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SEGMENTATION
AND TARGETTING
Dr. Vandana T Khanna
9/15/2014 Dr. Vandana Khanna
Marketing Segmentation
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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
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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
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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
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Bases of Segmenting
Consumers
SegmentationApproaches
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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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. . .
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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
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Bases of Segmentation
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
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Bases of Segmentation
Region
City or Metro size
Density
Climate
Geo-clustering
Psychographic
Segmentation
Personalitytraits
Lifestyle Values
VALS Segmentation
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The Revolution brand ofready-made womensapparel successfullyfocuses on the nichesegment of plus-size
clothes.
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Bases of Segmentation
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
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Indian Market
Segmentation
5000 400 , 75% .
5284 , 784 50,000.
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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% .
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Indian Market
Segmentation
, .
.
,, , .
Basesfor Segmenting
BusinessMarkets
DemographicsPersonalCharacteristics
SituationalFactors
OperatingCharacteristics
Purchasing
Approaches
Bases for Segmenting
Business Markets
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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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Bases for Segmenting
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 )
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Bases for Segmenting
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
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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 )
Dr. Vandana Khanna 9/15/2014
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
: . () & .
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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!
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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)
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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
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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
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Toyota
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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
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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?
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STP Has Great Impact on
Strategy and Tactical
Development
()
( )
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