Market Segmentation, Targeting and Positioning

Market Segmentation

Homogenous group of customers Definition of a Segment Homogenous group of customers

Traits that lead to behavior How can we segment? Two routes Behavior Traits that lead to behavior

Traits that lead to behavior Drilling Down… Behavior product purchase brand purchase purchase timing purchase quantity purchase location Traits that lead to behavior Demographics Psychographics Geographics

Examples of Behavior-Based Segmentation Product purchase behavior Brand purchase behavior brand loyalty Purchase quantity Heavy and light users Purchase location In-store vs. catalog/online

Purchase Timing Segmentation Early majority (34 %) Late majority (34 %) Innovators (2.5 %) Early Adopters (13.5 %) Laggards

Buying behavior by ZIP Codes An example application of psychographics Traits that Lead to Behavior Demographics ethnic background social class age gender Occupation Geographics Buying behavior by ZIP Codes Psychographics An example application of psychographics Psychogeographics?

B-to-B Segmentation

Segment by firmographics Types of Segments Segment by firmographics business of customer Size of customer Geographics E.g., Home builders Rural Suburban urban home builders

Decision making process Relationship-based vs. criterion-based Behavior of Business as a Customer Loyalty to suppliers Key decision criteria Price Quality Decision making process Individual vs. group Group composition Relationship-based vs. criterion-based

Segments defined by combining multiple segmentation variables Composite Segments Segments defined by combining multiple segmentation variables E.g., Price Sensitivity Benefits sought Age Gender Lifestyle

Smaller and more precisely defined segments result in … precise definition of customer needs better response to marketing efforts greater loyalty lower price sensitivity higher profitability of the customer

Lower economies of scale On the other hand ….. Smaller segments Smaller markets Lower economies of scale Higher costs Lower profits

Targeting

Promoting our products to the selected customer segments. Definition of Targeting Promoting our products to the selected customer segments.

An example of a well-targeted offer Demo e-mail from buy.com

Why Target?

Benefits of targeting Better response rate Higher efficiency Lower costs Higher efficiency

How can we target? Business 2.0 article on Ashford

Positioning

Customers’ perception of the product Definition of a Position Customers’ perception of the product Product image What its unique features are Who its customers are What its personality is

Composite (experiential). Different Positioning Concepts Simple (functional). Composite (experiential). Abstract (symbolic).