1. Segmenting markets

2. Defining potential customers
What they want.
What they will accept.
What kind of distribution will be most convenient to them.
The communication channels that can be used to reach them.

3. Segmentation the concept
Customer orientated concept - based on understanding customers.
Practical - breaking large markets down into manageable parts or groups.
Proactive part of developing a marketing strategy.
Consumer markets and B2B markets segmented differently.

4. B2B macro segmentation bases
Based on the characteristics of organisations and the broader purchasing context in which they operate.
Bases for macro segmentations tend to be observable or obtainable from secondary information.
Can be divided into different organisational characteristics.

5. The three organisational characteristics
Size of the organisation.
Location, e.g. geographical concentration.
Usage rate, e.g usage of products.

6. B2B micro segmentation bases
Micro segments may exist within a macro segment.
A detailed understanding of individual members of the macro segment needed (management philosophy, decision making structures, purchasing policies, etc.).
Starting with broad characteristics then developing increasingly fine detail (from understanding the industry to an organisation’s operating variables, purchasing approach, and finally personal characteristics).

7. Common micro segmentation bases in B2B markets
Product.
Applications.
Technology.
Purchasing policies.
Decision making unit structures.
Decision making process.
Buyer–seller relationship.

8. Segmenting consumer markets
Consumer segmentation bases place more emphasis on buyers’ lifestyles and purchasing context.

9. Consumer segmentation bases (1 of 2)
Geographic segmentation - defines customers according to their location.
Demographic segmentation - age, sex, race, income, occupation, socio-economic status, family structure, etc.
Geo-demographic segmentation - combines geographic information and lifestyle data about neighbourhoods.

10. Consumer segmentation bases (2 of 2)
Psychographic segmentation - intangible variables e.g. beliefs, attitudes, etc.
Behaviour segmentation - the individual’s relationship with the product, how the product will be used, benefits sought, etc.
Multivariable segmentation - using several segmentation variables.

11. AIDA response hierarchy model
Figure 4.2

12. Segmentation process
Defining the boundaries of the market - what business are we in?, and looking at the world through the customers’ eyes.
Targeting customers.

13. Targeting strategies
Figure 4.3

14. The concentrated targeting strategy
The concentrated approach is the most focused and involves specialising on serving one specific segment.
Can lead to very detailed knowledge of the target segment’s needs and wants.
This strategy can help keep costs down as there is only one marketing mix to manage.
Helps to develop a niche market.

15. The differentiated targeting strategy
Involves the development of a number of different marketing mixes for different segments.
Allows a business to tailor its offerings to suit different segments.
Spreads risk across market segments.
Requires a detailed overview of the market and its development potential.
Can dilute a company’s efforts.

16. The undifferentiated targeting strategy
Least demanding targeting strategy.
Assumes that the market is one homogeneous unit with no significant differences.
One single marketing mix serving all needs.
Relatively inexpensive.

17. Segmentation – the benefits (1 of 2)
Customers can find products/services that fit more closely to what they want.
Customers can feel more responsive and loyal to organisations that speak directly to them and tailor their products accordingly.
Enables organisations to target its marketing mix more closely on potential customers thus matching their needs more accurately.

18. Segmentation – the benefits (2 of 2)
Enables organisations to define shopping habits.
Places the customer at the core of all decisions.
Enables the organisation to achieve a better understanding of itself and its environment.

19. Segmentation - the dangers
Risk of poor definition and implementation of psychographic segmentation.
Knowing where to stop.
Fragmentation of the market.
Customer confusion.

20. Criteria for successful segmentation
Distinctive.
Tangible.
Accessible.
Differential advantage.