SEGMENTATION Flashcards
What is Market Segmentation?
Market segmentation involves dividing a market into distinct groups of buyers who have different
needs, characteristics, or behaviors and who might require separate marketing strategies or mixes.
The company identifies different ways to segment the market and develops profiles of the resulting market segments.
There are 4 types of segmentation:
-Geographic Segmentation
-Demographic Segmentation
-Psychographic Segmentation
-Behavioral Segmentation
The four major steps in designing a customer value-driven marketing strategy :
-Market segmentation involves dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate marketing strategies or mixes. The company identifies different ways to segment the market and develops profiles of the resulting market segments.
-Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter.
In the final two steps, the company decides on a value proposition—how it will create
value for target customers.
-Differentiation involves actually differentiating the firm’s market offering to create superior customer value.
-Positioning consists of arranging for
a market offering to occupy a clear, distinctive, and desirable place relative to competing
products in the minds of target consumers.
Geographic Segmentation:
Geographic segmentation calls for dividing the market into different geographical units,
such as nations, regions, states, counties, cities, or even neighborhoods.
Segmentation examples
Geographic: Nations, regions, states, counties, cities, neighborhoods, population density (urban, suburban, rural), climate.
Demographic: Age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, generation
Psychographic: Lifestyle, personality
Behavioral: Occasions, benefits, user status, usage rate, loyalty status
Demographic Segmentation:
Dividing the market into segments based on
variables such as age, life-cycle stage, gender,
income, occupation, education, religion,
ethnicity, and generation.
DEMOGRAPHIC factors are the most popular bases for segmenting customer groups. One reason is that consumer needs, wants, and usage rates often vary closely with demographic variables. Another is that demographic variables are easier to measure than most other types of variables.
–AGE & LIFE-CYCLE STAGE:
Consumer needs and wants change with age. Some companies use age and life-cycle segmentation, offering different products or using different marketing approaches for different age and life-cycle groups.
Marketers must be careful to guard against stereotypes when using age and life-cycle
segmentation. Age is often a poor predictor of a person’s life cycle, health, work or family status, needs, and buying power
–GENDER:
Gender segmentation has long been used in marketing clothing, cosmetics, toiletries,
toys, and magazines
–INCOME:
The marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel have long used income segmentation.
Some companies use income segmentation to target the affluent and others use it to target low and middle-income groups.
Psychographic Segmentation:
Divides buyers into different segments based on lifestyle or personality characteristics. People in the same demographic group can have very different psychographic characteristics.
Products people buy often reflect their lifestyles. As a result marketers often segment their markets by consumer lifestyles and base their marketing strategies on lifestyle appeals.
Marketers also use personality variables to segment markets.
[For example, Loews, a luxury-boutique hotel chain that offers high-level personal
service, targets “personas” segments, such as “weekend explorer
couples,” “confident business travelers,” “serious planners,” “luxury jetsetters,”
“vacationing families” and “Loews loyalists.”]
Behavioral Segmentation:
Dividing a market into segments based on consumer knowledge, attitudes, uses of a product, or responses to a product.
Many marketers believe that behavior variables are
the best starting point for building market segments.
Occasion segmentation
Dividing the market into segments according
to occasions when buyers get the idea to
buy, actually make their purchase, or use the
purchased item.
Benefit segmentation
Dividing the market into segments according
to the different benefits that consumers seek
from the product.
User status:
Markets can be segmented into nonusers, ex-users, potential users, first time users, and regular users of a product. Marketers want to reinforce and retain regular users, attract targeted nonusers, and reinvigorate relationships with ex-users.
Usage Rate:
Markets can also be segmented into light, medium, and heavy product users.
Heavy users are often a small percentage of the market but account for a high percentage of
total consumption.
What are the requirements of effective Segmentation?
To be useful, the size, purchasing power, and profiles of market segments should be measurable. The market segments must be accessible – effectively reached and served. The market segments should be substantial – large or profitable enough to serve. They should be differentiable, which means they are conceptually distinguishable and respond differently to different marketing mix elements and programs. Finally, the segments should be actionable, which means that effective programs can be designed for attracting and serving the segments.
●● Measurable. The size, purchasing power, and profiles of the segments can be
measured.
●● Accessible. The market segments can be effectively reached and served.
●● Substantial. The market segments are large or profitable enough to serve. A segment
should be the largest possible homogeneous group worth pursuing with a
tailored marketing program. It would not pay, for example, for an automobile
manufacturer to develop cars especially for people whose height is greater than
seven feet.
●● Differentiable. The segments are conceptually distinguishable and respond differently
to different marketing mix elements and programs. If men and women respond
similarly to marketing efforts for soft drinks, they do not constitute separate
segments.
●● Actionable. Effective programs can be designed for attracting and serving the
segments. For example, although one small airline identified seven market segments,
its staff was too small to develop separate marketing programs for each
segment.
Evaluating and selecting Market Segments:
In evaluating different market segments a firm must look at three factors: segment size and growth, segment structural attractiveness, and company objectives and resources. “size and growth” are relative.
After evaluating different segments, the company must decide which and how many segments it will target.
A target market consists of a set of buyers who share common needs or characteristics that a company decides to serve.
Market Targeting can be carried out at several different levels. Companies can target very broadly(Undifferentiated Marketing) or very narrowly(Micromarketing) or somewhere in between(differentiated or Concentrated marketing)
Undifferentiated Marketing:
Undifferentiated Marketing (mass marketing);
a firm might decide to ignore market segment differences and target the whole market with one offer. Such a strategy focuses on what is common in the needs of consumers rather than on what is different. The company designs a product and a marketing program that will appeal to the largest number of buyers.
Difficult to develop a product that will satisfy all consumers. Mass marketers have trouble competing with more-focused firms that do a better job of satisfying the needs of specific segments and niches.
Differentiated Marketing:
Differentiated Marketing (or segmented marketing) strategy, a firm decides to target several market segments and designs separate offers for each.
By offering product and marketing variations to segments, companies hope for higher sales and a stronger position within each market segment. Developing a stronger position within several segments creates more total sales than undifferentiated marketing across all segments.
However differentiated marketing also increases the cost of doing business.
Concentrated Marketing:
Concentrated marketing (or niche marketing) strategy, instead of going after a small share of a large market, a firm goes after a large share of one or a few smaller segments or niches.
Through concentrated marketing, the firm achieves a strong market position because of its greater knowledge of consumer needs in the niches it serves and the special reputation it acquires.
It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments. It can also market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.
Micromarketing:
Tailoring products and marketing programs
to the needs and wants of specific individuals
and local customer segments; it includes local
marketing and individual marketing.
Local Marketing:
Involves tailoring brands and promotions to the needs and wants of local customer segemnts–cities, neighborhoods, and even specific stores.
Thanks to explosion in smartphones and tablets that integrate geolocation technology, companies can track consumers’ whereabouts closely and engage them on the go with localized deals and information fast, wherever they may be.
Individual Marketing:
Tailoring products and marketing programs to the needs and preferences of individual customers. Also labeled as one-to-one marketing, mass customization, and markets-of-one marketing.
Mass customization is the process by which firms interact one to one with masses of customers to design products, services, and marketing programs tailor-made to individual
needs.
How to choose a Targeting Strategy:
Companies need to consider many factors when choosing a market-targeting strategy. best strategy depends on company’s resources & degree of product variability& product’s life cycle
When resources are limited, concentrated marketing makes most sense.
Undifferentiated marketing is more suited for uniform products.
Products that can vary in design are best suited differentiation or concentration.
When a firm introduces new product it may be practical to launch one version only(undifferentiated or concentrated marketing may make the most sense).
Market variability is also important:
If most buyers have the same tastes, buy the same
amounts, and react the same way to marketing efforts, undifferentiated marketing is appropriate.
Competitors’ marketing strategies should be considered:
When competitors use differentiated or concentrated marketing, undifferentiated marketing can be suicidal.
