Identifying Market Segments and Targets

Market Segments:. Markets are not homogeneous Market Segments: . Markets are not homogeneous. . A company can’t connect with all customers in large, broad, or diverse markets. . Consumers can be grouped by one or more characteristics.

Market Segments- cont. A company needs to identify which market segments it can serve effectively. Car markets: Low-cost Car buyers market. Those seeking luxurious driving experience. Those seeking driving thrills and performance. Those seeking for safety and comfort driving.

Levels of Market Segmentation Mass Marketing Micromarketing in one of four levels: segments, niches, local areas, and individuals.

Segment Marketing Market segment --a group of customers who share a similar set of needs and wants. Segment marketing offers key benefits over mass marketing. A company can better design, price, promote, and deliver the product to satisfy the target market.

Niche Marketing A niche is a narrowly defined customer group seeking a distinctive mix of benefits. We can identity niches by dividing a segment into subsegments. Ex. Enterprise Rent-A-Car has attracted to the low-budget, insurance-replacement market, by offering pick up customers. Genentech– pursues “targeted therapies” drugs aimed at small subset of patients for a premium price,--”Herceptin”. A breast cancer drug to only 25% of the patients.

Globalization has facilitated niche marketing. Customers in the niche market will pay a premium to the firm that best satisfies their needs. Niches are generally fairly small and attract only one or two competitors. Globalization has facilitated niche marketing. Low cost of setting up shop on the internet helps many small startups aimed at niches. Cont. Germany has more than 300,000 small and midsize co. and enjoyed over 50% MS in the global niche markets. Wedding planner, personal life style coach, Sushi bar—sashimi.

Local Marketing Marketing programs tailored to the needs and wants of local customer groups. Local marketing reflects a growing trend called “grassroots marketing”. Grocery retail chains (Safeway, Kroger) allowed retail stores managers carry mechandises to meet local customer needs– for Hispanic customers, Asian customers. Nike’s grass marketing such as sponsorship of local school teams, providing shoes, clothing and equipment.

Local Marketing cont. A large part of local marketing is “experiential marketing”, which promotes a product or service by connecting it with unique and interesting experiences. Disney maintains that salable experiences come in four varieties: entertainment, education, esthetic, and escapist.

Customerization The ultimate level of segmentation leads to “ segments of one’. Customized marketing is “one-to-one marketing”. Today customers are taking more individual initiative in determining what and how to buy. Cont. Honda center shows “the Lords of the rings in Concert” along with the movie “the Fellowership of the Rings.

More online companies re offering customers a “Choiceboard” that allows customers to design their own product and services. The firm provides a platform and tools and “rent” out to customers the means to design their own products. Cont.

Customerization is certainly not for every company, such as automobiles. Customerization can raise the cost of goods by more than the customers is willing to pay. Customers can’t cancel the order after the co. has started to work on it. Anderson Windows.– for customized windows. DeBeers– design your own rings.

Segmenting Consumer Markets To form segments by looking at descriptive characteristics: geographic, demographic, and psychographic. Or to form segments by looking at “behavioral” aspects.

Geographic Segmentation Dividing the market into different geographic units, such as nations, states, regions, counties, cities, or neighborhoods. More and more regional marketing means marketing right down to a specific zip code. Cont. Bed Bath and Beyond caters its home furnishing lines to local tastes.

Mapping software can be used to show the geographic location of their customers. Claritas, Inc., has developed a geoclustering approach called PRIZM (Potential Rating Index by ZIP Markets). Cont.

PRIZM PRIZM classifies over half a million U.S. residential neighborhoods into 15 distinct groups and 66 distinct lifestyle segments called PRIZM clusters. The neighborhoods are broken down by zip code, zip+4, or census tract and block group. Cont.

The residents in a cluster tend to lead similar lives, driving similar cars, have similar jobs, and read similar magazines, such as “Beltway Boomers”, “Hometown Retired”,”Latino America”,”The Cosmopolitans”.

Demographic Segmentation The market is divided into groups on the basis of variables such as age, family size, family life cycles, gender, income, occupation, education, religion, race, nationality, and social class.

Age and Life-cycle Stage Consumer wants and abilities change with age. Toothpaste brands such as Crest and Colgate offer 3 main lines of products to target kids, adults, and older consumers. Persons in the same part of the life cycle may differ in their life stage. Cont. Honda’s Element targeted to 21 years olds with the boxy car. However, baby boomers are attracted to the sexy car. Ave age of buyers are 42.

Life stage defines a person’s major concern, such as going through a divorce, going through a second marriage, taking care of an older parent, deciding to buy a new home. They present opportunities for marketers who can help people cope with their major concerns.

Gender Men and women tend to have different attitudinal and behavioral orientation. Women tend to be more communal-minded. Men tend to be self-expressive and goal-directed. Men often like to read product information; women may relate to a product on a more personal level. Cont.

Gender differentiation has long been applied in clothing, hairstyling, cosmetics,and magazines. Now, the auto industries are beginning to recognize gender segmentation, and are changing how they design and sell cars. Cont.

Research suggests that 80% of home improvement projects are initiated by women. Lowe’s designed its stores with wider aisles to make it easier for shopping carts to get around, and include more big-ticket appliances. Home Depot introduced “Ladies Night at Home Depot” to attract women.

Generation Each generation is profoundly influenced by the times in which it grows up– the music, movies, politics, and defining events of that period. Demographers call these groups “cohorts”. Members of a cohort share the same major cultural, political, and economic experience. Cont.

Generation Cohorts Silent generation (35 million) Born 1925-1945 Baby boomers (78 million) Born 1946-1965 Gen. X (47 million) Born 1966-1977 Gen. Y (72 million) Born 1978-1994 Millennials (42 million)Born 1995-2002

Income Income segmentation is a long-standing practice for such product and service categories as auto, clothing, cosmetics, financial services, and travel. However, income does not always predict the best customers for a given product.

Psychographic Segmentation Psychographics is the science of using psychology and demographics to better understand consumers. Buyers are divided into different groups on the basis of psychographic/personality traits, lifestyle, or values. Cont.

sta The most popular commercial pschographic measurements is SRI’s VALS framework. VALS classifies U.S. adults into eight primary groups based on personality traits and key demographics. They are innovators, thinkers, achievers, experiencers; believers, strivers, makers, and survivors.

Behavioral Segmentaion Buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. People play five different roles in a buying decision: initiator, influencer, decider, buyer, user.

Behavioral Variables Behavioral variables are the best starting points for constructing market segments– such as occasions, benefits, user status, usage rate, loyalty status, buyer-readiness stage, and attitude.

Market Targeting After identifying its market segment opportunities, it has to decide how many and which ones to target. Effective segmentation criteria are: Measurable, substantial, accessible, differentiable, and actionable.

Evaluating and Selecting he 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. Cont.

The firm can choose five patterns of target market selection: Single-segment concentration Selective specialization Product specialization Market specialization Full market coverage