Segmentation, Targeting and Positioning Flashcards
What is market segmentation?
Market segmentation involves the breaking down of a larger market into small sub-groups that share common characteristics. e.g. age, sex, geography, income, lifestyle, education
What does segmentation allow businesses to?
Segmentation allows businesses to produce goods or services that are precisely targeted at the specific needs of consumers.
What does segmentation help with?
This helps to reduce wastage on marketing to groups of consumers who hold little or no interest in your goods and to strengthen your relationship with those that do.
What can firms stress?
Firms can stress those elements of their goods and services that appeal to their target market in the hope of increasing sales and market share.
How are Markets Segmented?
Demographic Segmentation: This considers the social and economic characteristics of individuals and households including age, sex, nationality, social class and residential status.
Income Based Segmentation: A common approach is the use of socioeconomic groupings, which enables a business to more accurately target their customers by matching their income with the product or service being provided.
Geographic Segmentation: There are big differences in spending patterns, social activities and personal disposable income (PDI) depending upon where you live. Example: McDonalds use different ingredients and menus for each country.
Behavioural Segmentation: This looks at the way customers behave with or act towards products. Understanding how customers behave, and which product benefit are the most important for them and why, allows firms to identify new potential uses for their goods.
What 3 rules does market segmentation follow?
Market segmentation follows 3 rules:
- The market segment must be recognisable i.e. the segments must be clearly identifiable from one another.
- Market segments must have a critical mass i.e. they must be big enough to make the targeting of them financially worthwhile.
- Segments must be targetable i.e. you must be able to target your marketing specifically towards these groups.
Why do some of the most successful companies target several segments within the same market?
Some of the most successful companies target several segments within the same market so that as consumer pass through different phases of their life-cycle, they are still offering products and services relevant to their needs.
What are Problens with Segmentation?
- By focusing on one specific group of consumers, a business risks alienating all other groups.
- Market research is needed to pick up on any changes to consumer tastes and fashions. This takes time and money.
- Many consumers do not in reality fit neatly into one specific category.
- Poor quality research could lead firms to misjudge who their target market actually is
Demographic Segmentation
This considers the social and economic characteristics of individuals and households including:
Age
Social Class
Gender
Nationality
Family Cycle
Residential Status
AGE: Many products and services are directly targeted at a specific age group of customers e.g. Club 18-30
GENDER: Certain products are specifically aimed at particular genders e.g. perfumes. However, in recent years more gender neutral perfumes have been produced!
Social Class
Your class is decided upon according to the occupation of the main income earner within a household.
Based upon these marketers can estimate your likely purchasing habits e.g. higher classes (A, B and C1) are likely to spend more upon expensive cars and holidays.
Social Classification: A1 Professional, B Managerial, C1 Skilled non-manual, C2 Skilled Manual, D Semi-skilled, E Low Income
Consumer Life Cycles
Customers have different wants and needs according to which stage of their life cycle they are in.
Teenagers might find their priorities for tickets to Glastonbury or the latest clothes are not the same as their parents who might be more interested in city break holidays or their grandparents who enjoy gardening.
Marketers have to monitor changing cycles and adjust their offerings in an effort to stay relevant to their customer needs.
Residential Status
ACORN (A Classification of Residential Neighbours) is used to segment customers according to their housing. The postcode is used to help marketers decide upon things such as what paper you read and where you are likely to visit on holiday.
Geographical Segmentation
There are big differences in spending patterns, social activities and personal disposable income (PDI) depending upon where you live. The North of England is still a cheaper place to locate than the South East but spending patterns are lower.
Businesses also need to consider how they can reach their customers.
Proximity Marketing
A recent innovation has been the use of proximity marketing. This makes use of modern technology to offer customers personalised offers whenever their mobile phone picks up on signals from participating stores.
The risk is that customers could become over-loaded with offers and simply delete messages without even reading them.
Income Segmentation
This enables a business to more accurately target their customers matching their income with the product or service being provided.
Increasingly companies are adapting their product mix so that they are able to reach the widest possible number of customers. For example, Volkswagen aim the VW Polo at lower incomes, the VW Golf at medium incomes and the VW Phaeton at the higher earners.
What is behavioural segmentation used for?
Behavioural segmentation is used to focus upon the way customers behave with or act towards products.
