Marketing Segmentation _ Targetting

8/11/2019 Marketing Segmentation _ Targetting

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SEGMENTATION

AND TARGETTING

Dr. Vandana T Khanna

9/15/2014 Dr. Vandana Khanna

Marketing Segmentation


Why Segmentation?

Cut through superficial similarities toidentify real links

Try to carve out new segments acrossexisting one

Use motivators, not buying power to spotsegments

Segment by age-group to representdistinct lifestyles

Makes the marketing efforts more efficientand economic

Helps achieving specialization required inproduct, distribution, promotion and

pricing


Using Market

Segmentation

Mass marketing is losing popularity

Micromarketing can be undertaken at fourlevels:

SegmentSegmentSegmentSegment marketingmarketingmarketingmarketing

NicheNicheNicheNiche marketingmarketingmarketingmarketing

LocalLocalLocalLocal marketingmarketingmarketingmarketing

IndividualIndividualIndividualIndividual marketingmarketingmarketingmarketing

Mass MarketingSame product to all consumers

(no segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

MicromarketingProducts to suit the tastes of individuals or locations

(complete segmentation)

Niche MarketingDifferent products to subgroups within segments

( more segmentation)

Using Market

Segmentation

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Using Market

Segmentation

: Homogeneous preferences

Diffused preferences Clustered preferences

(a) Homogeneouspreferences

SweetnessCreaminess

(c) Clusteredpreferences

Creaminess

Sweetness

(b) Diffusedpreferences

Creaminess

Sweetness


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Market Segmentation

Procedure

AttributesAttributesAttributesAttributes of

ofofof product

productproductproduct and

andandand its

itsitsits importance

importanceimportanceimportance rating

ratingratingrating

BrandBrandBrandBrand awarenessawarenessawarenessawareness andandandand brandbrandbrandbrand ratingsratingsratingsratings

ProductProductProductProduct----usageusageusageusagepatternspatternspatternspatterns

AttitudesAttitudesAttitudesAttitudes towardstowardstowardstowardsproductproductproductproductcategorycategorycategorycategory

Demographics,Demographics,Demographics,Demographics, geographics,geographics,geographics,g eog rap hi cs , an dandandandpsychographicspsychographicspsychographicspsychographics ofofofof thethethethe respondentsrespondentsrespondentsrespondents

FactorsFactorsFactorsFactors

ClustersClustersClustersClusters


PlotDemographic& Socio-eco

profile

Search forCommonfactors

CreateClusters ofCustomers

CreateTarget

Segment

Check forEconomicPower ofSegment

Check forAbility of

Action

Symptoms

Are theLinks

Causes orSymptoms

CausesNo

IsFocusedMarketingPossible

Yes

EnsureIncrease inCustomer

Value

How to Add Value Through Segmentation

KeepTrackingSegment

ForChanges


Bases of Segmenting

Consumers

SegmentationApproaches


Bases of Segmentation

&

Age and life-cycle stage

Life stage

Gender

Income

Generation

Social class

Family size

Education

Religion

Age and Life-Cycle StageAge and Lifecycle Stage


. . .


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Life Stage Gender Women:

Influence 80% of consumerpurchases

Make 75% of new homedecisionsPurchase 40% of cars

Income Generation

Gen X (1964-1978)Baby Boomers (1946-1964)Silent Generation (1925-1945)

Millennials (Gen Y) (1979-1994)-78 Million people-$187 annual spending power

Race and Culture



A 1 and A 2 (9.5%) Graduates, White

Collared Workers and Professionals B 1 and B 2 (17%) Typically SSC

Qualified, About 40% Graduates,Occupation Clerk/Shopkeepers C (19.5%) Skilled Workers, Clerks,

Salespersons, etc. D (22.4%) Same as above, Occupation

Profile with SSC E 1 and E 2 (31.6%) Unskilled Labor


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SEC Classification:

Urban Markets

SEC Rural Consumers

in India



Region

City or Metro size

Density

Climate

Geo-clustering

Psychographic

Segmentation

Personalitytraits

Lifestyle Values

VALS Segmentation


The Revolution brand ofready-made womensapparel successfullyfocuses on the nichesegment of plus-size

clothes.



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Usage Benefits

Occasions/Promotions

ResponseBuyerBuyerBuyerBuyer----readinessreadinessreadinessreadinessstagestagestagestage

AttitudeAttitudeAttitudeAttitudetowardstowardstowardstowardsproductproductproductproduct

Loyalty

Behavioral

Segmentation

Consumer Attitudes

Enthusiastic Positive Indifferent Negative Hostile

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Indian Market

Segmentation

Indian Markets

Urban Semi-Rural RuralSemi-Urban


Indian Market

Segmentation

5000 400 , 75% .

5284 , 784 50,000.


Classification of

Indian Markets

TOWN CLASS POPULATION NO. OF TOWNS

CLASS I 1,00,000 & Above 423

CLASS II 50,000 99,999 498

CLASS III 20,000 49,999 1386

CLASS IV 10,000 19,999 1560

CLASS V 5,000 9,999 1057

CLASS VI Less Than 5000 110

Total Number Of

Towns

5,284


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Indian Market

Segmentation

/. 596 . .

6,38,667 . 72% . , 400 , 75% .


Indian Market

Segmentation

, .

.

,, , .

Basesfor Segmenting

BusinessMarkets

DemographicsPersonalCharacteristics

SituationalFactors

OperatingCharacteristics

Purchasing

Approaches

Bases for Segmenting

Business Markets


Segmenting

Business Markets

: Price-oriented customers:best served via

transactional selling

Solution-oriented customers: best servedby means of consultative selling

Strategic-value customers:best served bymeans of enterprise selling

Political/Legal

Cultural Intermarket

EconomicGeographic

Industrial Markets

Segmenting

Business Markets

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Business Markets

: Geographic location of the business

Customer type ( MNC / Indian Pvt / PublicSector )

Customer size ( large / medium / small )

Product use ( where it enters theproduction process )

Dr. Vandana Kha nna


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Business Markets

: Purchasing criteria Purchasing strategy

Importance

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Segmentation

:

Experience Observation

Strategic thinking

Cluster analysis

/

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Product Based

Segmentation

Product benefits: eg- watch ;gift/accessory/ jewelry/durability/timekeeping

Benefits can be tangible / intangible:clothes/cosmetics

Product usage rate: light / heavy /medium eg- pc memory size dependingon requirements; package sizes


Heavy and Light Users of

Common Consumer ProductsHEAVY HALF LIGHT HALFPRODUCT (% USERS)

Soups anddetergents (94%)

Toilet tissue (95%)

Shampoo (94%)

Paper towels (90%)

Cake mix (74%)

Cola (67%)

Beer (41%)

Dog food (30%)

Bourbon (20%)

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Cigarettes: beedi / Non filter / filter lower / filter medium / premium

Chocolates :

MoldedMoldedMoldedMolded chocolateschocolateschocolateschocolates :::: embeddedembeddedembeddedembedded withwithwithwith nutsnutsnutsnutsetc,etc,etc,etc, notnotnotnot breakablebreakablebreakablebreakable intointointointo smallsmallsmallsmall barsbarsbarsbars perkperkperkperk ////

picnicpicnicpicnicpicnic //// 5555----starstarstarstar

SugarSugarSugarSugar pannedpannedpannedpanned :::: sugarsugarsugarsugar coatedcoatedcoatedcoated onononon outsideoutsideoutsideoutside andandandand

filledfilledfilledfilled withwithwithwith caramelcaramelcaramelcaramelorororor cocoacocoacocoacocoa gemsgemsgemsgems

CountlineCountlineCountlineCountline barsbarsbarsbars :::: samesamesamesame asasasas moldedmoldedmoldedmolded chocolateschocolateschocolateschocolates

butbutbutbut brokenbrokenbrokenbroken intointointointo smallsmallsmallsmall barsbarsbarsbars cadburycadburycadburycadbury diarydiarydiarydiary

milkmilkmilkmilk ,,,, fruitfruitfruitfruit &&&& nutnutnutnut ,,,, KitKat,KitKat,KitKat,KitKat, etcetcetcetc

ChocoChocoChocoChoco pannedpannedpannedpanned :::: chocolatechocolatechocolatechocolate coatingcoatingcoatingcoating onononon thethethethe

outsideoutsideoutsideoutside &&&& filledfilledfilledfilled withwithwithwith caramelcaramelcaramelcaramel orororor somesomesomesome otherotherotherother

ingredientingredientingredientingredient nutti es,nutties,nutties,nutties,tiffinstiffinstiffinstiffins etcetcetcetc

Product Based

SegmentationSome Examples

Dr. Vandana Khanna

Segmentation :

Chocolatesproduct age Social class occasion

gems < 12 yrs M,UM, P Casual

CDM universal _ do _ All time

Roast almond ,fruit & nut

universal UM,P gifts., regularoccasions

Tiffins,caramels,nutties

kids M,UM,P All time

eclairs kids M,UM,P All time

Perk & picnic 15-25 yrs M,UM,P snacking9/15/2014 Dr. Vandana Khanna


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Other Bases for

Segmentation

Price Sensitive / Price InsensitiveCustomer ( luxury products )

Emerging segments due to changingpreference of consumer ( electric cars /mens grooming / changing technology /naukri for women / secondshaadi.com )


Examples of

Segmentation

Credit Cards :

Soaps : Shampoos :

Hair Oils :

Clothes :

Movies :

Cooking Oils :

Refreshing Drinks :

Cars :

Two Wheelers :

Watches :

Dr. Vandana Kha nna

Some Observations

Segmentation is a subjective art not anabsolute science

It is challenging to address multiple marketswith no common elements of the marketingmix

Adjacent segments are addressed with someelement/s of the marketing mix in commonwith each other

: . () & .


Measurable

Accessible

Substantial

Differential

Actionable

Segments must be large orprofitable enough to serve.

Segments can be effectivelyreached and served.

Size, purchasing power,profiles of segments can bemeasured.

Segments must responddifferently to differentmarketing elements & actions.

Must be able to attract and

serve the segments.

Effectiveness of

Segmentation

How Market Segmentation

Models Are Developed


Segmentation Examples

Yellow Pages Publishers Association (B to B)

Major Automotive Corporation (B to C)



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Yellow Pages Publishers

Association (YPPA)

Problem: National advertising was notgrowing

Sales efforts were not focused

No accepted hypothesis as to why or whatto do


Advertiser

Segmentation

Interviews showed that consumerdynamics drove role of the Yellow Pages inbusiness generation

Businesses where the consumer boughtinfrequently and under pressure waswhere the Yellow Pages were mostleverageable

Where consumers buy frequently and canshop easily there is less leverage


Segmentation and

Results

Categories ranked on Yellow Pagesleverage, and current advertising spend

Individual accounts targeted based onpotential

Testing program initiated, proving paybackof program upgrade

Results: Program in place 10+ years; $Bsincremental profitability


Major Automotive

Corporation

First time effort at market segmentationdespite 100 year history

Many factors make segmentation highlycomplex:

WideWideWideWiderangerangerangerange ofofofof productsproductsproductsproducts andandandand pricepricepriceprice pointspointspointspoints

WideWideWideWide variationvariationvariationvariation inininin categorycategorycategorycategory----relatedrelatedrelatedrelated attitudesattitudesattitudesattitudes

andandandand needsneedsneedsneeds

ComplexComplexComplexComplexbuyingbuyingbuyingbuyingdynamicsdynamicsdynamicsdynamics

ExternalExternalExternalExternal factorsfactorsfactorsfactors cancancancan changechangechangechange driversdriversdriversdrivers veryveryveryvery

quicklyquicklyquicklyquickly


Internal Factors made the

Effort More Challenging

Top Management enthusiastic but had noexperience in the area

Little segmentation expertise at any level

Product Development buy-in uncertain

Which Brand gets which segment?

But there was no hesitation to give thisproject the resources it needed


Mother of all Consumer

Segmentation Projects

10,000 person random sample in US;similar sample in Europe (new car buyers)

Three plus hour personal interview plusself administered questionnaire

Measured purchase/ownership history,attitudes (category related and other),automotive-related needs and desires,etc..highly comprehensive data basefrom which to work



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Once the data was collected,

the analytic approach was key

After several attempts, automotive-related attitudes, desires and needswere chosen as the driving variables

Other dataincluding vehicle ownedwas used to characterize the segments,not to define them

Luxury was broken out separately

The final model employed anapproximately 30 segment solution


The resultant model and learning

was very important to the

Corporation

While 30 segments is difficult toconceptualize, the effort did lead to much

better targeting of vehicles to buyergroups

With 10,000 individuals to work with,regional and ethnic differences could bebetter understood

Even model-level differences could beunderstoode.g. Ford Expedition vs.Lincoln Navigator

All Brands had a much betterunderstanding of who their customersreally were and who they could be


Implementation was

tricky

Brands fought over attractive segments

Product Development not keen to developproducts for boring segments

Difficult to drive understanding of thesegments down into the Organization

Updating required on a regular basis


Some final thoughts on

Segmentation

Critical to the entire marketing and saleseffort

Done right, an insightful SegmentationModel is a major competitive advantage

Requires a knowledgeable Champion to beresponsible for completion andinstallation.

To be successful, requires TopManagement and cross-functional buy-in.

And the discipline to focus on the rightsegments!


Example Coffee

Consumption

:

Typical regular coffee consumer is over 35years 75% of market

Non regular is under 35 years - 25% ofmarket

:

Consume for taste enjoyment (coffee shop)

Consume for the wake up effect (Nestle)


Market Targeting

Use focus benefits to build loyalcustomers in chosen segments and sub-segments

Provides added benefits to existing

products when entering new segments Use customer tastes to carve out new

niches

Use focused brands to cover possibility ofemerging niches

. .


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Selecting Target

Market Segments

.

Single market concentration

Selective specialization

Product specialization

Market specialization

Full market coverage


Single-segmentconcentration

Productspecialization

M1 M2 M3P1

P2

P3

Selectivespecialization

M1 M2 M3

P1

P2

P3

M1 M2 M3

Full marketcoverage

P1

P2

P3

Marketspecialization

M1 M2 M3

P1

P2

P3

P1

P2

P3

M1 M2 M3

P = ProductM = Market

Five Patterns of Target

Market Selection

Target Market Selection


Toyota



Market Targeting

Strategies

Targeting multiple segments may result incost economies

Super-segment targeting may beappropriate

Blocked markets often require mega-marketing counter measures

Be aware of ethical concerns

9/15/2014Dr. Vandana Kha nna

Steps for STP

1. Identify segmentationvariables and segmentthe market

2. Develop profiles ofresulting segments

3. Evaluate theattractivenessof each segment

4. Select the targetsegment(s)

5. Identify possiblepositioning conceptsfor each target segment

6. Select, develop andcommunicate the chosenpositioning concept


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Opportunity

Evaluation Matrix

Market

nichecriterion

Competitive

Activity

Buyer

Requirements

Demand/

Supply

Political,Technological,

andSocioeconomicForces

Organizational

Capabilities

BuyerType

BuyerNeeds

Meansfor Buyer

Needs9/15/2014 Dr. Vandana Khanna

Fundamental-Buyer

Related Questions

Who are they?

What do they want to buy?

How do they want to buy?

When do they want to buy?

Where do they want to buy?

Why do they want to buy?


STP Has Great Impact on

Strategy and Tactical

Development

()

( )


Documents

Marketing Segmentation _ Targetting