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Identifying Market Segments and Targets
Chapter Objectives
• ‘Market Segmentation and its benefits/ limitations• Four levels of marketing segmentation• Segmenting Consumer market• Segmenting business market• Steps in Segmentation Process• Requirements for Effective Segmentation• Target marketing
• Market Targeting Strategies• Managing multiple segments• Segment-by-Segment Invasion Plan
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
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Ford’s Model T Followed a Mass Market Approach
Baby Boomers: A Lucrative Market
‘Market Segmentation’
Market Segmentation is the sub-dividing of customers into homogenous sub-set of customers where any sub-set may conceivably selected as market target to be reached with distinct Marketing Mix – Philip Kotler
Market-product grid showing how different Reebok shoes reach customer groups with different needs
Benefits and LimitationsBenefits:The Organisation gets to know its customers better.Provides guidelines for resource allocation.It helps focus the strategy of the organisation.
Limitations:Targeting multiple segments increases marketing costs.Segmentation can lead to proliferation of products.Narrowly segmenting a market can hamper the development of broad-brand equity.
When to Segment Markets
When the expected gain in sales is largerthan the expense of the process
Steps in Target MarketingEffective targeting requires:•Identify and profile distinct groups of buyers who differ in their needs and preferences•Select one or more market segments to enter•Establish and communicate the distinctive benefits of the market offering
Mass Marketing
Companies have not always practiced
target marketing. In fact, for most of the 1900s, major consumer products companies held fast to mass marketing--mass producing, mass distributing, and mass promoting about the same
product in about the same way to all consumers.
Advantage:lowest costs, which in turn can translate into either lower prices or higher margins.
Limitation:The proliferation of distribution channels and advertising media has also made it difficult to practice "one-size-fits-all" marketing
Four levels of marketing segmentation
Segments
Local areas Individuals
Niches
Segment Marketing
A company that practices segment
marketing isolates broad segments that make up a market and adapts its offers to more closely match the needs of one or more
segments.
Marriott markets to a variety of segments business travelers, families, and others--with packages adapted to their varying needs.
Advantage:•can market more efficiently, Targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.
• fewer competitors.
Examples of Segmented Marketing
– Targets several segments and designs separate offers for each.
– Coca-Cola (Coke, Sprite, Diet Coke, etc.)
– Procter & Gamble (Tide, Cheer, Gain, Dreft, etc.)
– Toyota (Camry, Corolla, Prius, Scion, etc.)
Niche marketing
Niche marketing focuses on subgroups within these segments. A niche is a more narrowly defined group, usually identified by dividing a segment into sub segments or by defining a group with a distinctive set of traits who may seek a special combination of benefits. Whereas segments are fairly large and normally attract several competitors, niches are smaller and normally attract only one or a few competitors. Niche marketers presumably understand their niches' needs so well that their customers willingly pay a price premium
Niche Marketing
– Targets one or a couple small segments– Niches have very specialized interests
Example of niche marketing
• For example, there is a sales training expert in America who teaches financial planners how to generate referrals from customer at the close of the selling process. Therefore, he specializes in one minor part of the sales process only.
• Some non-traditional schools and other education providers could be considered niche marketers. For example, the Montessori school system appeals to a small proportion of parents, and the Montessori offering is virtually the only alternative for parents who do not want a structured/traditional education process for their kids.
• Restaurant for gun holder.
Micro Marketing
Micro marketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Micro marketing includes local marketing and Individual marketing.
Local Marketing:Local marketing involves tailoring brands and promotions to the needs and wants of local customer groups--cities, neighborhoods, and even specific stores.
Progoti Exchange provides different mixes of exchange services in its branches depending on neighborhood demographics
Individual Marketing:
individual marketing refers to tailoring products and
marketing programs to the needs and preferences of
individual customers.
Example: IKEA home renovation, consultancy services.
Four levels of marketing segmentation
Segments
Local areas Individuals
Niches
Why do this?
Overview: Segmentation, Targeting & Positioning
Segmenting can be:
• Segmenting Consumer Market• Segmenting Business market
• Segmenting Inter Market
A. Segmenting consumer maket
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
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Geographic Segmentation:
Geographic segmentation divides the market into geographical units such as nations, states, regions, counties, cities, or neighborhoods. The company can operate in one or a few areas, or it can operate in all but pay attention to local variations.
• Hilton Hotel customize rooms and lobbies according to location.
• Barbies with hijab• Sea view resort
2. Demographic Segmentation
• Age and life cycle: Crystler• Life stage: Newlyweds• Gender: cosmetics, tv channels, magazines.• Income: Mobile, clothing, financial services• Generation: Toyota Scion targets Gen Y customers• Social class: Tiffany, Burberry, Tag Huere.• Race and Culture: Alam, Ritaz.
Age and Lifecycle Stage
Gender and Income
Dove Targets Women
Women above 30 years
Generational Influences
Race and Culture
3. Psychographic Segmentation and The VALS Framework
The major tendencies of Four groups with Higher resources:
1.Innovator
2.Thinker
3.Achiever
4.Experiencer
The major tendencies of Four groups with Lower resources:
1.Believer
2.Striver
3.Makers
4.Survivors
3. Psychographic Segmentation and The VALS Framework
4.Behavioral Segmentation: Behavioral Variables
• Occasions: Vacation, Holidays, Birthdays• Benefits: Premium product, quality
services, fast service, branded products, Convenience, lower price.
• User Status: Non users, ex-users, potential users, full time users, regular users.
• Usage Rate: Light, medium and heavy users.
4. Behavioral Segmentation: Behavioral Variables
• Buyer-Readiness: unaware, aware, informed, interested, desire the product, intend to buy.
• Attitude: enthusiastic, positive, indifferent, negative, hostile.
• Loyalty
Loyalty Status
• Hard-core: buy only one brand• Split loyals: Buy two or three brands• Shifting loyals: Shifts from one to another
brand• Switchers: Show no loyalty
Figure 8.3 Behavioral Segmentation Breakdown
B. Segmenting for Business Markets
DemographicOperating variablePurchasing approachesSituational factorsPersonal characteristics
Ex: Dell segmented its customers based on situational factors.
Market Segmentation
Intermarket segmentation divides consumers into groups with similar needs and buying behaviors even though they are located in different countries
Example: Economy and luxury cars.
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Steps in Segmentation Process
• Need-based segmentation• Segment identification• Segment attractiveness• Segment profitability• Segment positioning• Segment acid test• Market mix strategy
Market Segmentation
Requirements for Effective Segmentation
To be useful, a market segment must be:• Measurable• Accessible• Substantial• Differentiable• Actionable
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Effective Segmentation Criteria
• Measurable: Measurable include the size, purchasing power, and profiles of the segments. EX: Gun holders restaurant
• Substantial: The segment is large and profitable enough to serve. Car for people under four feet is not sustainable.
• Accessible: The segment can be effectively reached and served.
Effective Segmentation Criteria
• Differentiable: The segment are conceptually distinguishable and respond differently to the different marketing mix elements and programs. Ex: Perfume for married and unmarried women is not different.
• Actionable: Effective program can be formulated for attracting and serving the segment.
Figure 8.4 Possible Levels of Segmentation
• Target Marketing-• Is a market segmentation and market coverage strategy
whereby a product is developed and marketed for a very well-defined, specific segment of the consumer population.
• Target marketing is particularly effective for small companies with limited resources because it enables the company to achieve a strong market position in the specific market segment it serves without mass production, mass distribution, or mass advertising. It enables firms to capitalize on the respective serve market share
Market Targeting Strategies
• Single-segment concentration
• Selective specialization
• Product specialization
• Market specialization
Slide 45 in Chapter 9
Patterns of Target Market Selection
Full market coverage
Figure 8.4 Patterns of Target Market Selection
Figure 8.4 Patterns of Target Market Selection
Figure 8.4 Patterns of Target Market Selection
Managing multiple segments
• The best way to manage multiple segments is to appoint segment manager with sufficient authority and responsibility for building a segments business.
Market Targeting Strategies
• Targeting multiple segments may result in cost economies
• Supersegment targeting may be appropriate• Blocked markets often require
megamarketing countermeasures• Be aware of ethical concerns
Slide 51 in Chapter 9
Figure 8.5 Segment-by-Segment Invasion Plan
For Review1. What is market segmentation. Describe its benefits
and limitations.2. Describe Four levels of marketing segmentation
1. Describe the criteria necessary for effective segmentation.
2. Explain each of the four bases for segmenting consumer markets.
3. Identify the steps in the market segmentation process.
4. Define target marketing. Discuss four basic strategies for reaching target markets.
FIGURE 9-6 FIGURE 9-6 Advertising actions to reach specific student segments
