Market segmentation in Consumer Behavior

Market Segmentation:

Introduction, categories, variables. 2015 - CONSUMER BEHAVIOR DR. AHMAD FARAZ – CBA - UOD

Lecture

2

Marketing

We argued that marketing is about creating mutually beneficial exchange

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Exchange is the process where you willingly give something of value to

another, in return for getting something of value to you QuickTime™ and aTIFF (Uncompressed) decompressorare needed to see this p icture.

2015 - CONSUMER BEHAVIOR DR. AHMAD FARAZ – CBA - UOD

How Market Segmentation evolved?

A strategy that believes there is one undifferentiated market and that one product will appeal to all consumers in that market.

Mass Marketing

Advantages Lower cost One ad campaign One marketing

strategy Usually, one product

Disadvantages Only works if all

consumers have the same needs, wants, desires, back ground, education and experience.


Now markets are becoming more fragmented

• In the developed economies at least the idea of mass marketing is essentially dead

• One product for a large market does not work anymore

• Consumers are becoming more sophisticated and choosy

- They have better access to information. Why?- They have more choice.- They are overloaded with marketing messages. Why?- They are more suspicious.


Market SegmentationToday, Mass Marketing is largely replaced by a 3 step

strategyMarket Matching

Strategy SEGMENTATION

TARGETING

POSITIO

NIN

G

Dividing the marketplace into submarkets that require different marketing mixes.

Process of reviewing market segments and deciding which one(s) to pursue

Placement of the products by creating a differentiation in the eyes of customers and competitors


Market Segmentation (definitions)

A process used to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs.

The process of dividing a market into distinct subsets (segments) of consumers with common needs or characteristics and selecting one or more to target with a distinct marketing mix.

Group consumers according to their similarity related to a particular product category.


Why market segmentation?

Better market segmentation creates profitable customers

Market segmentation allows you to; Target the right segment to approachWhich means you can position your offer more effectivelyWhich leads to better marketing mixesWhich leads to your customers choosing your offerWord of mouth (and telling their friends).


Any colour you like, as long as it’s Black

The Model T Ford is regarded as the first car to be built in 1908, using a production line.

Henry Ford wanted to produce quickly. So Black paint was used, that dries more quickly so the only colour one could have was Black. Soon Ford lost share to companies that offered other colours.


No cup holders please, we are German In the 1990’s cup holders

became popular in the USA

German companies such as BMW and Mercedes didn’t see them as necessary (cars were about engineering not cup holders!)

Their market share fell in the USA


The Mobile phone is just a device• Early mobile phones were

seen as just devices to make calls.

• The idea of a mobile phone as a fashion accessory was at first not accepted by many companies.

• Nokia did understand this and were the first company to offer different designs and colours

• Nokia gained huge market shares

Why kitchen appliances must be in White? KitchenAid is an American home appliance brand. Company started in 1919, faced stiff competition. In the late '80s with a promotional campaign double the business in three years.No other company in the world is offering so

diverse color and design range in kitchen aids.


What we learn from these stories?

1. The customer really is king

2. One offer never appeals to everyone

3. Offers to everyone will be beaten by offers to targeted groups

4. Marketing is becoming more complex (and more exciting - no honestly it is…)


Segmentation variables

If you’re not segmenting, then you’re not marketing


How segmentation is applied at McDonalds


Segmentation variables


more Segmentation variables


more Segmentation variable


An innovative segmentation Latest addition to the family – Coca‑Cola Life. – Company’s first lower-calorie cola sweetened from natural sources (stevia leaf) and contains a third less sugar and a third fewer calories than Coca‑Cola2.We're constantly innovating and creating products that we think people will love. The introduction of Coca‑Cola Life is part of our commitment to offer a variety of drinks, so there’s something to suit every lifestyle and occasion.

Coca‑Cola = 42 calories/ 100mlCoca‑Cola Life = 27 calories/ 100mlCoca‑Cola Zero = Less than 1 calorie/ 100mlDiet Coke = Less than 1 calorie/ 100ml


How does Airlines position their offerings for different market segments?

Economy ClassBusiness ClassFirst ClassPrivate Cabins

Economy ClassBusiness ClassFirst ClassPrivate Cabins

First Class Business Class Guest Class


Market Segmentation leading to success(Saudi FMCG Market)

Abdulla Aujan & Brothers was established in 1905 Businesses include Tobacco, Rice, Beverages. In 1928, the company obtained Vimto, (UK 1908). By 1970s, Aujan Industries established itself throughout the Saudi Arabian & GCC markets. 1n 1973, company innovates and launched Vimto Carbonated; the first fruit flavored carbonated soft drink.

In Dec 2011, Aujan Industries and The Coca-Cola Company announce signing of $980 M Agreementhttp://www.coca-colacompany.com/press-center/press-releases/aujan-industries-and-the-coca-cola-company-announce-signing-of-980-million-agreement

In 1982, Aujan Industries’ first homegrown brand: Rani (Orange Float) by 1999, sales of Rani had passed the 10 million case mark.Also in the early 1980s, the company introduced to the region the malt beverage drink, Barbican. Launched to great acclaim, Barbican personified the future of beverages amongst the GCC’s growing


Presently over 3,000 employees. ACCBC’s production capacity has crossed 100 million physical cases in 2014.The company present in Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, Oman, Yemen, Jordan, Iraq, Lebanon, Egypt, Libya and Algeria. 3 manufacturing facilities located in Dammam (KSA), Dubai (UAE) & and Beirut (Lebanon). In addition, ACCBC continues to supply more than 70 markets

Market Segmentation leading to success(Saudi FMCG Market)


Which . . . . . . . segment is targeted? Identify variables?Age: ?

Gender: ?Population: ? Psychographic: ? Social Class: ? Life Style: ? Personality: ?

Life stage: ? Income: ? Education: ? Religion: ? Culture: ? Country: ?


Multivariable segmentation• For most products one variable is not enough, it will

tell you little about the target group• So organizations tend use multivariable segmentation

In general multivariable segmentation leads to better customer insights

This is simply combining segmentation basis:

Simple multivariable segmentation uses two or more bases from one category

E.g. Age and gender from demographic variablesAdvanced multivariable segmentation uses two or more bases from two or more categories

E.g. Lifestyle, age, family life cycle and attitude to the product

Multistage segmentation uses different variables at different times E.g. Region, then lifestyle and age


Criteria for effective market segmentation?

A good market segmentation is one that is:Identifiable – able to identify relevant characteristics. Measurable - you know how many members it has and you can track their purchasesAccessible - you can contact them and make your offer Sustainable - you can make a profit by serving themActionable - you are able to develop offers those can be attractive to

the segmentIn addition a good segmentation allows you to understand the customer from their point of view so that you can make offers that will meet their needs better than your competitors.


Which . . . . . . . segment is targeted? Identify

variables?Age: ?Gender: ?Population: ? Psychographic: ? Social Class: ? Life Style: ? Personality: ?

Life stage: ? Income: ? Education: ? Religion: ? Culture: ? Country: ?


Which . . . . . . . segment is targeted?


Segmentation by seven life development stages


VALS Segmentation

VALS "Values, Attitudes And Lifestyles" is a research methodology used for psychographic market segmentation. Market segmentation is designed to guide companies in tailoring their products and services in order to appeal to the people most likely to purchase them.VALS was developed in 1978 by social scientists (Arnold Mitchell and his colleagues). It was immediately embraced by advertising agencies. VALS draws heavily on the work of Harvard sociologist David Riesman and psychologist Abraham Maslow.Arnold Mitchell used statistics to identify attitudinal and demographic questions that helped categorize adult American consumers into one of nine (9) lifestyle types: survivors (4%), sustainers (7%), belongers (35%), emulators (9%), achievers (22%), I-am-me (5%), experiential (7%), societally conscious (9%), and integrated (2%).

The survey done among 1,635 Americans and their partners, who responded to an SRI International survey in 1980.


VALS Segmentation


Thank you and Good Bye, till next class.
