Revel Flashcards - Chapter 4 Segmenting Markets.
How do we define and profile our customers?
Potential customers will want and may be defined by:
- Price
- What distribution is convenient for them.
- What communication channels can they be best reached.
- What they want from the product itself.
What is segmentation?
Smith (1957) first developed this idea.
Segmentation can be viewed as defining meaningful differences between groups of customers to form the foundations of a more focused marketing effort.
Segmentation is practical …
As meeting the needs very well for one or 2 consumer groups is far better for a business than trying to be all things to all people.
Example: Nokia
Identified 12 segments of mobile users and grouped them into 4 categories to target with tailored offers:
- Live
- Connect
- Achieve
- Explore.
Wind and Cardozo (1974) two stages of segmenting a B2B market:
1) Identify subgroups within the whole market that share common general characteristics (macro segments)
2) Select Target segments from within the macro segments based on differences in buying characteristics these are called micro segments.
How B2B markets are segmented: Macro segmentation bases.
- Macro segments are based on the characteristics of organisations and the broader purchasing context in which they operate.
- Bases for macro segmentation tends to be from secondary info which can be grouped into 2 main categories
1) Organisational characteristics
2) Product or service application.
How are B2B markets segmented: Micro segmentation bases.
Common bases for micro segmentation in B2B markets include:
- Product
- Applications
- Technology
- Purchasing policies
Benefits allow business to fine tune marketing to consumers specific needs.
3 organisational characteristics used for macro segmentation:
Business size
Business location
Usage rate
What is the main difference between segmenting consumer markets and segmenting B2B markets:
- Consumer segments are much larger in terms of the number of potential buyers, so is much more difficult to get close to the individual buyer.
- Consumer segmentation puts more emphasis on buyer lifestyle and context.
Upper levels of MHON:
Self-actualisation: Achieve potential, Personal Fulfilment.
Esteem: Success and Status
Belongingness and Love: Affection and Group Membership
What is Geographic Segmentation:
- Defines customers according to their location.
- E.g. Lidl Price conscious catchments
Evaluation of Geographic segmentation:
Pros:
- Geographic segments are easy to define.
- Information is freely available from public sources.
- Operational advantages such as developing efficiency for distribution.
Cons:
- Being too focused on purely geographical segmentation the firm would be vulnerable to competition coming in with a more customer focused segmentation strategy.
What is demographic segmentation:
Segmenting on factors such as age, sex, race, income, occupation, socioeconomic status and family structure.
Evaluation of demographic segmentation:
Pros:
- Info easy to find, freely available.
- main advantage is a clear profile of the customer on criteria is identified and this can be worked into marketing strategies.
Cons:
- Demographics are purely descriptive so assume that all people in the same demographic group have similar needs and wants which isn’t necessarily true.
- Vulnerable to firms using a more customer focused segmentation strategies.
What is Geodemographic segmentation?
- Defined as the analysis of people by where they live.
- Combines geographic information with demographic and lifestyle data about neighbourhoods.
