MARKET SEGMENTATION

TOPIC 5

MARKET SEGMENTATION:

Mkt Seg. represents an effort to increase a companys targeting precision.

It can be carried out at four levels: - Segments - niches - local areas - individuals

1.SEGMENT MARKETING

It consist of an identifiable group within a group. A company that practices segment marketing recognizes that buyers differ in their wants, purchasing power, geographical locations, buying attitudes and buying needs.

1.SEGMENT MARKETING
The company is not willing to customize its offer /communication bundle to each individual customer. The co. tries to isolate some broad segments that make up a market. e.g. An auto. Co. may identify four broad segments: car buyers seeking basic transport, performance, luxury and safety.

1.SEGMENT MARKETING

Segmentation is a midpoint between mass marketing and individual marketing. The consumer belonging to a segment are assumed to be quite similar in their wants and needs. Yet they are not identical.

1.SEGMENT MARKETING
Some segment members will like to have additional features and benefits not included in the offer, while others would give up something that they dont want very much. e.g. Ritz-Carlton hotels target affluent guest and provide many amenities in their rooms. Some guest may want to

1.SEGMENT MARKETING
Find more items in their rooms, such as fax, while others may prefer fewer amenities and a lower price. Segment marketing is not as precise as individual marketing but is much more precise than mass marketing. The company can create a more fine tuned product/service offer and price it according to its target audience.

1.SEGMENT MARKETING

The choice of distribution channels and communications channels become easier.

2.NICHE MARKETING
Niche marketing is a more narrowly defined group, typically a small market whose needs are not being well served. Marketers usually identify niches by dividing a segment into sub-segments or by defining a group with a distinctive set of traits, who may seek a special combination of benefits.

2.NICHE MARKETING
Niches are fairly small and normally attract only one or few competitors. Niches attract smaller companies also. Characteristics of a niche co. is as follows: - Target has a distinct and complete set of needs. - They will pay a premium to get best service.

2.NICHE MARKETING
- The manufacturer has the required skill to serve the niches in a superior fashion. - The co. gains certain economies through specialization. - The niche is not likely to attract other competitors. - The niche has sufficient size, profit and growth potential.

3.Local Area Marketing

Target marketing is increasingly taking on the character of regional and local marketing with marketing programs being tailored to the needs and wants of local customer groups like: -trading areas - Neighborhoods - Even individual stores.

3.Local Area Marketing

Those in favor of localizing a companys marketing point to the pronounced regional differences in communitys demographics and lifestyle. - They see national advertising as wasteful because it fails to address local target groups.

3.Local Area Marketing

- They also see powerful local and regional retailers who are demanding more fine tuned product assortments for their neighborhood. Those against argue that it drives up marketing and manufacturing cost by reducing economies of scale. -logistic problems become magnified when companies try to meet different regional and local marketers requirement.

3.Local Area Marketing

- A brands overall image maybe diluted if the product and messages differ in different localities.

4.Indiviual Marketing
The ultimate level of segmentation leads to segments of one, customized marketing, or one to one marketing. The prevalence of mass marketing has obscured the fact that for centuries consumers were served as individuals. Tailors, cobblers, etc. designed for individuals.

4.Indiviual Marketing
Business to business marketing today is customized, in that a manufacturer will customize the offer, logistics and financial terms for each account. It is the new technologies specifically computers, databases, robotic production, and instant communication media such as e-mail and fax that are permitting companies to consider a return to customized marketing, or what is called mass customization.

4.Indiviual Marketing
Customer marketers are now experimenting with new systems of providing custom-made products in areas such as text books, greeting cards, vacations and cosmetics.

PATTERNS OF MARKET SEGMENTATION

Market segments can be built up in many ways. Instead of looking at demographic or lifestyle segments, we can distinguish preference segments. There are 3 different patterns:

Basic MarketPreference Patterns

PATTERNS OF MARKET SEGMENTATION

HOMOGENEOUS PREFERENCES: Market where all the consumers have roughly the same preference. Brands are similar.

DIFFUSED PREFERENCES: - At the other extreme, consumers preferences may be scattered throughout . - Consumers vary greatly in their preference.

First brand to enter the market is likely to position in the centre to appeal to the most people minimum dissatisfied consumers. Second competitor locate near the 1st brand and fight for market share ,or locate in a corner to attract a customer group that was not satisfied with the centre brand. New competitors, position throughout the space and show real differences to match consumer preference differences.

CLUSTERED PREFERENCES: - Distinct preference clusters, called natural market segments. - The first has 3 choice /position 1st centre, hoping to appeal to all. 2nd largest market segment (concentrated marketing). 3rd develop several brands to cater to all segments , because if he doesn't competitors will.

MARKET SEGMENTATION PROCEDURE

Market segments and Niches can be identified by applying successive variables to subdivide a market. Common 3 step approach used by Mkt. Research firms: Step 1: Survey Stage - the researcher conducts exploratory interviews and focus groups to gain insight into customer motivations, attitudes and behavior.

MARKET SEGMENTATION PROCEDURE

Using these findings, the researchers prepares a questionnaire to collect data on: - attributes and their importance rating. - brand awareness and brand rating. - product usage patterns. - attributes towards the product category. - demographics, geographic, psychographics and media graphics.

MARKET SEGMENTATION PROCEDURE

Step 2 : Analysis Stage: The researcher applies factor analysis to the data to remove highly correlated variables, then applies cluster analyses to create a specific number of maximally different segments.

MARKET SEGMENTATION PROCEDURE

Step 3: Profiling Stage: - Each cluster is profiled in terms of its distinguishing attitudes, behavior, demographics, psychographics and media patterns. - Each segment can be given a name based on a dominant distinguishing characteristics.

MARKET SEGMENTATION PROCEDURE

Adreasen and Balk in a study of the leisure market, found six segments and their corresponding profiles: - passive homebody - active sports enthusiast - inner directed, self sufficient - culture patrons - active homebody - socially active

MARKET SEGMENTATION PROCEDURE

They found out that performing arts organizations could sell the most tickets by targeting culture patrons and socially active people. Market segmentation must be redone periodically because market segments change.

MARKET SEGMENTATION PROCEDURE

One way of discovering new segments is to investigate the hierarchy of attributes that consumers examine in choosing a Brand. This is called Market Partitioning. The hierarchy of attributes can also be used to reveal customer segments. Those who decide on price are price dominant, similarly there are brand/Quality/ Service etc dominant, each having distinct features.

BASES FOR SEGMENTING CONSUMER MARKETS.

Major segmentation variables, researches try to form segments by consumer characteristics are: - Geographic - Demographic - Psychographics - Behavioral

BASES FOR SEGMENTING CONSUMER MARKETS.

GEOGRAPHIC - Dividing the market into different geographical units such as nations, States, regions, countries, cities or neighborhoods. - the company can decide to operate in one or a few geographic areas or operate in all but pay attention to local variations in geographic needs and preferences.

BASES FOR SEGMENTING CONSUMER MARKETS.

DEMOGRAPHIC: - Dividing the market into groups on the bases of variables: Age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality or social class.

BASES FOR SEGMENTING CONSUMER MARKETS.

PSYCHOGRAPHIC: Buyers are divided into different groups on the basis of lifestyle and/or personality. (I)LIFESTYLE: - Peoples product interests are influenced by their lifestyle. - the goods they consume express their lifestyle. - marketers are increasingly segmenting their markets by consumer lifestyle.

BASES FOR SEGMENTING CONSUMER MARKETS.

(II)PERSONALITY :
- Marketers have used personality variables to segment markets. - They endow their products with Brand Personalities that correspond to consumer personalities.

BASES FOR SEGMENTING CONSUMER MARKETS.

BEHAVIORAL: - Buyers are divided into groups on the basis of their knowledge of attitudes towards, use of, or response to a product. - Many marketers believe that behavioral variables like occasions, benefits, user status, usage rate, loyalty status, buyer readiness stage and attitude, influence the buying decision

MARKET TARGETING
Once the firm has identified its market segment opportunities, it has to evaluate the various segments and decide how many which ones to target.

EVALUATING THE MARKET SEGEMENT In evaluating different market segments, the firm must look at two factors : 1st Overall attractiveness of the segment. the firm must ask whether a potential segment has the characteristic that makes it generally attractive, such as size, growth, profitability,

MARKET TARGETING
economies of scale, low risk and so on. e.g.: - how easy it will be to persuade the members of the segment to shift their purchase. - How much is their business worth?

MARKET TARGETING
2nd Companys objective and resources. :
The firm must consider whether investing in the segment makes sense given the firms objective and resources. Some attractive segments could be dismissed because they do not go along with the companys long term objective. Even if the companys objective is met in a particular segment the company must consider whether it possesses the skills and resources it needs to succeed in that segment.

MARKET TARGETING
The segment should be dismissed if the company lacks one or more necessary competences and is in no position to acquire them. Even if a company possesses the required competence it needs to develop some superior advantages. It should enter only market segments in which it can offer superior value.

MARKET TARGETING
Having evaluated different segments, the company must decide which and how many segments to serve/target. Company can consider five patterns of target market selection.

MARKET TARGETING
1st Single Segment Concentration: - the company selects a single segment. - Concentrated marketing involves higher than normal risks. 2nd Selective Specialization: - the firm selects a number of segments. - each objectively attractive and appropriate.

MARKET TARGETING
- there may be little or no synergy among the segment, but each segment can be a success. 3rd Product Specialization: - here the firm concentrates on making a certain product that it sells to several segments.

MARKET TARGETING
4th Market Specialization: - the firm concentrates on serving many needs of a particular customer groups. - the firm gains a strong reputation for specialization in serving this customer group and becomes a channel for all new products that the customer group could feasibly use.

MARKET TARGETING
- risk is that the customer group may have its budget cost.

5th Full Market Coverage: - firm attempts to serve all customers groups with all the products that they might need. (large organizations attempt these strategy )

POSITIONING

The act of designing the companys offering and image so that they occupy a meaningful and distinct, competitive position in the target customers minds. Not all brand differences are meaningful or worth while.

POSITIONING

Each difference has the potential to create company costs as well as customer benefits. Difference is worth establishing to the extend that it satisfies the following criteria: - important: the difference delivers a highly valued benefit to a sufficient number of buyers.

POSITIONING
- distinctive: the difference either isnt offered by others or is offered in a more distinctive way by the company. - superior: the difference is superior to other ways of obtaining the same benefit.

POSITIONING
- communicable: the difference is communicable and visible to buyers. - pre-emptive: the difference cannot be easily copied by competitors. - affordable: the buyer can afford to pay for the difference. - profitable: the company will find it profitable to introduce the difference.

POSITIONING

As companies increase the number of claims for their brand, they risk disbelief and loss of clear positioning.

POSITIONING

In general, a company must avoid four major positioning errors:

- Under positioning:
Some companies discover that buyers have only a vague idea of the brand. Buyers dont really sense anything special about it.

POSITIONING
The brand is seen as just another entry in a crowded market place. When Pepsi introduced its clear crystal Pepsi in 1993, customers were distinctly unimpressed. They didn't see clarity as an important benefit in a soft drink.

POSITIONING
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Over Positioning:
Buyers may have too narrow an image of the Brand. A consumer might think that diamond rings at tiffanys start at $5000, when in fact , it is available from $900 onwards.

POSITIONING

Confused Positioning:
- Buyers might have a confused image of the brand resulting from the companys making too many claims or changing the Brands positioning too frequently. - this was the case with Stephen Jobs sleek and powerful NEXT desktop computer, which was positioned for

POSITIONING
first for students, then on engineers and then for business people, all unsuccessfully.

Doubtful Positioning:
Buyers may find it hard to believe the brand claims in view of the products features, price or manufacturer.

POSITIONING
e.g. : When GMs Cadillac division introduced the Cimarron, it positioned the car as a luxury competitor with BMW, Mercedes and Audi. While the car featured leather seats, a luggage rack, lots of chrome, etc, the customer saw the car as a dolled up version of Chevy's Cavalier, while the

POSITIONING
Car was positioned as More for More, the customer saw it as less for More.