CHAPTER based segmentation procedure/ process 1. Needs

CHAPTER 5© Pearson Education South Asia Pte Ltd 2013. All rights reserved1Identifying Market Segments and Selecting Target marketsLearning Issues for Chapter five1.

What are the different levels of market segmentation?2.In what ways can a company divide a market into segments?3.What are the requirements for effective segmentation?4.How should a company choose the most attractive target markets?© Pearson Education South Asia Pte Ltd 2013.

Don't waste your time
on finding examples

We can write the essay sample you need

All rights reserved23What is a market segment?A subgroup of people or organizations sharing one or more characteristics that cause them to have relatively similar product needs. E.g Children segment, Adult segment4What is The Process of market segmentation??The process of dividing a market into meaningful segments or groups.?The purpose of market segmentation is to enable the marketer to tailor marketing mixes to meet the needs of one or more specific segments.5The Importance Of Market Segmentation?1.Helps marketers define customer needs and wants more precisely.

?2.Helps marketers define objective more accurately and better allocate resources?3.Performancecan be better evaluated. ?4.Market segmentation can revive flagging or declining sales?5.The rapidly changing environment means that segmentation is a continuous process.?6.More effective marketing mix strategy6The need based segmentation procedure/ process1.

Needs based segmentation-Groups customers based on similar needs2. Segment Identification -For each segment determine the segment demographics, lifestyle and usage behaviors.3. Segment attractiveness -Determine the attractiveness of each segment4. Segment profitability-Determine segment profitability5.

Segment positioning -Create a value proposition for each segment.6. Segment Acid -Test-Test the attractiveness of each positioning strategy.7.

Develop marketing mix strategy for each segment.Target Marketing•To compete more effectively, many companies are now embracing target marketing. •Effective target marketing requires that marketers: a.

Identify and profile distinct groups of buyers who differ in their needs and wants (market segmentation).b.Select one or more market segments to enter (market targeting).c.

For each target market, establish and communicate the distinctive benefit(s) of the company’s market offering (market positioning).© Pearson Education South Asia Pte Ltd 2013. All rights reserved75.1 Bases for Segmenting Consumer Markets•There are 2 broad groups of variables to segment consumer markets.Regardless of which type of segmentation scheme we use, the key is adjusting the marketing program to recognize customer differences.© Pearson Education South Asia Pte Ltd 2013. All rights reserved8•geographic, demographics, and psycho-graphic.Descriptive characteristics•consumer responses to benefits, usage occasions, or brands.

Behavioral considerations1.Geographic SegmentationThe company can operate in one or a few areas, or operate in all but pay attention to local variations. It can tailor marketing programsto the needs and wants of local customer groups in trading areas, neighborhoods, and even individual stores.

© Pearson Education South Asia Pte Ltd 2013. All rights reserved9Divide overall market by locationDivide markets into different geographical unitsnations, states, regions, counties, cities, or neighborhoodsExample of Geographic Segmentation?Padini-DataranPahlawanMega mall store carries a wider range and attracts a different clientele, mostly tourists and expatriates, while a few hundred meters away, vinccistore at AEON attracts locals.© Pearson Education South Asia Pte Ltd 2013.

All rights reserved10Geographic Segmentation: Grassroots MarketingIn a growing trend called grassroots marketing, such activities concentrate on getting as close and personally relevant to individual customers as possible.Example: HP in IndiaWorkingwiththelocalgovernment,aswellasabranchofHPLabsbasedinIndia,thecompany,throughgrassrootsmarketing,providestheruralpoorwithaccesstogovernmentrecords,schools,healthinformation,cropprices,andsoon.Itshopeistostimulatesmall,tech-basedbusinesses.NotonlydoesthisbuildgoodwillandtheHPbrandinIndia,italsohelpsthecompanydiscovernew,profitablelinesofbusiness.© Pearson Education South Asia Pte Ltd 2013. All rights reserved11Geographic Segmentation: Regional Marketing•Regional marketing means marketing right down to a specific district. •Some companies use mapping software to show the geographic locations of their customers.•By mapping the densest areas, the retailer can resort to customer cloning, assuming that the best prospects live where most of his customers come from.

© Pearson Education South Asia Pte Ltd 2013. All rights reserved12Geographic Segmentation: Regional Marketing•Some approaches combine geographic data with demographic datato yield even richer descriptions of consumers and neighborhoods.•Called geo-clustering, it captures the increasing diversity of the population.© Pearson Education South Asia Pte Ltd 2013. All rights reserved132. Demographic Segmentation© Pearson Education South Asia Pte Ltd 2013.

All rights reserved14Demographicagefamily life cycleincomeeducationgenderfamily sizegenerationRace Social classnationalityreligionoccupationReasons for Popularity of Demographic Segmentation1.Consumer needs, wants, usage rates, and product and brand preferences are often associated with demographic variables. 2.demographic variables are easier to measure. 3.demographic characteristics is needed to estimate the size of the market and the media that should be used to reach it efficiently.

© Pearson Education South Asia Pte Ltd 2013. All rights reserved15Age and Life-Cycle Stage•Consumer wants and abilities change with age.•Nevertheless, age and life cycle can be tricky variables.•Life stage defines a person’s major concern© Pearson Education South Asia Pte Ltd 2013. All rights reserved16Safi Rania Gold?Safi Rania Gold targets the young segment who wants anti-aging products. It has Rozita Che wan mature but youthful-looking celebrity, endorse the product.© Pearson Education South Asia Pte Ltd 2013. All rights reserved17Gender Segmentation•Gender differentiation has long been applied in clothing, hairstyling, cosmetics, and magazines.

•Men and women have different attitudes and behave differently, based partly on genetic makeup and partly on socialization.•Examples:?Womentend to be more communal-minded and mentend to be more self-expressive and goal-directed.?Men often like to read product information; women may relate to a product on a more personal level.?Women influence 80% of consumer purchase; make 75% of new home decisions and purchase 60% of cars© Pearson Education South Asia Pte Ltd 2013.

All rights reserved18Gender Segmentation•Some traditionally more male-orientated markets are beginning to recognize gender segmentation, changing how they design and sell their products.•Example: Several Korean car manufacturers have designed cars specifically for women. Banks are also finding women a lucrative segment in Japan.© Pearson Education South Asia Pte Ltd 2013. All rights reserved19Income•Income segmentation is a long-standing practice in product and service categories esp. for clothing, travel, financial services and automobiles.•However, income does not always predict the best customers for a given product.

•Increasingly, companies are finding their markets are hourglass-shaped as middle-market consumers migrate toward both discount and premium products.© Pearson Education South Asia Pte Ltd 2013. All rights reserved20Example of Income Segmentation: Banyan Tree?Banyan Tree is a niche international chain of high-end resorts and hotels catering to the affluent.21http://www.banyantree.com/en/em-uae-al-wadi/http://www.

banyantree.com/en/find-a-hotel-list#maldivesExample of Income Segmentation: Kraft in Rural Indonesia•In Indonesia, for instance, such rising rural incomes have not gone unnoticed and Kraft has adapted its products to suit this segment.•Rural consumers are still extremely price sensitive. Television ads are thus adapted to make the products more approachable and affordable.•Kraft offers products in biscuit and soft cake forms, and in smaller packages to be sold at snack kiosks in towns and villages.•Small packets costs 500 rupiah (6 cents) thereby making it extremely affordable to the rural customer.© Pearson Education South Asia Pte Ltd 2013.

All rights reserved22Generation •Each generationor cohort is profoundly influenced by the times in which it grows up. •Demographers call these groups cohorts.•They share similar outlooks and values.•Marketers often advertise to a cohort by using the icons and images prominent in its experiences.© Pearson Education South Asia Pte Ltd 2013. All rights reserved23Gen Y•A generation group of interest to marketers is the Gen Y. •Because Gen Y members are often turned off by overt branding practices and “hard sell,” marketers use different approaches to reach and persuade them.

•These include online buzz, student ambassadors, product placements in computer games, and sponsoring cool events.© Pearson Education South Asia Pte Ltd 2013. All rights reserved24Gen Y in China?China’s Gen Y are more entrepreneurial, more Internet connected, and know more about Westerners than Westerners know about them.

© Pearson Education South Asia Pte Ltd 2013. All rights reserved253. Psychographic Segmentation•Psychographics is the science of using psychology and demographics to better understand consumers. •In psychographic segmentation, buyers are divided into different groups on the basis of :1) psychological/personality traits, 2) lifestyle, 3 ) values.•People within the same demographic group can exhibit very different psychographic profiles.© Pearson Education South Asia Pte Ltd 2013. All rights reserved26Psychographic Segmentation•One of the most popular commercially available classification systems based on psychographic measurements is Strategic Business Insights’ VALSTMframework.

•VALS classifies adults into eight primary groups based on personality traits and key demographics.•The segmentation system is based on responses to a questionnaire featuring four demographic and 35 attitudinal questions (see Figure 8.1).© Pearson Education South Asia Pte Ltd 2013. All rights reserved27Figure 8.

1: The VALS Segmentation System© Pearson Education South Asia Pte Ltd 2013. All rights reserved28The main dimensions of the VALS segmentation framework are consumer motivation (the horizontal dimension) and consumer resources (the vertical dimension).Four groups with HIGHER resources1.Innovators—Successful, sophisticated, active, and “take-charge” people with high self-esteem. Purchases often reflect cultivated tastes for relatively upscale, niche-oriented products and services.2.Thinkers—Mature, satisfied, and reflective people who are motivated by ideals and value order, knowledge, and responsibility.

Favor durability, functionality, and value in products.3.Achievers—Successful career-and work-oriented people who value consensus and stability.

They favor established and prestige products that demonstrate success to their peers.4.Experiencers—Young, enthusiastic, and impulsive people who seek variety and excitement. Spend a comparatively high proportion of income on fashion, entertainment, and socializing.© Pearson Education South Asia Pte Ltd 2013.

All rights reserved29Four groups with LOWER resources1.Believers—Conservative, conventional, and traditional people with concrete beliefs. Favor familiar and established products and are loyal to established brands.2.Strivers—Trendy and fun-loving people who seek the approval of others but are resource-constrained. Favor stylish products that emulate the purchases of those with greater material wealth.3.Makers—Practical, self-sufficient, traditional, and family-oriented people who focus on their work and home context.

Favor basic products with a practical or functional purpose.4.Strugglers—Elderly, resigned, and passive people who are concerned about change. Loyal to their favorite brands.© Pearson Education South Asia Pte Ltd 2013. All rights reserved304. Behavioral Segmentation In behavioral segmentation, marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. © Pearson Education South Asia Pte Ltd 2013.

All rights reserved31Needs and Benefits•Not everyone who buys a product has the same needs or wants the same benefits from it.•Needs-based or benefits-based segmentation is a widely used approach because it identifies distinct market segments with clear marketing implications.Procter & Gamble, for instance, has different shampoo brands according to the needs of each segment. •Head & Shoulders is for those who need to control their dandruff problem;•Pantene is for those who want to protect their hair from environmental damage from the sun;•Rejoice is for those who want a mild shampoo for everyday use.© Pearson Education South Asia Pte Ltd 2013. All rights reserved32User and Usage—Real User and Usage-related VariablesMany marketers believe that behavioral variables—occasions, benefits, user status, usage rate, loyalty status, buyer-readiness stage, and attitudeare the best starting points for constructing market segments.© Pearson Education South Asia Pte Ltd 2013.

All rights reserved33Decision Roles•It is easy to identify the buyer for many products.•People play five roles in a buying decision: initiator, influencer, decider, buyer, and user.•Different people are playing different roles, but all are crucial in the decision process and ultimate consumer satisfaction.© Pearson Education South Asia Pte Ltd 2013. All rights reserved34Occasions•Occasions are determined by a time of day, week, month, year or other well-defined temporal aspects of a consumer’s life. •Buyers can be distinguished according to the occasions when they develop a need, purchase a product, or use a product.

•Occasion segmentation can help firms expand product usage.© Pearson Education South Asia Pte Ltd 2013. All rights reserved35User Status•Markets can be segmented into non-users, ex-users, potential users, first-time users, and regular users of a product.•Each will require a different marketing strategy.© Pearson Education South Asia Pte Ltd 2013. All rights reserved36Usage Rate•Markets can be segmented into light, medium, and heavy product users. © Pearson Education South Asia Pte Ltd 2013.

All rights reserved37Buyer Readiness Stage•Some people are unaware of the product, some are aware, some are informed, some are interested, some desire the product, and some intend to buy. •To help characterize how many people are at different stages and how well they have converted people from one stage to another, some marketers employ a marketing funnel.•See Figure 8.2: The Brand Funnel.© Pearson Education South Asia Pte Ltd 2013. All rights reserved38Figure 8.2: The Brand Funnel?The relative numbers of consumers at different stages make a big difference in designing the marketing program.

© Pearson Education South Asia Pte Ltd 2013. All rights reserved39Loyalty StatusBuyers can be divided into four groups according to brand loyalty status:1.Hard-core loyals—Consumers who buy only one brand all the time.2.Splitloyals—Consumers who are loyal to two or three brands.

3.Shiftingloyals—Consumers who shift loyalty from one brand to another.4.Switchers—Consumers who show no loyalty to any brand© Pearson Education South Asia Pte Ltd 2013. All rights reserved40Marketing ApplicationsA company can learn a great deal by analyzing the degrees of brand loyalty:i.By studying its hard-core loyals, the company can identify its products’ strengths;ii.By studying its split loyals, the company can pinpoint which brands are most competitive with its own; andiii.

By looking at customers who are shifting away from its brand, the company can learn about its marketing weaknesses and attempt to correct them.© Pearson Education South Asia Pte Ltd 2013. All rights reserved41Attitude© Pearson Education South Asia Pte Ltd 2013. All rights reserved42ATTITUDE GROUPSENTHUSIASTICPOSITIVEINDIFFERENTNEGATIVEHOSTILEMultiple Bases•Combining different behavioral bases can help to provide a more comprehensive and cohesive view of a market and its segments.•Figure 8.3 depicts one possible way to break down a target market by various behavioral segmentation bases.© Pearson Education South Asia Pte Ltd 2013.

All rights reserved43Figure 8.3: Behavioral Segmentation Breakdown© Pearson Education South Asia Pte Ltd 2013. All rights reserved4445Advantage -It is more descriptive and precise than single variable segmentationDisadvantages1.More difficult to employ2.The segment size becomes smaller and reduces its economic significant 3.More difficult to obtain the required secondary data. Advantages & disadvantages of Multiple Bases segmentation5.

2 Market Targeting•Once the firm has identified its market-segment opportunities, it has to decide how many and which ones to target. •Marketers are increasingly combining several variables in an effort to identify smaller, better-defined target groups.•This has lead some researchers to advocate a needs-based market segmentation approach. © Pearson Education South Asia Pte Ltd 2013. All rights reserved465.3 Effective Segmentation Criteria1.Measurable—The size, purchasing power, and characteristics of the segments can be measured.

2.Substantial—The segments are large and profitable enough to serve. A segment should be the largest possible homogeneous group worth going after with a tailored marketing program.

3.Accessible—The segments can be effectively reached and served.4.Differentiable—The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs. 5.Actionable—Effective programs can be formulated for attracting and serving the segments.© Pearson Education South Asia Pte Ltd 2013. All rights reserved47Porter’s Five Forces Model and Segment AttractivenessMichael Porter has identified 5 forces that determine the intrinsic long-run attractiveness of a market or market segment:© Pearson Education South Asia Pte Ltd 2013.

All rights reserved48industry competitors potential entrantssubstitutesbuyerssuppliersPorter’s Five Forces Model and Segment Attractiveness1.Threat of intense segment rivalry—A segment is unattractive if it already contains numerous, strong, or aggressive competitors.2.Threat of new entrants—The most attractive segment is one in which entry barriers are high and exit barriers are low.3.Threat of substitute products—A segment is unattractive when there are actual or potential substitutes for the product.

Substitutes place a limit on prices and on profits.© Pearson Education South Asia Pte Ltd 2013. All rights reserved49Porter’s Five Forces Model and Segment Attractiveness4.Threat of buyers’ growing bargaining power—A segment is unattractive if buyers possess strong or growing bargaining power.5.Threat of suppliers’ growing bargaining power—A segment is unattractive if the company’s suppliers are able to raise prices or reduce quantity supplied.

© Pearson Education South Asia Pte Ltd 2013. All rights reserved50Evaluating and Selecting the Market Segments•In evaluating different market segments, the firm must look at two factors: ?The segment’s overall attractiveness and?The company’s objectives and resources•Does a potential segment have characteristics that make it generally attractive, such as size, growth, profitability, scale economies, and low risk? •Does investing in the segment make sense given the firm’s objectives, competencies, and resources? © Pearson Education South Asia Pte Ltd 2013. All rights reserved51Segment Attractiveness?Energy drink, 100 Plus, considers the tertiary segment attractive enough for it to allocate resources such as this promotional banner put up at the National University of Singapore’s Business School to welcome students when they began their new academic year.© Pearson Education South Asia Pte Ltd 2013. All rights reserved52Figure 8.

4: Possible Levels of Segmentation© Pearson Education South Asia Pte Ltd 2013. All rights reserved53Levels of Segmentation1)Full Market Coverage•The firm attempts to serve all customer groups with all the products they might need.•In undifferentiated marketing, the firm ignores segment differences and goes after the whole market with one offer.•In differentiated marketing, the firm operates in several market segments and designs different products for each segment.© Pearson Education South Asia Pte Ltd 2013.

All rights reserved54?Samsung identified six segments of mobile phone users based on their need for style, infotainment, business, multimedia, connection, and basic necessities. It has a slew of mobile phones to address these varied needs.© Pearson Education South Asia Pte Ltd 2013. All rights reserved55Undifferentiated Marketing•In undifferentiated marketing or mass marketing, the firm ignores segment differences and goes after the whole market with one offer. •It designs a product and a marketing program that will appeal to the broadest number of buyers.

•It relies on mass distribution and advertising.•It aims to endow the product with a superior image.© Pearson Education South Asia Pte Ltd 2013. All rights reserved56Undifferentiated Marketing•”the marketing counterpart to standardization and mass production in manufacturing.”•The narrow product line keeps down costs of research and development, production, inventory, transportation, marketing research, advertising, and product management. •The undifferentiated advertising program also reduces costs.•The company can turn its lower costs into lower prices to win the price-sensitive segment of the market.© Pearson Education South Asia Pte Ltd 2013.

All rights reserved57Differentiated Marketing•The firm operates in several market segments and designs different products for each segment.•Creates more total sales than undifferentiated marketing. However, it also increases the costs of doing business.

•Leads to both higher sales and higher costs, nothing general can be said about the profitability of this strategy.© Pearson Education South Asia Pte Ltd 2013. All rights reserved58Differentiated Marketing –LenovoLenovo practices differentiated marketing to reach out more effectively to consumer and business customers.© Pearson Education South Asia Pte Ltd 2013.

All rights reserved592)Multiple Segment Specialization•With selective specialization, a firm selects a subset of all the possible segments, each objectively attractive and appropriate. •There may be little or no synergy among the segments, but each promises to be a moneymaker. •Keeping synergies in mind, companies can try to operate in supersegmentsrather than in isolated segments. A supersegment is a set of segments sharing some exploitable similarity.

© Pearson Education South Asia Pte Ltd 2013. All rights reserved602)Multiple Segment Specialization•With product specialization, the firm sells a certain product to several different market segments. This leads to a strong reputation in the specific product area. The downside/risk is that the product may be supplanted by an entirely new technology.•With market specialization, the firm concentrates on serving many needs of a particular customer group, such as by selling an assortment of products only to university laboratories. The firm gains a strong reputation among this customer group and becomes a channel for additional products its members can use. The downside/risk is that the customer group may suffer budget cuts or shrink in size.© Pearson Education South Asia Pte Ltd 2013.

All rights reserved613)Single-segment Concentration •The firm markets to only one particular segment.•Through concentrated marketing, the firm gains deep knowledge of the segment’s needs and achieves a strong market presence.•The firm enjoys operating economies through specializing its production, distribution, and promotion. •If it captures segment leadership, the firm can earn a high return on its investment.© Pearson Education South Asia Pte Ltd 2013. All rights reserved62Tiger Motorcycles in ThailandTiger’s bikes are targeted at a segment that Japanese producers have overlooked—the thrifty, yet style-conscious, rural rider.

© Pearson Education South Asia Pte Ltd 2013. All rights reserved63Niche Marketing•More narrowly defined customer group seeking a distinctive mix of benefits within a segment. Marketers usually identify niches by dividing a segment into sub-segments.•Aim to understand their customers’ needs so well that customers willingly pay a premium.•However, there are risks. A market segment can turn sour or a competitor may invade the segment.© Pearson Education South Asia Pte Ltd 2013. All rights reserved644)Individual Marketing•The ultimate level of segmentation leads to “segments of one,” “customized marketing,” or “one-to-one marketing.

•Today customers are taking more individual initiative in determining what and how to buy. •They log onto the Internet; look up information and evaluations of product or service offerings; conduct dialogue with suppliers, users, and product critics; and in many cases design the product they want.•Customerizationcombines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice.© Pearson Education South Asia Pte Ltd 2013. All rights reserved65Ethical Choice of Market Targets•Market targeting also can generate public controversy when marketers take unfair advantage of vulnerable or disadvantaged groups, or promote potentially harmful products.

•Example, the fast-food industry has been heavily criticized for marketing efforts directed toward children.© Pearson Education South Asia Pte Ltd 2013. All rights reserved66Ethical Choice of Market TargetsSocially responsible marketing calls for targeting that serves not only the company’s interests, but also the interests of those targeted.© Pearson Education South Asia Pte Ltd 2013.

All rights reserved67Thank you

x

Hi!
I'm Owen!

Would you like to get a custom essay? How about receiving a customized one?

Check it out