketing Micro-marketing (local or individual Marketing) Targeting narrowly Targeting broadly

Target marketing strategies Undifferentiated) ( Mass) marketing A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer . Differentiated ( Segmented ) marketing A market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each. Concentrated (niche) marketing A market-coverage strategy in which a firm goes after a large share of one or a few segments or niches. Micro-marketing The practice of tailoring products and marketing programs to suit the tastes of specific individual and locations.

Target marketing strategies Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups (cities, neighborhoods and stores). Benefits of local marketing Increased marketing effectiveness in competitive markets More customer-specific offerings Challenges of local marketing Increased manufacturing and marketing costs Less economy of scale Logistics Dilution of company image

Target marketing strategies Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers. Also known as: One-to-one marketing Mass customization Markets-of-one marketing

Positioning Positioning is the act of establishing the brand’s superior value or benefit in the minds of the consumers. In other words, the positioning of a brand provides consumers a compelling reason to make a purchase