Marketing and

Segmentation

Suppose a teenage girl is looking for a pair of jeans.What influences her?

1. Demographics

1. Demographics2. Psychographics

1. Demographics2. Psychographics3. Perceptual clues

1. Demographics2. Psychographics3. Perceptual clues4. Symbolism

1. Demographics2. Psychographics3. Perceptual clues4. Symbolism5. Past experience

1. Demographics2. Psychographics3. Perceptual clues4. Symbolism5. Past experience6. Group dynamics

1. Demographics2. Psychographics3. Perceptual clues4. Symbolism5. Past experience6. Group dynamics

RitualsFamilyReference groupsRace & ethnic factorsSocial classSubcultureCulture

Since there ae so many influences in our lives,does it make sense to try to sell something

to everyone?

Market Segmentation

“Smart marketing starts with smart segmentation.”

Jeffrey J. Fox

Target Market: A group of people or organizations which a business creates and maintains a marketing mix specifically designed to satisfy the needs of group members

Market Segment: Individuals, groups, or organizations with one or more similar characteristics that cause them to have similar product needs

Market Segmentation: The process of dividing a total market into groups with relatively similar product needs to design a marketing mix that matches those needs

Marketing Concept:“All marketing strategies shouldbe based on known customerneeds and or wants.”

Segmentation is the practical application ofmarketing research and consumer behavior.

Reminder:

The “marketing mix” consists of:

ProductPricePromotionDistribution (Place)

Almost no one tries to sellto everyone!

Undifferentiated

Concentrated

Major kinds of segmentation:

1.Undifferentiated marketing strategy:Generic DifferentiationSame marketing mix for ALL segmentsOverlooks segment differences4-Ps designed for everyoneAdvantage:

Concentrated resources

Major kinds of segmentation:

1.Undifferentiated marketing strategy:Generic DifferentiationSame marketing mix for ALL segmentsOverlooks segment differences4-Ps designed for everyoneDisadvantage:

4-Ps for everyone?Competing against focused firms

2. Full-coverage marketing strategy:Segmented DifferentiationTreat each segment as separate market4-Ps designed for every marketAdvantage:

Focus…

2. Full-coverage marketing strategy:Segmented DifferentiationTreat each segment as separate market4-Ps designed for every marketDisadvantage:

Development costs(must weigh increased costsincreased sale)

Undifferentiated

Concentrated

3. Single Marketing Strategy:Targeted Differentiation Niche MarketingGo after one segment (ethnic marketing)Advantage: Sharp focus… good expertise

efficiency… high profitsgives smaller firms a chancegood place to start

3. Single Marketing Strategy:Targeted Differentiation Niche MarketingGo after one segment (ethnic marketing)Disadvantage:

More risk… eggs in one basketCompetition can wipe you out

Undifferentiated

Concentrated

4. Concentrated marketing strategy:Hybrid DifferentiationSingle product to several segment

5. MicromarketingLocal marketing and individual marketing

Mass CustomizationBuild-to-Order (BTO)

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Which is this?

To work, segments must have:

1. Substantiality Must be large enough

enough money, customers, etc

enough room to grow

Basic marketing rule:The best product, best prices, and

best business in the worldwill fail if there are no customers!

Basic marketing rule:The best product, best prices, and

best business in the worldwill fail if there are no customers!

To work, segments must have:

2. Identifiablity Must be able to identify segment

and measure it

To work, segments must have:

3. Reachability Must be accessible

must be actionable

(can action be taken?)

The Segmentation Tradeoff:Synergies vs. Cannibalization

• Organizational Synergy

• Cannibalization

• “Tiffany/Walmart” Strategiestwo-tier products

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Increased customer value through efficientmarketing and manufacturing

The five key steps in segmenting and targeting markets that link market needs to a

firm’s marketing program

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Ryan Hamilton

Segments should be based on whatpeople VALUE!

Five Steps in Market Segmentation

Criteria to Use in Forming the Segments

• Simplicity and Cost-Effectiveness of assigningpotential buyers to Segments

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Step 1.

Criteria to Use in Forming the Segments

• Simplicity and Cost-Effectiveness of assigningpotential buyers to Segments

• Potential for increased Profit

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Step 1.

Criteria to Use in Forming the Segments

• Simplicity and Cost-Effectiveness of assigningpotential buyers to Segments

• Potential for increased Profit

• Similarity of needs of potential buyerswithin a Segment

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Step 1.

Criteria to Use in Forming the Segments

• Simplicity and Cost-Effectiveness of assigningpotential buyers to Segments

• Potential for increased Profit

• Similarity of needs of potential buyerswithin a Segment

• Difference of needs of buyers among Segments

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Step 1.

Criteria to Use in Forming the Segments

• Simplicity and Cost-Effectiveness of assigningpotential buyers to Segments

• Potential for increased Profit

• Similarity of needs of potential buyerswithin a Segment

• Potential of a marketing action to reacha Segment

• Difference of needs of buyers among Segments

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Step 1.

Common Segments

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Step 1.

GeographicalClimate

RegionCity sizePopulation density

Market Segmentation

1.Geographic

Market Segmentation

1.Geographic2.Demographic

Common Segments

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Step 1.

DemographicsAge (Generational marketing)

Gender (?)Marital statusIncomeEducationOccupationRacial and Ethnic

Market Segmentation

1.Geographic2.Demographic3.Psychographic

Common Segments

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Step 1.

PsychographicsPerceptionGender (?)MotivationPersonalityAttitudes

http://www.expedia.com/Waterloo-Hotels-Baymont-Inn-Suites-Waterloo.h17890.Hotel-Information?chkin=10%2F29%2F2013&chkout=10%2F30%2F2013&rm1=a2&hwrqCacheKey=3ac1ed16-2067-4bf3-b2a0-8b521c84be7aHWRQ1381949822543&c=30126d42-02ed-4261-9ade-64b0ef193af1

&

https://www.youtube.com/watch?v=DV6X7POhdoo

Market Segmentation

1.Geographic2.Demographic3.Psychographic

The Nine Nations

Montana economic development?From east to west

OrFrom north to south

Common Segments

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Step 1.

LifestyleCombination of:

PlacePersonProducts

VALs

Place

Person

Products

Common Segments

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Step 1.

UsageUse-related

usage ratebrand loyaltyawareness

Use-situationwhere… when… why… with whom

http://www.youtube.com/watch?v=vbsyEI78m5s

Common Segments

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Step 1.

BehavioralProduct featuresUsage rates (frequency)80/20 ruleLong tail

Selling small amounts to few customers,

BUT have lots of things to sell (Netflix)

Common Segments

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Step 1.

Socio-culturalCulture and subcultureSocial classReligion

https://www.youtube.com/watch?v=ouZLD2vfD6Q

Subculture

Social class may be hard to define, but we all know it when we see it.

Segmentation bases, variables, and breakdowns for U.S. consumer markets

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The five key steps in segmenting and targeting markets that link market needs to a

firm’s marketing program

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Target Marketing

The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

Step 2:

Marketing positioning

Arranging for a product to occupy a clear, distinctive , and desirable place relative to competing products in the minds of target consumers.

Product positioning: is theplace an offering occupies in a consumer’s mind on important

attributes relative to competitive products.

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Product differentiation: is a marketing strategy that involvesa firm using different marketing mix activities to help consumers perceive the product as being

different and better than competing products.

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Prince Sports targets racquets at specific market segments

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Market-product grids show alternative strategies for a lawnmower manufacturer

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Step 3

The five key steps in segmenting and targeting markets that link market needs to a

firm’s marketing program

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Criteria to Use in SelectingTarget Markets

Those that divide a market into Segments

• Two Types of Criteria

Those that actually pick the Target Segments

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STEP 4: SELECT TARGET MARKETS

Criteria to Use in Selecting Target Markets

• Market Size

• Expected Growth

• Competitive Position

• Cost of reaching the Segment

• Compatibility with organizationalobjectives and resources

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Perceptual Map Example

A Perceptual Map to repositionchocolate milk for adults:

• Identify Important Attributes for Adult Drinks

• Discover How Customers See Chocolate Milk

• Reposition Chocolate Milk to Make ItMore Appealing to Adults

• Discover How Adults See Competing Drinks

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A perceptual map: is a means of displaying or graphing in two

dimensions the location of products or brands in the minds of consumers to

enable a manager to see how consumers perceive competing

products or brands, as well as the firm’s own product or brand.

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A perceptual map of the location of beverages in the minds of American adults

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The strategy American dairies are using to reposition chocolate milk to reach adults

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Step 5

Do it!