Market Segmentation

Market Segmentation, Targeting, and Positioning

2BA-3365 Marketing Management

Market Needs vs. Segmentation…

Benefits in terms of:•Product Features•Expense•Quality•Savings in time and convenience

Benefits in terms of:•Product Features•Expense•Quality•Savings in time and convenience Process of Market

Segmentation,Targeting, &

Positioning

Process of MarketSegmentation,Targeting, &

Positioning A marketing mix in terms of:ProductPricePromotionPlace

A marketing mix in terms of:ProductPricePromotionPlace

Identify Market NeedsIdentify Market Needs

Marketing ProgramMarketing Program


Process of Market Segmentation, Targeting & Positioning

1. Identify bases for segmenting the market

2. Develop segment profiles

1. Identify bases for segmenting the market

2. Develop segment profiles

Market SegmentationMarket Segmentation

3. Develop measure of segment attractiveness

4. Select target segments

3. Develop measure of segment attractiveness

4. Select target segments

Market TargetingMarket Targeting

5. Develop positioning for target segments

6. Develop a marketing mix for each segment

5. Develop positioning for target segments

6. Develop a marketing mix for each segment

Market PositioningMarket Positioning


Market SegmentationMarket Segmentation:Market Segmentation:

� It involves aggregating prospective buyers into groups that:1. Have common needs and2. Will respond similarly to the marketing action.

� The groups that result from the market segmentation process are called market segments, a relatively homogeneous collection of prospective buyers.

Time to Market Segmentation:Time to Market Segmentation:� One Product & Multiple Market Segments� Multiple Products & Multiple Market Segments� Segments of One: Mass Customization


Criteria for Market Segmentation

Criteria for Market Segmentation:Criteria for Market Segmentation:1. Potential for increased profit and ROI.

2. Similarity of needs of potential buyers within a segment.

3. Difference of needs of buyers among/across segments.

4. Feasibility of marketing action to reach a segment.

5. Simplicity and cost of assigning potential buyers to segments.


Market Segmentation: VariablesConsumer Characteristics::� Geographic: Region, city size, metropolitan area, density,

etc.� Demographic: Gender, age, race, life stage, birth era, HHD

size, residence tenure, marital status, etc.� Socioeconomic: Income, education, etc.� Psychographic: Personality, values, lifestyle, etc.

Buying Situations:� Outlet type: Instore, direct, etc.� Benefits sought: Product feature, needs, etc.� Usage: Usage rate, user status, etc.� Awareness & intentions: Product knowledge, etc.� Behavior: Involvement


Level of Marketing Segmentation

Mass MarketingMass Marketing

Segment MarketingSegment Marketing

Niche MarketingNiche Marketing

Micro MarketingMicro Marketing

Segm

enta

tion

No

Complete


Market Segmentation: Product Differentiation

Product Differentiation:Product Differentiation:� In a broad sense, it involves a firm’s using different

marketing mix activities, such as product features and advertising, to help consumers perceive the product as being different and better than competing products. The perceived differences may involve physical or nonphysical features, such as image or price.

� In a narrower sense, it involves a firm’s selling two or more products with different features targeted to different market segments.


Criteria for Target MarketCriteria for Target Market:

1. Size: The estimated size of the market to determine whether or not it is worth going after.

2. Expected Growth: The size of the market may be small, but if it is growing significantly it may be worth going after.

3. Competitive position: The less competition the more attractive the market.

4. Cost of reaching the market: Is the market accessible to a firm’s marketing actions? If not it should not be pursued.

5. Compatibility with the organization’s objectives and resources.


Market Segmentation: Reebok Market-Product Grid

Market Segment ProductGROUP Running Aerobic Tennis Basketball Children’s Walking Cross Step Athletic Golf WITH Shoes Shoes Shoes Shoes Shoes Shoes Train’g Train’g clothing shoes

General NEED 1981 1982 1984 1984 1984 1986 1988 1991 1993 1997Runners P P

Performance- Aerobic P p conscious Dancersconsumers Tennis P P(athletes) players

Basketball P PplayersStep S PexercisersGolfers P P

Fashion- Comfort & S S S S S S Sconscious style consumers Conscious(nonathletes) walkers S S S S P P

Children PKEY: P=Primary Market S=Secondary Market


Market Segmentation: Hudson’s Example

Markets Soft Pillow Medium Pillow Firm Pillow

Stomach Sleepers L M S

Back Sleepers M L M

Side Sleepers S M L


Market Segmentation: Apple’s Segmentation Strategy

EDUCATION

COMMERICAL

SECTOR

Consumer/household

Kindergartenthru 12th grade

College andUniversity

Small businessLarge businessDesign and

Publishing

SEGMENT

Family/Games

StudentsFaculty/administration

StudentsFacultyadministration

Owners/employees

Administration/technical

Media/graphics/Internet

Desktop publishing

POWERMACINTOSH

G4

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POWERBOOKG4

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√

√

√

√√

IMAC

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√

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POWERMACINTOSHG4 SERVER

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MARKETS PRODUCTS (PERSONAL COMPUTERS)


Market Segmentation: Impact of Decision Variables I

Econometric ModelEconometric Model

McCANN (1974, JMR)


Market Segmentation: Impact of Decision Variables II


Market Segmentation: Impact of Decision Variables III


Market Segmentation: Cross Tabulation

Cross Tabulation:� A method of presenting and relating data having two or more

variables. Cross tabs are used to analyze and discover relationships in the data.

� An important aspect of cross tabulations is deciding which two variables should be paired together for analysis.

Examples:

AGE OFHEAD OF ONCE 2 OR 3 ONCEHOUSEHOLD A WEEK TIMES A MONTH(YEARS) OR MORE A MONTH OR LESS TOTAL

FREQUENCY

24 or less 25 to 3940 or overTotal

144 52 19 21546 58 29 13382 69 87 238272 179 135 586


Positioning: Product PositioningProduct Positioning:Product Positioning:� It refers to the place an offering occupies in

consumers’ minds on important attributes relative to competitive offerings.

Approaches:Approaches:� Head-to-Head Positioning

� It involves competing directly with competitors on similar attributes in the same target market

� Differentiation Positioning� It involves seeking a less competitive, smaller market

niche in which to locate a brand.


Positioning: Perceptual Map I

Rationale (or Assumptions):Rationale (or Assumptions):� Consumers generally use a small number (2~4)

of product attributes when they think about a particular product or product class.

� In determining a brand’s position and the preferences of consumers, companies obtain three types of data from consumers:� Evaluations of the important attributes for a

product class.� Judgments of the existing brands with the

important attributes.� Ratings of an “ideal” brand’s attributes.


Positioning: Perceptual MapObjectives:Objectives:� It is to identify the relevant dimensions & to

locate the positions of existing & potential new products along these dimensions� Products are represented by locations in a space

of several dimensions that distinguish among the products

Approaches:Approaches:� Attribute-based procedures: Factor analysis� Similarity-based procedures:

Multidimensional scaling (MDS)


Positioning: GM’s Repositioning Strategies Using Perceptual Map

A. Consumer perceptions in 1982 [o] and GM goalsfor 1990 [�]

B. Potential change in goals from 1990 [�] to 2000

High Price

Low Price

Family/Conservative

Personal/Expressive

�Cadillac o

�Buick o

Chevrolet o

�

o Pontiac

�

� Saturn(1990)

�Oldsmobile

o

High Price

Low Price

Family/Conservative

Personal/Expressive

Cadillac �

Buick �

Oldsmobile

?

?

?

??Chevrolet

�

�

� Saturn

�Pontiac

Documents

Market Segmentation