4. Segmenting Markets Flashcards
Define Segmentation
Segmentation is the art of discerning and defining meaningful differences between groups of customers to form the foundations of a more focused marketing effort.
e.g. business travellers expect higher quality service S
Segmenting B2B markets
based on both organisation and individual buyers within it:
Wind and Cardozo (1974) - 2 stages involved
- Identify MACROSEGMENTS - subgroups within the whole market that share common characteristics
e. g. size, location, usage rate, SIC code - Select TARGET SEGMENTS - based on differences in buying characteristics (micro segments)
e. g. product, applications,
Segmenting C2C markets
What is a SIC code and how is it used in segmenting?
Standard Industrial Classification
This classification acknowledges that the same good can be used in different ways
e.g. glass, plastic
In segmenting markets, this code can help to identify sectors with a greater propensity to use a particular product/service
B2C : Geographic Segmentation
- Info is public
- simplest way to segment markets, most large and small companies do it.
- operational advantage, more efficient distribution systems
- cultural diversity between geographical segments
e. g. Heinz markets differently in each of its european segments
B2C : Demographic Segmentation
- measurable criteria such as age, sex, occupation
- easy to obtain information
- more clear profile of customer
- however they are descriptive and marketers should not assume that people in the same demographic group want the same thing
- best used for products that have a clear bias towards a certain demographic. e.g. baby products for women between 20 and 35.
B2C : Geodemographic Segmentation
- combines geographic and demographic
- ‘the analysis of people by where they live’
- may be useful for door-to-door marketing
B2C : Psychographic Segmentation
- lifestyle
- more difficult to define as it consists of attitudes and opinions
- individual differences make this category very difficult to apply in a commercial context
- One example is vegetarians and the meat-free market
B2C : Behaviour/ Product use segmentation
End use - what do they want it for?
e.g. soup - for a light snack, hearty lunch, dinner party
Usage rate - heavy/medium/light
Loyalty
Buyer readiness - early (doesn’t know product exists), interest, awareness, desire, action
What is AIDA and how is it useful?
The buyer readiness model Awareness Interest Desire Action
Allows marketers to target customers based on how ‘ready’ they are to buy. Concentrates on moving through stages to action!
Most commonly, firms use a number of segmenting variables
Benefits of segmentation
- customers - find products that fit better with what they want
- marketing mix - is a better reflection of target market
- resource allocation - company knows what it needs to satisfy customers needs
- competition - firm has a better understanding of marketing environment, will be able to identify competitors strengths and weaknesses
Concentrated
Specialising in serving one specific segment
- detailed knowledge of TM
- only one marketing mix to manage
- costs are low due to this
- all eggs in one basket, if this segment fails may be problematic for firm
Differentiated
- a number of different marketing mixes developed to target a few different segments
- each segment has tailored marketing mix
- Thin spreading of resources
- the danger is to over-reach
Undifferentiated
- treats the market like a homogeneous unit
- mass market marketing mix
- low costs
- best for products with no psychological appeal e.g .petrol
Criteria for successful segmentation in B2C and B2B
Distinctive
significantly different from other segments
Tangible
must be sufficient size to make its pursuit worthwhile
Accessible
geographically, communication
Defendable
to ensure competitors do not steal segment
