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Market Segmentation

Segmentation
Market segmentation is the process of dividing a heterogeneous market into homogenous sub units. Need for segmentation To be able to compete in a highly competitive market. To position itself as segment leader. To gain competitive edge.

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Market Segmentation Procedure


Need based segmentation Segment identification Segment awareness Segment profitability Segment positioning Segment acid test Marketing mix strategy

BASIS FOR SEGMENTING THE MARKET

(a) Customer based segmentation (b) Product related segmentation (c) Competition related segmentation

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Customer Based Segmentation


Geographic location of customers:
RURAL vs. URBAN METRO vs. NON METRO

Demographic Characteristic Age Gender Income Occupation Education Marital Status Family Size & Structure Psychographic Variables Life Style Personality Buyer Readiness
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Product Related Segmentation


Product Use situations Different customers may use the same product in different situations. Benefits Segmentation Marketers identifies benefits that a customer looks for when buying a product. Quantity consumed- one of the basis of segmentation beverages tea ,coffee, soft drinks, liquor and cigarette markets. Following segments are visible

a) Heavy users b) Moderate users

c) Light users

9.7

Decision Criteria Used by customer to evaluate and buy a brand or the product. Following four parameters are considered in consumer decision making today Price Perceived quality of the product/ service Service offered by the firm Technology

9.8

Competition Based Segmentation


Hard Core Loyal

Soft Core Loyal


Switchers

9.9

Segmenting Industrial Markets


a) Based on Size & purchase of the customer , there are Category customers large buyers

b)
c)

Category customers medium sized buyers


Small buyers Geographical Location Firms located in a particular region form a part of segmentation End Use by differentiating end users of firms products Within end use segment further market can be segmented on basis of purchase criteria. Combining purchase criteria, size and geography Matrix form of market segmentation .

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Three Stages of Market Segmentation


1) 2) Survey Stage - Divided into two partsFocus group discussions & in depth interviews with a view to getting an insight into consumer motivation , attitudes and behavior. Based on this insight, developing a questionnaire for a sample group of customers. Analysis Stage using factor analysis. Identifying factors that differentiate customer groups. Profiling Stage- Each cluster is profiled in terms of demographics, psychographics, media habits , attitudes , behavior and consumption habits.

Requirements for Effective Segmentationa) Accessibility b) Measurable c) Viable d) Intensity in Competition.

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Market Targeting Strategies


Standardization Firm offers the same product to different market segments. It uses the same communication , pricing and distribution strategies. Differentiation Focus - Focus is a combination of standardization & differentiation, where the core strategy remains the same , but differentiation is made to take into account specific customer group requirements. Positioning- the differentiation could be along following linesProduct Service Channel Price People Image

a) b) c) d) e) f)

9.12

Evaluating & selecting the market segments


Single segment concentration Selective specialization Product specialization Market specialization Full market coverage

Consumer/Buyer Behaviour
Demographic Factors The Consumer Buying Process Maslows hierarchy of needs Types of buyer behaviour The Buying Decision Process Organisational Buyer Behaviour

Demographic Factors
Age Stage in family life cycle Occupation Economic circumstances Lifestyle social influence variables
family background reference groups roles and status

The Consumer Buying Process


Marketing Inputs

Product Price Promotion Place

Purchase Decisions

Product Choice

Consumer

Location Choice Brand Choice Other Choices

Psychological Inputs Culture Attitude

Learning
Perception

Five Stage Model of Consumer Buying Process


Problem recognition

Information search Evaluation of alternatives

Purchase decision

Post purchase behaviour

Maslows Hierarchy of Needs


Self Actualisation Esteem Social Safety Physiological

Types of buyer behaviour


Complex buyer behaviour e.g. Intel Pentium Processor Dissonance-reducing behaviour (brand reduces after-sales discomfort) Habitual buying behaviour e.g. salt - little difference variety seeking behaviour - significant brand differences e.g soap powder

The Buying Decision Process


recognition of the need e.g a new PC choice of involvement level (time and effort justified) e.g. two week ends identification of alternatives e.g. Dell, PC World evaluation of alternatives I.e. price, customer service, software support, printer/scanner package decision - choice made e.g Epsom action e.g buy Epsom model from Comet post-purchase behaviour I.e. use, breakdowns, etc

Organisational Buyer Behaviour


The decision-making process by which formal organisations establish the need for purchased products and services, and identify, evaluate, and choose among alternative brands and suppliers Kotler and Armstrong 1989

Characteristics of organisational buyer behaviour


Organisation purpose - Goodyear Tyres Derived demand - follows cars and lorries Concentrated purchasing - stockholdings of rubber Direct dealings - large purchaser of basic rubber - no intermediaries Specialist activities - learns about the product Multiple purchase influences - DMU - Decision making unit

Product Positioning

Developing schematic representations that reflect how products or services compare to competitors on dimensions are most important to success in the industry

Product Positioning

Product Positioning based on:


Customers wants Customers needs

Product Positioning Steps


1. Select Key Criteria

2. Diagram Map

Product Positioning Steps

3. Plot competitors products

4. Look for niches

5. Develop Marketing Plan

Product Positioning Map


High Convenience

Firm 1
High Customer Loyalty

Firm 2
Low Customer Loyalty

Firm 3
Low Convenience

Major rules in product positioning


a. Establish a definition of positioning, b. Keep it simple, c. Make it unique, d. Excavate(bring out) product benefits and market needs, e. Construct a credible position, f. Ensure strong support by starting early, g. Follow the market dynamics, h. Make positioning visible in all communications, i. Test alternative positioning options,

PRODUCT DIFFERENTIATION
The challenge before the product marketers is to create relevant and distinctive product differentiation. The product differentiation may be based on : Physical Differences ( eg., features, performance, conformance, durability, reliability, design, style, packaging ) Availability Differences ( eg., available from stores or orderable by phone, mail, fax, internet )

Service Differences ( eg., delivery, installation, training, consulting, maintenance, repair )


Price Differences ( eg., very high price, medium price, low price, very low price ) Image Differences ( eg., symbols, atmosphere, events, media )

Positioning Strategies
1. By attribute or benefitThis is the most frequently used positioning strategy. For a light beer, it might be that it tastes great. For toothpaste, it might be the mint taste .

2. By use or applicationThe users of Apple computers can design and use graphics more easily than with Windows or UNIX. Apple positions its computers based on how the computer will be used.
3. By userFacebook is a social networking site used exclusively by college students. Only college students may participate with their campus email IDs.

4. By product or service classMargarine competes as an alternative to butter. Margarine is positioned as a lower cost and healthier alternative to butter, while butter provides better taste and wholesome ingredients.
5. By competitorBMW and Mercedes often compare themselves to each other segmenting the market to just the crme de la crme of the automobile market. Ford and Chevy need not apply.

6. By price or qualityTiffany and Costco both sell diamonds. Tiffany wants us to believe that their diamonds are of the highest quality, while Costco tells us that diamonds are diamonds and that only a chump(fool) will pay Tiffany prices.

7. Positioning strategy based on Product Process


Another positioning approach is to associate the product with its users or a class of users. Makes of casual clothing like jeans have introduced designer labels to develop a fashion image. In this case the expectation is that the model or personality will influence the products image by reflecting the characteristics and image of the model or personality communicated as a product user. Lets not forget that Johnson and Johnson repositioned its shampoo from one used for babies to one used by people who wash their hair frequently and therefore need a mild people who wash their hair frequently and therefore need a mild shampoo. This repositioning resulted in a market share.

8. Positioning strategy based on Cultural Symbols


In todays world many advertisers are using deeply entrenched cultural symbols to differentiate their brands from that of competitors. The essential task is to identify something that is very meaningful to people that other competitors are not using and associate this brand with that symbol. Air India uses maharaja as its logo, by this they are trying to show that we welcome guest and give them royal treatment with lot of respect and it also highlights Indian tradition. Using and popularizing trademarks generally follow this type of positioning.

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