Marketin segmentation

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Kotler on
Marketing
“Don’t buy market share. Figure out how to earn it.”

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Chapter Objectives
We focus on the following questions:
How can a company
identify the segments
that make up a
market?
What criteria can
a company use to
choose the most
attractive target
markets?

Segmented market
Target market
Mass market
… an amorphous mass
Why Segment?
Mass – segment - target

Levels of Market Segmentation
Individual
Local
Niche
Segment
None
Mass marketing
Identifiable group, differentiated product
Narrowly defined group; needs not currently met
Tailored products/services to local customer
Segments of 1: customised

Niches: Ferrari-Lamborghini/Porsche/Aston Martin
Advantages of niches?
Mass customized marketing # customized marketing

Viability of segment affected by:
market factors
Size & growth rate
identity
relevance (to product)
access
intensity of competition
New entrants & substitute products
Bargaining power of
customers & suppliers
Political/social &
Environmental
factors
And ……
Segmentation Viability

Demographic Geographic Psychographic
Age Country Personality
Gender Region Lifestyle
Family life cycle City size Activities
Occupation Population density Social Class
Education Continent
Religion Climate
Nationality
income
Consumer Segmentation

Behaviour
Benefits sought
Purchase occasion
Purchase behaviour
Usage
Perceptions and beliefs
Consumer Segmentation (2)

Ramstor
Magnum
Examples

Organizational Segmentation
Macro-segmentation
Micro-segmentation
Organizational
size
Industry
Geographic
location
Purchasing
Organization
Organizational
Innovativeness
Source: Jobber, 2001, p.199
D-M
Unit structure
D-M
Process
Choice
criteria
Buy Class

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Target Marketing
Target marketing requires marketers to take three major steps:
Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation).
Select one or more market segments to enter (market targeting).
For each target segment, establish and communicate the key distinctive benefit(s) of the company’s market offering (market positioning).

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Levels and Patterns of Market Segmentation
Levels of Market Segmentation
Mass marketing
Micromarketing
Segment marketing
Market segment
Sector
Flexible market offering
Naked solution
Discretionary options

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Levels and Patterns of Market Segmentation
Niche Marketing
Niche
Local Marketing
Individual Customer Marketing
Mass-customization
Choiceboard
Customerization
Segments
Individuals

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Levels and Patterns of Market Segmentation
Patterns for Market Segmentation
Preference segments
Homogeneous preferences
Diffused preferences
Clustered preferences
Natural market segments
Concentrated marketing

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Figure 10-1: Basic
Market-Preference Patterns

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Levels and Patterns of Market Segmentation
Market Segmentation Procedure
Needs-based market
segmentation approach
Market partitioning
Brand-dominant hierarchy
Nation-dominant
hierarchy

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Table 10-1: Steps in Segmentation Process
See text for complete table

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Levels and Patterns of Market Segmentation
Effective Segmentation
Measurable
Substantial
Accessible
Differentiable
Actionable

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Segmenting Consumer and Business Markets
Bases for Segmenting
Consumer Markets

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Table 10-2: Major Segmentation Variables for Consumer Markets
See text for complete table

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Segmenting Consumer and Business Markets
Bases for Segmenting Consumer Markets
Geographic Segmentation
Demographic Segmentation
Age and Life-Cycle
Stage

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An easily identifiable demographic group which is often targeted by marketers is college students. Do you think this is influenced more by a common economic status of the target group, geographic concentration of a specific
age group, or some
other factor(s)?
Discussion Question

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Segmenting Consumer and Business Markets
Life Stage
Gender
Income
Generation
The Depression Cohort
The World War II Cohort
The Post-War Cohort
Leading-Edge
Baby Boomer Cohort
Trailing-Edge
Baby Boomer Cohort
Generation X Cohort
The Generation Y Cohort

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Segmenting Consumer and Business Markets
Lifestage Analytic Matrix
Lifestages
Physiographics
Emotional effects
Socioeconomics
Social Class
Psychographic Segmentation
Lifestyle
Time-constrained
multitasking
Money-constrained

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Improvements in both the average standard of living and in health care have had profound effects in the industrialized world during the last two generations. Other than an increase in the average life expectancy for both men and women, what effects has this trend toward longer and
healthier lives in general had
on the traditional life stage
assumptions that marketers
make?
Discussion Question

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Segmenting Consumer and Business Markets
Personality
“Brand personality” examples:
Sincere
Exciting
Competent
Sophisticated
Rugged
Values
Core values

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Segmenting Consumer and Business Markets
Behavioral Segmentation
Occasions
Critical life events or transitions
Benefits
Mobil has identified five
segments and their sizes
Road Warriors 16%
Generation F 27%
True Blues 16%
Home Bodies 21%
Price Shoppers 20%

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Segmenting Consumer and Business Markets
User Status
Usage Rate
Loyalty Status
Hard-core loyals
Split loyals
Shifting loyals
Switchers
Buyer-Readiness Stage
Attitude

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Segmenting Consumer and Business Markets
Multi-Attribute Segmentation
(Geoclustering)
Four PRIZM clusters
American Dreams
Rural Industria
Gray Power
Country Squires
Targeting Multiple
Segments

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Segmenting Consumer and Business Markets
Bases For Segmenting
Business Markets

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Table 10-3: Major Segmentation Variables for Business Markets
Demographic
Industry: Which industries should we serve?
Company size: What size companies should we serve?
Location: What geographical areas should we serve?
Operating Variables
Technology: What customer technologies should we focus on?
User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers?
Customer capabilities: Should we serve customers needing many or few services?
Purchasing Approaches
Purchasing-function organization: Should we serve companies with highly centralized or decentralized purchasing organizations?
Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on?
See text for complete table

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Segmenting Consumer and Business Markets
Business buyers seek different benefit bundles based on their stage in
the purchase decision process.
First-time prospects
Novices
Sophisticates

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Segmenting Consumer and Business Markets
Rangan, Moriarty, and Swartz studied a mature commodity market, steel stamping, and found four business segments
Program buyers
Relationship buyers
Transaction buyers
Bargain hunters

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Segmenting Consumer and Business Markets
Rackman and Vincentis proposed a segmentation scheme that classifies business buyers into three groups
Price-oriented customers
(transactional selling)
Solution-oriented customers
(consultative selling)
Strategic-value customers
(enterprise selling)

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Market Targeting
Evaluating and Selecting the Market Segments
Single-Segment Concentration
Selective Specialization
Product Specialization
Market Specialization
Full Market Coverage
Undifferentiated marketing
Differentiated marketing

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Market Targeting
Higher costs using differentiated
marketing include:
Product modification cost
Manufacturing cost
Administrative cost
Inventory cost
Promotion cost

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Market Targeting
Additional Considerations
Ethical Choice of Market Targets
Supersegment
Segment-By-Segment Invasion Plans

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Figure 10-3: Segment-by-Segment Invasion Plan

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Intersegment Cooperation
Market Targeting

Competitive Advantage?
(Treacy & Wiersema, 1997)
- Excel in specific dimension
- Maintain threshold standards in other value dimensions
- Improvement year after year
- Well-tuned operating model dedicated to delivering unmatched value
Customer benefit/Unique/Profitable/Sustainable

Products
Existing Modified New
Existing
New
Markets
Market
Penetration
Geographical
Expansion
Segment
Invasion
Product
Modification
Geographical
expansion
New types
of Customers
New Product
Development
Geographical
Expansion
Diversification
Company Growth Paths? Nine Ways to build
Demand

- Innovating new value Systems
Dell/First Direct (Bank)/Amazon
- Invading new market spaces
Walt Disney/Honda/Nike
Two New Additional Growth Paths

1/ Porter’s Generic Competitive Strategies
FOCUSED
LOW COST ---------------------------”NICHE”-------------------------- HIGH COST
Capability

DEVELOPMENT OF A POSITIONING STRATEGY
Identify competitors
- Primary
- Secondary
- What would you buy if the brand was not available?
Determine how they are perceived / evaluated
- List of product associations
- Most relevant / useful

DEVELOPMENT OF A POSITIONING STRATEGY
Determine competitors’ positioning
- Subjective
- Multi - dimensional scaling & Perceptual map

DEVELOPMENT OF A POSITIONING STRATEGY
Analyse the consumer
- Motivations / perceptions
- Habits
- Benefits sought
- Behaviour patterns
UNDERSTAND THE CONSUMER AND THE MARKET
-BENEFIT SEGMENTATION?

PERCEPTUAL MAP OF SUPERMARKETS
HIGH PRICE
LOW PRICE
NARROW PRODUCT
RANGE
WIDE PRODUCT RANGE
A
B
C
D
W

DEVELOPMENT OF A POSITIONING STRATEGY
Make the positioning decision
- Commit to a segment
- Don’t try to be something you’re not
- Don’t change for the sake of it
- Economic analysis
(Potential market x penetration probability)
Monitor
- Objective measures

Single Benefit
Mercedes/BMW/Hyundai
Volvo(2)
Triple Benefit: Aquafresh Toothpaste (Smithkline Beecham)
Attribute/Benefit/user/use(application)/competitor/quality-price... Positioning
Avoid:
Underpositioning - Overpositioning - Confused
positioning - Irrelevant p. & Doubtful one.
2/ Specific Positioning

- More for more (Häagen-Dazs/Starbucks) (Imitation issue)
- More for the Same (Lexus)
- Same for Less (John Lewis/Letsbuyit.com)
- Less for much Less (Aldi/Southwest Airlines)
- More for Less (Wal-Mart/Toys’R’Us)
4/ Developing the Total Value Proposition
Volvo
3/ Choosing a value positioning

Disney World & Disney Parks
Bayer Aspirin
Repositioning

Questions?
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