Market segmentation

Slide 9-5
LECTURE QUESTIONS:
Definition of Market segmentation
Different factors used to segment consumer and organizational markets.

Slide 9-6
LECTURE QUESTIONS:
The significance of heavy users in targeting markets.
Market-product grid
Product positioning

WHY SEGMENT MARKETS?
Slide 9-11
What Market Segmentation Means
Market Segmentation
Market Segments
Product Differentiation
Segmentation: Linking Needs to Actions

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Market segmentation involves aggregating prospective into groups that (1) have common needs and
(2) will respond similarly to a marketing action.
Market Segmentation

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Market segments are relatively homogeneous groups of prospective buyers that result from the process of of market segmentation and are similar to each other in terms of their consumption behavior.
Market Segments

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Product differentiation is a strategy that involves a firm’s using different marketing mix activities to help consumers perceive the product as being different and better than competing products.
Product Differentiation

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Market segmentation links market needs to an organization’s marketing program

Slide 9-13
WHY SEGMENT MARKETS?
Using Market-Product Grids
What Market Segmentation Means
How Reebok’s Segmentation Strategy
Developed
Market-Product Grid

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A market-product grid is a framework to relate the segments of a market to products offered or potential marketing actions by the firm.
Market-Product Grid

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WHY SEGMENT MARKETS?
Examples of Successful Market Segmentation
Build-to-Order (BTO)
Mass Customization
When to Segment Markets
The Segmentation Trade-Off:
CRM vs. Synergies
Synergy
Customer Relationship Management (CRM)

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Synergy is the increased customer value achieved through performing organizational functions more efficiently.
Synergy

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1. Market segmentation involves aggregating prospective buyers into groups that have two key characteristics. What are they?
A: The groups should (1) have common needs and (2) respond similarly to a marketing action.
Concept Check

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2. What is product differentiation?
A: Product differentiation involves a firm’s using different marketing mix activities to help consumers perceive the product as being different and better than competing products.
Concept Check

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3. The process of segmenting and targeting markets is a bridge between what two marketing activities?
A: These activities are (1) identifying market needs and (2) taking marketing actions.
Concept Check

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STEPS IN SEGMENTING AND
TARGETING MARKETS
Step 1: Form Potential Buyers
into Segments
Criteria to Use in Forming the Segments
Increased Profit
Similarity of Needs Among Segments
Difference of Needs Between Segments
Marketing Action to Reach a Segment
Simplicity & Cost of Assigning Buyers to Segments

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The process of segmenting and targeting markets involves five key steps

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STEPS IN SEGMENTING AND TARGETING MARKETS
Step 1: Form Potential Buyers
into Segments
Ways to Segment Consumer Markets
Customer Characteristics
Region
Buying Situations
Household Size
Lifestyle
Benefits Sought
Usage Rate
80/20 Rule

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The usage rate is the quantity consumed or patronage during a specific period of time.
Usage Rate

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The 80/20 rule is a concept that suggests 80 percent of a firm’s sales are obtained from 20 percent
of its customers.
80/20 Rule

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STEPS IN SEGMENTING AND TARGETING MARKETS
Step 1: Form Potential Buyers
into Segments
Variables to Use in Forming Segments
Ways to Segment Organizational Markets
Location
NAICS Code
Number of Employees
Benefits Sought

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STEPS IN SEGMENTING AND TARGETING MARKETS
Step 2: Form Products to be Sold into Groups
Step 3: Develop a Market-Product Grid and Estimate Size of Markets

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STEPS IN SEGMENTING AND TARGETING MARKETS
Step 4: Select Target Markets
Criteria to Use in Picking the
Target Segments
Choose the Segments
Market Size
Expected Growth
Cost of Reaching Segment
Compatibility with the
Organization’s Objectives
and Resources
Competitive Position

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STEPS IN SEGMENTING AND TARGETING MARKETS
Step 5: Take Marketing Action to Reach Target Markets
Your Wendy’s Segmentation Strategy
Apple’s Ever-Changing Segmentation
Strategy

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STEPS IN SEGMENTING AND TARGETING MARKETS
Market-Product Synergies:
A Balancing Act
Marketing Synergies
Product Synergies

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1. What are some of the variables used to segment consumer markets?
A: These variables include demographic (gender, age, etc.), geographic (region, city size, etc.), socioeconomic (income, education, etc.), psychographic (lifestyle, etc.), benefits sought (features, quality, etc.) and usage rate (light/medium/heavy user).
Concept Check

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2. What are some criteria used to decide which segments to choose for targets?
A: These criteria include market size, expected growth, competitive position, cost of reaching the segment, and compatibility with the organization’s objectives and resources.
Concept Check

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3. Why is usage rate important in segmentation studies?
A: Usage rate is the quantity consumed during a specific time period and varies among different customer groups. In many cases, 80% of a firm’s sales are obtained from 20% of its customers—the “heavy users.” As a result, these target consumers are the most important to the firm.
Concept Check

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POSITIONING THE PRODUCT
Product Positioning Using Perceptual Maps
Product Positioning
Perceptual Map
Positioning Chocolate Milk for Adults

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1. What is product positioning?
A: Product positioning refers to the place an offering occupies in consumers’ minds on important attributes relative to competitive offerings.
Concept Check

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2. Why do marketers use perceptual maps in product positioning decisions?
A: Marketers use perceptual maps to display in two dimensions the location of their and competing products or brands to see how consumers perceive them and then take marketing actions.
Concept Check

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Product positioning refers to the place an offering occupies in consumers’ minds on important attributes relative to competitive offerings.
Product Positioning