Content of the Lecture Definition of Market Segmentation Purpose of segmentation Types of segmentation Segmentation process Levels of segmentation

What really is a market? A place where forces of demand and supply operate

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?

Definition A 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 stimuli it can be reached by a Communication Channel

Criteria for Segmentation Measurable Effective Segmentation This CTR relates to the material on pp. 215. Criteria for Segmentation Accessible Substantial Size, purchasing power, profiles of segments can be measured Differential Can be reached and served Requirements for Effective Segmentation Measurability . 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 serve Actionable Respond differently Effective programs can be developed

Purpose Increase marketing efficiency by focusing marketing efforts to a particular group Maximize scarce marketing resources Find a market with limited competition Select the most profitable segment

Product Segementation by Industry

Segmentation Criteria Geographic variables region 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.

Segmentation Criteria Market Segmentation This CTR relates to Table 7-1 on p. 203 and the material on pp. 202-209. Segmentation Criteria Geographic Nations, states, regions or cities Demographic Bases for Segmenting Consumer Markets Geographic 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 income Psychographic Social class, lifestyle, or personality Behavioral Occasions, benefits, uses, or responses

Demographic Criteria Demographic variables age gender sexual orientation family size family life cycle education income occupation socioeconomic status religion nationality/race language

Psychographic Criteria Psychographic variables personality life style value attitude

Behavioral Criteria Behavioral variables benefit sought product usage rate brand loyalty product end use readiness-to-buy stage decision making unit profitability income status Heavy Users / Light Users

Segmenting Business Markets Demographic segmentation Industry, company size, location Operating variables Technology, usage status, customer capabilities Purchasing approaches Situational factors Urgency, specific application, size of order Personal characteristics Buyer-seller similarity, attitudes toward risk, loyalty

Segmenting International Markets Geographic segmentation Location or region Economic factors Population income or level of economic development Emerging Countries Political and legal factors Type / stability of government, monetary regulations, bureaucracy, etc. Cultural factors Language, religion, values, attitudes, customs, behavioral patterns

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.

Market Segmentation Process Example minor Entrepreneurship Desktop Computers: Home Use Office Use Gaming

Market Segmentation Process Steps in Segmentation, Targeting, and Positioning This CTR corresponds to Figure 7-1 on p. 196 and relates to the material on pp. 196. Market Segmentation Process 6. Develop Marketing Mix for Each Target Segment Market Positioning Steps in Segmentation, Targeting, and Positioning Market 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 Positioning for Each Target Segment 4. Select Target Segment(s) Market Targeting 3. Develop Measures of Segment Attractiveness 2. Develop Profiles of Resulting Segments Market Segmentation 1. Identify Bases for Segmenting the Market

Levels of Segmentation Mass Marketing Same product to all consumers (no segmentation) Segment Marketing Different products to one or more segments (some segmentation) Stages in Market Orientation This CTR relates to the discussion on pp. 197-202. Levels of Segmentation Niche Marketing Different products to subgroups within segments ( more segmentation) Micromarketing Products to suit the tastes of individuals or locations (complete segmentation) Stages in Market Orientation Sellers 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 to Niche 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.

Target Marketing Consists of a set of buyers who share common needs or characteristics that the company decides to serve

Target Marketing Evaluating Market Segments Segment size and growth Segment structural attractiveness Level of competition Substitute products Power of buyers Powerful suppliers Company objectives and resources

Target Marketing Selecting Target Market Segments Shampoo Undifferentiated (mass) marketing Differentiated (segmented) marketing Concentrated (niche) marketing Micromarketing (local or individual) Shampoo Shampoo for dry hair, long hair etc Shampoo with natural ingredients Shampoo for Hair salons Company

Choosing a Target Marketing Strategy Considerations include: Company resources The degree of product variability Product’s life-cycle stage Market variability Competitors’ marketing strategies References, experience with the market

Positioning The 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 market e.g what you perceive as quality, value for money, etc, is different to my perception

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?