Market Segmentation Flashcards
Market Segmentation
First step in defining a target market -> Stepping stone
Process of splitting entire market of consumers/potential into 2+ group of different types of consumers
Each market segment has similar traits/features (behaviour, purchasing habit)
Consumers that have similar product needs
Goal: Use segment as the target market
STPD Process
Segmentation
Targeting
Positioning -> Differentiation (Apart of Positioning)
History
Found in late 1950’s to meet needs of specific consumers rather than mass marketing
Why Use Marketing Segmentation
Mass marketing is not effective approach for most consumers
Marketing segmentation gives more defined consumer base from precise target market = more money
Advantages of Marketing Segmentation
Better understanding of consumer needs & overall market
Targets gaps in the marketplace
Gives choice of attacking or avoiding the competition which = advantage
Get closer to target consumers
Gives a defined marketing strategy
Perserves resources of the company & relevant market research & clear positioning
Company becomes more focused which simplifies their strategy & product mix decision
Creates stronger brand for their select consumers
Benefits = Profits
Clear focus w/ strategy
Increase in market share for target consumer
Brand loyalty = more protection from competitors
Market Segmentation Trade-Off
Excludes certain segments for focus of 1-2 similar target markets
Trade-off: Focuses on small portion of market rather than mass market to entire market
Not ignoring the entire market, just focusing on one particular segment
More Consumer ≠ Better
Ex. Law Firm Specializing in Large Corporation
Wouldn’t help giving advice to individuals
Increases target market but can devalue reputation = decrease in profit (+ more costs)
Construct Market Segment
Seems straightforward, but approach is challenging
Takes time + trial & error (Consider all variations)
Requires consumer data base
Different approaches for different segments for same product
Data Sources for Marketing Segmentation
Consumer Database: Array of Information
Marketing Survey Results - Has mix of purchase history, attitude, demographics, media
Publicly available info (Census, Industry Report)
Third Party Data
Types of Marketing Approaches
Mass Marketing
Appeal to everyone with the same marketing strategy (same product, positioning)
**Product-Vareity Marketing **
Lots of choices in similar product line, yet has no segmentation in mind
Market Segmentation
Seperating the overall market into groups w/ similar traits & features
Niche Marketing
Targetting very small target markets
Localized Marketing
Targetting local consumers
Individualized Marketing
Giving product based on a one-to-one basis
Cons of Mass Marketing
Intense competition, as every competitor is reaching to same target: everyone
Product is “okay” fit for most, but better fit for some
More specialized marketers take market share, as they target specific type of consumer
Prone to risk of environmental change, as only has one business model and one prime offering
Ex. Resturant that sells all cuisines, compared to one restaurant specializing in pizza, people will likely get pizza from that place, as they known as experts
Key Requirement for Market Segmentation
STP Process
Clearly Identifiable - Knows everything about consumer is each segment
Easy to Measure - Measure size+growth of segment
Size - Large enough to be profitable
Mutally Exclusive - All consumers fit into one segment
Unique Consumer Behavior - People in that segment purchase differently
Provides insight on consumer behavior
Workable as target market segment - Reachable communication
Informative - Useful info of consumers in segment to consumer
Strategic Fit - Segment works well with business objectives
Logical & Easy to Communicate - Makes sense enough to communicate w/ staff
Acceptable Amount of Segments
Divide market into 4-5 segments, and choose 1-2 target markets
1 segment=entire market
Segmentation Bases
Geographic
Demographic
Psychographic
Behavioural
Geographic Segmentation
Where consumer lives
Similarities that impacts consumers purchasing behaviour
Assumes that geographic segmentation effects behaviour, preferences, purchases
Geographic Segmentation Variables
Climate
Terrain
Type of Area: Urban, Suburban, Rural
City/Town Size
Population density
Region/City
Pros of Geographic Segmentation
Cost and Efficiency Advantages for Marketer
Focuses on particular geographic area, so can place advertisements there
Ex. Billboards, TV ads, Train Stations
Cost- Effective for Logistics
Approaches international marketers, and can group companies with similar features
Most effective, when in one country there are diverse groups of people
Ex. English & French Canadians
Types of Businesses Geographic Segmentation is Most Helpful For
Local marketing for small businesses
Selecting new location for major brand/retailer
International brands selecting new area(country/city) to expand in
Firms operating in various countries w/ diverse group
Logistics dependent businesses (manufacturing/logistics)
Cons of Geographic Segmentation
Relies on Assumption of..
Geographic location = consumers behaviour
All people at location have similar needs
Limits Insight on..
Consumer motivation
Consumer needs & preferences
Can be outperformed by competitors w/ more marketing segment knowledge
Demographic Segmentation
Measurable aspects: Age, Gender, Religon, Race, Occupation, Income Level
Goal of Demographic Segmentation
View how variables effect consumer behavior to understand the market
Demographic Variable
Age
Gender - Cosmetics, clothes, jewllery
Income
Education
Occupation
Family size & life stage/cycle
Religion
Ethnic background - Influence clothes, food
Demographic Information Application
Describe/segment identified with a variable. If organization has segmented market for product usage and use demographics to describe heavy users
Used as a starting point for market segmentation
Example of Use of Demographic
Motor Oils saw demographic of truck drivers (middle aged males) that made frequent stops at their gas stations, and improves lighting and bathroom for them (Road Warrior)
Prices reduced for people over the age of 50, as they have more average net worth + more purchasing power
Geodemographic Segmentation
Form of market segmentation that identifies neighborhoods around the country with common demographics
Identifies by ZIP/Postal Code
Usually constructed from census
Psychographics Segmentation
Includes personality traits, lifestyle, activities, interests, opinions, motivations, values, mindset
Looks at brand loyalty, product usage
Gets detailed understanding of the consumer to get in their mind
Differs in various countries, from different cultures & values
Lifestyle Segmentation
Form of segmentation that focuses on consumer’s AOI
Valuable for creating advertisements
Ex. Pilsbury did a study w/ various tagline for different segments
AIO
Activities, Interests, Opinions
Considers interests in family, work, vacation, how they spend their time, etc
Challenge in Psychographic Segmentation
Deeper, and more difficult to receive this information compared to demographics & geographics
Behavioral Segmentation
How people behave as consumers
Which products they buy, their price sensitivity, brand loyalty
Can be measured by loyalty cards at large chains
Variable of Behavioral Segmentation
Key benefits sought
Level of brand loyalty
Degree of price sensitivity
Volume of purchases = heavy or light users or non-consumers
Occasion = seasonal, special occasion versus everyday purchase
Buyer readiness stage (or stage in their customary journey)
Product Variety Marketing
Consumer-focused brands that offer a lot of product choices
Usage & Commitment Levels
Measures how many time a consumer buys a product
Way to segment a market
Heavy/Committed/Lead Users
Consumer that purchases products much more frequently than others
May be primary target
Can account for majority of sales
Ex. Consumer of CoffeeMate used 4 jars of creamers a week
Downside of Heavy Consumers
Takes away focus/time/resource from consumers that need the push to buy the product
Brand Freaks
Very committed to brand, that their behaviour is borderline pathological
Considered valuable for their knowledge of brand, and presumed social influence
Switchers/Variety Seekers
Market segment of consumers that buy what is discounted or on sale -> cheapest
Costly target segment, and not very profitable
Emergent Consumers
Gradual but constant influx of first time buyers
Can be triggered by puberty, graduation, marriage, divorce, home-owner, retirement, new job
Brand preference is still developing, which can create brand loyalty in the long run
Targets emergents with messages to fit circumstance & age
Point of Entry Marketing
Advertising strategy to gain brand loyalty from consumers that are still developing brand preferences
Ex. Folgers coffee marketed towards young adults with jobs, that move into the real world and tolerate mornings
Benefits Segmentation
Types of market segmenting that target segments are defined by benefits a different consumer gain from a product type
Ex. Different people want different thing from cars (luxury, transportation)
Consideration in Selecting Segmentations
What members of segment desire from product vs what company can offer
Size and growth potential of segment + willingness to purchase product
Projected return on investment (ROI) on segment
View competitive field (companies compete for segment’s business) for segment
Niche Marketing
Practice of targeting relatively small segments of market where consumers pay premium price for product
The smaller-the-better segmentation principle
Threat of competitors is reduced
Ex. Bras made for women w/ breast cancer
