Service Market Segmentation

8/4/2019 Service Market Segmentation

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SERVICEMARKETSEGMENTATION


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WHAT DOESMARKETSEGMENTATIONMEAN?

A marketing term referring to the aggregating ofprospective buyers into groups (segments) that havecommon needs and will respond similarly to a marketingaction. Market segmentation enables companies totarget different categories of consumers who perceivethe full value of certain products and services differentlyfrom one another. Generally three criteria can be usedto identify different market segments:

1) Homogeneity (common needs within segment)

2) Distinction (unique from other groups)

3) Reaction (similar response to market)


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REQUIREMENTSOF MARKET SEGMENTS

In addition to having different needs, for segments to bepractical they should be evaluated against the followingcriteria:

Identifiable: the differentiating attributes of the segmentsmust be measurable so that they can be identified.

Accessible: the segments must be reachable throughcommunication and distribution channels.

Substantial: the segments should be sufficiently large tojustify the resources required to target them.

Unique needs: to justify separate offerings, the

segments must respond differently to the differentmarketing mixes.

Durable: the segments should be relatively stable tominimize the cost of frequent changes.


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BASESFOR SEGMENTATIONIN CONSUMERMARKETS

Consumer markets can be segmented on thefollowing customer characteristics.

Geographic

Demographic Psychographic

Behavioralistic


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GEOGRAPHIC SEGMENTATION

The following are some examples of geographicvariables often used in segmentation.

Region: by continent, country, state, or evenneighbourhood

Size of metropolitan area: segmented according tosize of population

Population density: often classified as urban,suburban, or rural

Climate: according to weather patterns common tocertain geographic regions


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DEMOGRAPHIC SEGMENTATION

Some demographic segmentation variables include:

Age

Gender

Family size

Family lifecycle Generation: baby-boomers, Generation X, etc.

Income

Occupation

Education

Ethnicity Nationality

Religion

Social class


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PSYCHOGRAPHIC SEGMENTATION

Psychographic segmentation groups customersaccording to their lifestyle. Activities, interests, andopinions (AIO) surveys are one tool for measuringlifestyle. Some psychographic variables include:

Activities

Interests

Opinions

Attitudes Values


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BEHAVIOURALISTIC SEGMENTATION

Behavioural segmentation is based on actual customerbehaviour toward products. Some behaviouralistic variablesinclude:

Benefits sought

Usage rate

Brand loyalty

User status: potential, first-time, regular, etc.

Readiness to buy

Occasions: holidays and events that stimulate purchases Behavioural segmentation has the advantage of using

variables that are closely related to the product itself. It is afairly direct starting point for market segmentation.


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TARGETING


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Target marketing tailors a marketing mix for one ormore segments identified by market segmentation.Target marketing contrasts with mass marketing,which offers a single product to the entire market.

Two important factors to consider when selecting atarget market segment are the attractiveness of thesegment and the fit between the segment and the

firm's objectives, resources, and capabilities.
http://www.netmba.com/marketing/market/segmentation/http://www.netmba.com/marketing/market/segmentation/


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ATTRACTIVENESSOFA MARKET SEGMENT

The following are some examples of aspects that shouldbe considered when evaluating the attractiveness of amarket segment:

Size of the segment (number of customers and/ornumber of units)

Growth rate of the segment

Competition in the segment

Brand loyalty of existing customers in the segment

Attainable market share given promotional budget and

competitors' expenditures Required market share to break even

Sales potential for the firm in the segment

Expected profit margins in the segment


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SUITABILITYOF MARKET SEGMENTSTOTHE FIRM

Market segments also should be evaluated according tohow they fit the firm's objectives, resources, andcapabilities. Some aspects of fit include:

Whether the firm can offer superior value to thecustomers in the segment

The impact of serving the segment on the firm's image

Access to distribution channels required to serve thesegment

The firm's resources vs. capital investment required to

serve the segment The better the firm's fit to a market segment, and the

more attractive the market segment, the greater theprofit potential to the firm.


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TARGET MARKET STRATEGIES

Single-segment strategy - also known as a concentrated

strategy. One market segment (not the entire market) isserved with one marketing mix. A single-segment approachoften is the strategy of choice for smaller companies withlimited resources.

S1 S2 S3

P1

P2

P3


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Selective specialization- this is a multiple-segment strategy, also known as a differentiatedstrategy. Different marketing mixes are offered todifferent segments. The product itself may or may

not be different - in many cases only thepromotional message or distribution channels vary.

S1 S2 S3

P1

P2

P3


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Product specialization- the firm specializes in aparticular product and tailors it to different marketsegments.

S1 S2 S3

P1

P2

P3


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Market specialization- the firm specializes inserving a particular market segment and offers thatsegment an array of different products.

S1 S2 S3

P1

P2

P3


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Full market coverage - the firm attempts to servethe entire market. This coverage can be achievedby means of either a mass market strategy in whicha single undifferentiated marketing mix is offered to

the entire market, or by a differentiated strategy inwhich a separate marketing mix is offered to eachsegment.

S1 S2 S3

P1

P2

P3


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OR

Standardization

The marketing firm offers the same product to differentmarket segments and uses the same communication,pricing and distribution strategies in different market

segments Differentiation

It is just the opposite of the strategy of Standardization.The firm differentiates its product to suit different

segment needs and expectations Focus

It is the combination of both. The core product remains thesame. But differentiation is made to take care of specificcustomer group requirements.


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POSITIONING


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It is arranging of a product to occupy a clear,distinctive and desirable place relative to competingproducts in the minds of the customers


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METHODS

Product differentiation

Price differentiation Service differentiation

image differentiation

Documents

Service Market Segmentation