Dr. S. Borna MBA671

MARKET SEGMENTATION

Objectives: 1. To understand what it means to “segment” a market. to “segment” a market. 2. To know the basic steps in segmenting a market. segmenting a market. 3. To understand the bases used to segment consumer and industrial segment consumer and industrial markets. markets. Market Segmentation

4. To know how to evaluate and select segments for targeting of select segments for targeting of marketing programs. marketing programs. 5. To know how to determine and structure a product position to structure a product position to gain a competitive advantage. gain a competitive advantage. 6. To understand the concepts of positioning and differentiation. positioning and differentiation. Objectives Continued

7. To be able to identify competitive advantages of specific firms in advantages of specific firms in the marketplace. the marketplace. 8. Be able to discern differentiation attributes attributes 9. To be able to review how different firms are trying to communicate firms are trying to communicate their positioning strategies. their positioning strategies.

Benefits of the Segmentation Concept Concept 1. Market “Reality” 2. Provides a Market Opportunity Opportunity 3. Precise Definition of the Market in Terms of Market in Terms of Consumer Needs Consumer Needs

4. Efficient Allocation of Marketing Resources Marketing Resources 5. Segmentation Leads to a More Precise Setting of More Precise Setting of Market Objectives Market Objectives Benefits cont.

The Concept of Segmentation is Based on Three Propositions: is Based on Three Propositions: 1. Consumers are different. 2. Differences in consumers are related to differences in related to differences in market demand market demand 3. Segments of consumers can be isolated within overall be isolated within overall market market

Three Simple Consumer Models Models (Management View of Consumers) 1. Similarity 2. Unique 3. Difference/ Similarity These views lead to:

Three Alternative Marketing Strategies Strategies 1. Market Aggregation (mass production) (mass production) 2. Extreme Market Segmentation (mass customization) (mass customization) 3. Partial Market Segmentation

Mass Marketer’s View of Its Market Market P OQ D

Segmenter’s View of the Market P P P Q Q Q

Levels of Market Segmentation Niche Marketing Local Marketing Individual Marketing Mass Marketing nosegmentation Segment Marketing

Basic Market-Preference Patterns (a) Homogeneous preferencesSweetness Creaminess (c) Clustered preferencesCreaminess Sweetness (b) Diffused preferencesCreaminess Sweetness

Criteria for Segmentation 1. Size (Substantiality) 2. Reachability 3. Measurability (size, purchasing power, profiles of segments can be measured) power, profiles of segments can be measured)

4. Variations in Market Response Response 5. Segments are Sufficiently Stable Stable 6. To minimize within group difference and maximize difference and maximize among group difference. among group difference. Criteria cont.

Two Approaches To Market Segmentation Segmentation 1. Analysis of Consumer Consumer Characteristics Characteristics A. Socioeconomic B. Psychological C. Geographic (forward segmentation)

2. Analysis of Consumer Consumer Responses Responses (Behavioral (Behavioral Differences) Differences) Subjective Measures of consumer Responses (Perceptual Factors) Objective Measure of Consumer Responses (Usage Factors) (backward segmentation) segmentation)

A) Social Class Ethnic Ethnic Demographic Demographic B) Personality Type (Compulsive, Ambitious) Ambitious) Buyer Motives Buyer Motives Economy Economy Patronage, etc. Patronage, etc. AgeIncome Sex, etc.

Bases for Segmentation 1. Socioeconomic and Demographic Demographic 2. Geographical 3. Psychological 4. Perceptual Factors 5. Usage Factors

Five Patterns of Target Market Selection Single-segmentconcentrationProductspecialization M1 M2 M3 P1 P2 P3 Selectivespecialization M1 M2 M3 P1 P2 P3 M1 M2 M3 Full market coverage P1 P2 P3 Marketspecialization M1 M2 M3 P1 P2 P3 P1 P2 P3 M1 M2 M3 P= Product M= Market Selling lab equipment to universities only Microscope to labs Radio Broadcast to …

MKGMIX MARKET MKG MIX 1 MKG MIX 2 MKG MIX 3 SEGMENT 1 SEGMENT 2 SEGMENT 3 Undifferentiated Market Strategy Differentiated Strategy SEGMENT 2 SEGMENT 3 MKG MIX Concentrated marketing

Selecting a marketing strategy 1. Company Resources 2. Product Homogeneity 3. Product Stage in P.L.C. cont.

4. Market Homogeneity 5. Competitive Marketing Strategy Strategy Selection of strategy cont. cont.

Evaluating The Market Segments Segments 1. Segment Size and Growth 2. Segment Structural Attractiveness Attractiveness Segment Rivalry Segment Rivalry Threat of New Entrant Threat of Substitute P. Bargaining Power of Buyers and Suppliers

3. Company Objectives and Resources and Resources Evaluation cont.