chapter 5 segmenting markets

learning objectives_1 Explain how both B2B and consumer markets can be broken down into smaller, more manageable groups of similar customers Understand the effects on the marketing mix of pursuing specific segments 5-2 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

learning objectives_2 Understand the potential benefits and risks of segmentation Appreciate the role of segmentation in strategic marketing thinking 5-3 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Segmentation Defined Segmentation is the art of discerning and defining meaningful differences between groups of customers to form the foundations of a more focused marketing effort. 5-4 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

eg business and consumer travel markets 5-5 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Stages of Segmentation for B2B Markets Identify subgroups within the whole market that share common general characteristics (macro segments) Select target segments from macro segments based on differences in specific buying characteristics (micro segments) 5-6 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

B2B Segmentation Bases Macro Size Location Usage rate Micro Product Applications Technology Purchasing and decision-making processes Buyer-seller relationships 5-7 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Consumer Segmentation Similar to B2B segmentation, except Consumer segments tend to be larger More difficult to get close to buyer More emphasis on lifestyle and context 5-8 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Consumer Segmentation Bases Geographic Multi-variable Geodemographic Behaviour Psychographic Demographic 5-9 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

eg Geographic Segmentation and Instant Hot Chocolate Ideal for UK market (homes equipped with kettles, nice bedtime drink, or substitute for tea Less so for French market (kettles uncommon, norm of making hot chocolate with milk rather than water) 5-10 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Demographic Segmentation Age Gender Race Income Occupation Social status Family structure 5-11 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

eg Geodemographic Segmentation and Mosaic The analysis of people by where they live Micro-targeting system Targets by neighourhood Source: Experian Ltd, http://www.experian.com. © 2005 Experian Ltd. All rights reserved. The word ‘Experian’ is a registered trademark in the EU and other countries and is owned by Experian Ltd and/or its associated companies 5-12 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Psychographic Segmentation Lifestyle segmentation Categories Activities Interests Opinions Demographics Quorn targets vegetarians with meat substitutes Source: © Quorn http://www.quorn.co.uk 5-13 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

eg Lifestyle Orientations in China Fashion-orientated Tradition-orientated Achievement-orientated Moderate-orientated 5-14 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Lifestyle Orientations in the USA 5-15 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Why Use Psychographic Segmentation? To define a target market To create a new view of the market To position the product To better communicate product attributes To develop overall strategy To market social and political issues 5-16 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Behaviour Segmentation End use Benefits sought Usage rate Loyalty Attitude Buyer readiness eg usage segmentation in the soup market Dinner party starter Warming snack Meal replacement Recipe ingredient Easy office lunch 5-17 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Loyalty Segments Current loyal user, continuing purchase Current customer, switching possible Occasional user, could become loyal Occasional user, switching possible Non-user, could become user Non-user, unlikely to become user 5-18 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Figure 5.2 The AIDA Response Hierarchy Model Awareness Interest Desire Action 5-19 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Segmentation Targeting Strategies Concentrated Undifferentiated Differentiated 5-20 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Undifferentiated Strategy Marketing mix The market 5-21 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Differentiated Strategy Marketing mix 1 Segment 1 Marketing mix 2 Segment 2 Marketing mix 3 Segment 3 5-22 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

eg Cadbury’s Market Segments Immediate eat Home stock Kids Seasonal Gift 5-23 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Concentrated Strategy Marketing mix 2 Segment 2 5-24 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Criteria for Successful Segmentation Distinctiveness Tangibility Accessibility Defendability 5-25 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Key Terms_1 Which bases of segmentation groups consumers in terms of their usage rate, the purpose of use, or their willingness and readiness to buy? Behavioural segmentation _____ occurs when a consumer consistently buys the same brand over a long period. Brand loyalty 5-26 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Key Terms_2 _____ stages categorise consumers in terms of how close they are to making a purchase or a decision. Buyer readiness Which segmentation base considers the measurable aspects of population structure, such as birth rates, age profiles, family structures, education levels, occupation, income and expenditure patterns? Demographic segmentation 5-27 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Key Terms_3 _____ is a combination of geographic and demographic segmentation that can either give the demographic characteristics of particular regions, neighbourhoods and even streets, or show the geographic spread of any demographic characteristics. Geodemographics Which segmentation base groups customers in terms of their geographic location? Differential advantage 5-28 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Key Terms_4 _____ means to group consumers on the basis of psychographic characteristics. Lifestyle segmentation _____ segments in B2B markets are defined in terms of broad organisational characteristics such as size, location and usage rates, or in terms of product applications. Macro 5-29 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Key Terms_5 _____ segments in B2B markets are defined in terms of detailed organisational characteristics such as management philosophy, decision-making structures, purchasing policies. Micro What term refers to using a number of different variables to develop a rich profile of a target group of customers? Multivariate segmentation 5-30 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Key Terms_6 Which bases of segmentation defines consumers in terms of their attitudes, interests and opinions? Psychographics _____ are consumers who are not loyal to any one brand of a particular product and buy two or more brands within the category. Switchers 5-31 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006

Key Terms_7 _____ is the process of deciding how many market segments to aim for and how to do it. Targeting 5-32 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006