Chapter 6 Flashcards
Nature of market segmentation
Market:
- People or organisations with needs and wants and have the ability to buy
Market segment:
- A subgroup of people or organisation
- Have similar characteristics
- Have similar product needs
Market segmentation
- The process of dividing a market into meaningful, relatively similar and identifiable segments or groups
Importance of market segmentation
Market segmentation:
- Plays a key role in marketing strategy
- Helps to define customer needs/wants
- Helps decision-makers to define marketing objectives
The criteria for successful segmentation
- Sustainability
- Identifiable and measurable
- Accessibility
- Responsiveness
Bases for segmenting consumer markets
Bases for segmentation:
single-variable segmentation
- simple and easy to use
- maybe inaccurate
multiple-variable segmentation
- more complex to use
- secondary data may not be available
- more accurate
Behaviour
Geographic
Demographic
Age
Generational
Gender
Income
Ethic
Family life-cycle
Psychographic
Benefit
Behavioural
segmentation based on knowledge of, attitude towards, use of, or response to a product
- usage-rate
- occasions
- brand familiarity
Geographic
segmentation based on national region, world region, market size, market density or climate
Market density = the number of people within a unit of land
Demographic
Segmentation based on demographic information, which is widely available
- age
- generations
- gender
- income
- ethnicity
- family life-cycle
Age
- Children aged 4 – 12: influence family consumption of products
- People aged 35 – 44: spend most of food at home, housing and clothing
- 45 – 54 year olds: spend on eating out, transport, entertainment, education
- Lucrative over-50 and over-70 markets
Generational
- Silent Generation (born before 1946)
- Baby Boomers (born between 1946 & 1964)
- Generation X (born between 1965 & 1980)
- Generation Y (born between 1981 & 2000)
- Generation Z (today’s tweens and teenagers)
Gender
- Products such as clothing, cosmetics, personal-care items, magazines, jewellery and footwear
- Women oversee 80% of spending in SA
- Brands traditionally marketing to men are trying to attract women
- Women’s products are also being targeted at men
Income
- Influence’s consumer’s wants and buying power
- Markets segmented by income:
-Housing
-Clothing
-Automobiles
-Food
-Banking
Ethnic
- Consumers that belong to different ethnic groups behave and consume differently
- May be controversial in SA
- Black middle class is feasible market
Family Life-cycle
- Family life cycle: series of stages determined by a combination of age, marital status and presence/absence of children
- Valuable basis for segmenting markets
Psychographic
segmentation based on differences in consumer lifestyles
- personality
- motives
- lifestyle
- geodemographics
- AIO (activities, interests, opinions)
Benefit
customers are grouped into segments according to the benefits they seek from the product
Qualification and determining bases for segmentation
Qualifying dimension = qualifies a consumer for a specific target market
Determining dimension= will determine a consumer’s decision to buy or not to buy
- related to the firm’s competitive advantage
Segmentation scenarios for firms moving online:
- No change
- Market expansion
- Market reclassification
- Reclassified expansion
Steps to segmenting a market
- Select product market/category
- List potential needs
- Choose segmentation base
- Select descriptors
- Profile segments
- Identify determining dimensions
- Name and select target market
Strategies for segmentation
- Undifferentiated
- Concentrated
- Multi- segmented
Undifferentiated- Mass market
Advantage:
- potential to save on production and marketing costs
Disadvantages:
- unimaginative product offerings
- firm more susceptible to competition
Concentrated- Niche
Specialist roles:
- end-use specialist
- vertical-level specialist
- customer-size specialist
- specific-customer specialist
- geographic specialist
- product or feature specialist
- quality-price specialist
- service specialist
Advantages:
- concentration of resources
- better meet needs of a narrowly defined market segment
- compete effectively with much larger firms
- stronger positioning
Disadvantages:
- segment too small or changing
- large competitors market more effectively to niche segment
- vulnerable to the impact of environmental changes
Multi-segmented- choose two or more segments and develop separate strategies for each segment
Potential costs:
- product design costs
- production costs
- communication costs
- inventory costs
- marketing research costs
- management costs
- cannibalisation
Advantages:
- greater financial success
- economies of scale in manufacturing and marketing
Disadvantages:
- high costs
- cannibalisation
