Market Segmentation Special Topic Mktg 633

Objectives n Definition n Reasons for segmentation n Bases of segmentation n Applications n Product Positioning

Definition n The process of dividing all possible users of a product into groups that have similar needs the products might satisfy.

Historical Development n 50s & 60s: Mass Marketing n 90s: Breaking Up Into Smaller Groups n Extensive Segmentation and targeting smaller consumer groups necessarily produces higher marketing costs

Criteria for Segmentation n Know Your Customers (Scanner Data) n Make What Customers Want. Offer many variations on a single product. n Reach Target Customers. Ex: “smart” cash registers.

Segmentation Approaches n A Priori Approach n Post Hoc Approach

Market Segmentation ÊAnalyze the Consumer/Product Relationship u Essence of developing effective marketing strategies is understanding the special relationship that consumers have with products and/or brands. Concerns how consumers perceive a product as relevant for their lifestyle, salient consequences and values, and self-concepts.

Market Segmentation ·Determine Segmentation Bases u Geographic u Demographic u Sociocultural u Affective and Cognitive u Behavioral

Using VALS 2 in Marketing n Who your consumers are? n What are they buying? n Where are they? (geodemographic) n How to effectively communicate with customers? n Why? Relate consumers underlying psychological values to their lifestyles and buying behavior

Sample Questions from VALS 2 n I am often interested in theories n I like outrageous people and things n I like a lot of variety in my life n I love to make things I can use everyday n I follow the latest trends and fashions n Just as the Bible says, the world literally was created in six days n I like being in charge of a group n I have more ability than most people n I must admit that I like to show off n I like trying new things Measured on a 4-point scale from Mostly Disagree to Mostly Agree.

VALS I Typology VALS I Typology

VALS 1 n Classifies the American population into 4 general consumer groups u Need-Driven (Sustainers and Survivors) F The poor and uneducated (11%) u Outer-Directed (Achievers, Emulators and Belongers) F Lifestyles directed by external criteria (67%) u Inner-Directed (Societally Conscious, Exeriential and I-Am- Me) F Motivated by personal needs than by expectations of others (20%) u Integrated F Those who are able to combine the best of both outer- and inner-directed values (2%)

VALS 2 n Classifies the American population into 3 general consumer groups and then subdivides into 8 distinctive subgroups u Principle-Oriented F motivated in their choice by their beliefs, rather than by desire for approval u Status-Oriented F guided by actions, approval, and opinions of others u Action-Oriented F propelled by a desire for social or physical, variety, and risk- taking

Example of VALS 2 Segment: Principled n years, Married n College graduate n 11% of U.S. adult n Well informed, “info junkie” n Value education and travel n Practical consumers n Prestige, image unimportant n Watch TV news

Market Segmentation ¸Select Segmentation Strategy u Do not enter u Mass market (mass market strategy) u One segment (concentrated strategy u More than one segment, separate marketing mix for each (differentiated strategy)

Product Positioning n Determining how to differentiate one’s product from those of competitors in the minds of consumers u 1. Position on product attributes Ex: price (Budget Car Rental) u 2. Position on benefits Ex: Close-Up’s benefit of fresh breath u 3. Position on usage Ex: Michelob: special occasion beer u 4. Position on user category Ex: Wheaties as the “breakfast of champions”