Grayson -Market Segmentation and Customer Targeting

1

Market segmentation & targetingMarketing Excellence at Sony

Market Segmentation and Customer Targeting


Marketing strategy and implementation

Identify the competition

What is my position?

Understand the consumer market

What is my target segment?

Understand your company

What are my goals?

Develop and implement a market

offering

What are my four ps?


Main questions for this morning

• What is the definition of market segmentation?

• What is the purpose of market segmentation?

• How are market segments identified?

• How do these questions apply to Nissan’s market segments?

2


The following are quotations from trade magazines published in

April/May 2007. They describe segments in different industries.

Select the quotation(s) that illustrate the most accurate

understanding of the definition of market segmentation.

Segmentation Exercise


A group of individuals who share a common need/want or a common set of needs/wants.

What is a market segment?


“The beer market refers to the production, distribution, marketing and sale of alcoholic beverages brewed primarily from water, hops and malt. These cover the full range of beers, including lagers, ales and stouts. Lagers dominate the market but, due to a tax loophole, low malt beers, known as happoshu, are significantly cheaper than traditional beers and the segment has been growing rapidly.”

Datamonitor, January 2002

3


Chu-HiChu-Hi

The beer category (and sub-categories)

“THIRD BEER” (18%)(beer-like no-malt beverage)

REGULAR LAGERS (50%)

HAPPOSHU (25%)(beer-like low-malt beverage)

Shoc

hu ? ?


What segments do these categories imply?


Some don’t like the taste (but think the price is worth it)

• 30-year-old graduate student: “It’s bogus. I’ve never tried it and I never will. Simple as that.”

• 38-year-old director of research: “It tastes awful. It has a very artificial flavor, with funny (sometimes sweet, sometimes bitter) aftertastes.”

• 40-year-old beer expert: “It’s like using chemicals to make strawberries taste sweet. People just buy happoshu because it’s cheap.”

• 28-year-old masseuse: “Happoshu tastes like medicine. I drink Kirin’s Tanrei because of the price and because it tastes the best of the worst.”

• 33-year-old office worker: “Happoshu may taste a bit thin, but the savings add up if you drink daily”

• 35-year-old scientist: “Generally, it is too light. It doesn’t taste good. If the price were raised, I would never drink happoshu.”

4


Some like the taste (and think the price is a bonus)

• 24-year-old office worker (who lives with family): “We love it. Everyone in my family drinks it every day. We buy it in cases since it’s cheaper, and yet it tastes just like beer.”

• 45-year-old liquor store manager: “Yes, it is like water. But it is light and good in a refreshing way. Some people like it for this.”

• 35-year-old computer programmer: “It looks like beer, it contains the same amount of alcohol as beer, but it is made with less malt than beer, giving it a different, lighter taste.”

• 52-year-old writer: “Happoshu looks like beer, smells like beer, and tastes almost like Japanese beer. It’s a bit more watery than Japanese beer, which makes it taste like American beer, but I like American beer.”

• 55-year-old fruit vendor: “I love the taste of the tiny bubbles”• 35-year-old teacher: “It had a very good beer smell, a light body,

and a touch of pale ale bitterness. I thought it was a real beer until my wife told me it was happoshu.”

• 22-year-old student: “If you drink beer in Japan you are seen as “oyaji” (old man). My friends and I drink Happoshu and Chu-hai.”


Product category versus consumer segment

Dividing a market by product categories tells us little about who the

buyers are and why they buy.

Merely guessing why customers buy in a particular category means using intuition only to make one of the most important marketing decisions.

It is not informa-

tive to say that the

target segment for hap-poshu is

“happoshudrinkers”.


An un-segmented market

Why segment a market?

5


What about mass-market products?


All US households


Source: HallbergAll Customers are not Created Equal

50% of US households consume instant coffee in any

given year

38% of US households consume

Folgers in any given year


All Folgershouseholds

What about mass-market products?70% of Folgers volume comes

from 40% of its households

6



All USgroceryhouseholds

All Folgershouseholds

All instantcoffee households

HeavyFolgershouseholds

7.6% of households

produce 70%of the brand’s

volume

40% of 38% of 50% = 7.6%



• 24% of all US soft-drink buyers buy Diet Coke, but 8% of all buyers produce 84% of the volume.

• 15% of all US clothing buyers buy Levi’s blue jeans, but 5% of all buyers produces 85% of the profit.

Source: HallbergAll Customers are not Created Equal


SO WHAT?

• Most of your profits are going to come from a small percent of the total market. You can either ignore this or make it part of your strategy.

• The return you earn on your marketing investments will depend on the customers you decide to invest in.

7



Using consumer research to understand your key market

segment—or to identify new ones


How are ice cream customers segmented?

8


Is it useful to segment by gender

If 50% of the market is female, what % of

ice cream eaters would you expect to

be female?

and/or other demographics?


Male

Female

High income

Kids in HH

No Kids in HH

% ofmkt.

13%

46%

33%

67%

54%

% ofpop

15%

48%

43%

57%

52%

index

69

129

126

81

87

Middle income

Low income

60%

25%

66%

21%

110

84

Demographic characteristicsIce Cream Eaters

(depending on your goals, could be “Ice Cream Buyers” instead)

This kind of analysis can also be done for your own product/brand.


“Psychographic” characteristics

• Green Tea

• Vanilla

• Cookies & Cream

• Strawberry

• Macadamia Nut

• Rum Raisin

• Espresso

• Azuki Bean

• Mango

• Black Sesame

• Hazelnut

• Chocolate

How much do you like each of the following ice cream flavors? Next to each flavor, write a number from 1

(absolutely hate it) to 7 (one of my favorites)

Collected, for example, via a consumer preference questionnaire

9


Statistically determined preference map

Higher Preference for Texture Variety

Lower Preference for Texture Variety

Low

er P

refe

ren

ce f

or S

wee

tnes

s

High

er Preferen

ce for Sw

eetness

The closer together words are on the map, the more frequently they were rated similarly by respondents.

MacadamiaNut

Black Sesame

VanillaGreen

Tea

Strawberry

Hazelnut

Mango

Rum Raisin

Cookies &Cream

AzukiBean

Espresso

Chocolate





Low

er P

refe

ren

ce f

or S

wee

tnes

s

High

er Preferen

ce for Sw

eetness

MacadamiaNut

Black Sesame

VanillaGreen

Tea

Strawberry

Hazelnut

Mango

Rum Raisin

Cookies &Cream

AzukiBean

Espresso

Chocolate

Each dot represents where a consumer’s preferencelies on the map

These customers have a higher index for less sweet, more textured ice cream.





Low

er P

refe

ren

ce f

or S

wee

tnes

s

High

er Preferen

ce for Sw

eetness

MacadamiaNut

Black Sesame

VanillaGreen

Tea

Strawberry

Hazelnut

Mango

Rum Raisin

Cookies &Cream

AzukiBean

Espresso

Chocolate

Your statistical analysis can include more dimensions.

Less HealthConscious

More Health Conscious

HH haschildren

HH hasno children

Eats ice cream 1 time

a week or more

Eats ice cream as an infrequent

treat

?

10


Gaining deeper consumer insights


Combining demographics and psychogrpahics

Self-Rewarding Moms

Adventurous Kids

Occasional Eaters

Picky Gourmets

Favorite-Flavor Bingers

% ofco. rev.

33%

19%

23%

15%

10%

% ofmkt.

35%

13%

20%

21%

11%

index

176

136

50

90

94

What segments are currently important to our business?

Under what conditions would we target SRMs and AKs? Under what conditions would this be a bad idea?


Summary conclusions

• Segments are not products.

• The premises of segmentation: – Different people want different things

– One product cannot be all things to all people

• Products/brands depend on segments whether they realize it or not.

• The more distinguishing dimensions you use to define a segment, the better able you are to target and position.

• Decisions about market segmentation have considerable influence on market attractiveness.

Documents

Grayson -Market Segmentation and Customer Targeting