Examples of Segmentation Analysis Muge Ozman October 2010

European Metal Can Industry (Source: Grant) 1. Identify Key Segmentation Variables 1. Identify possible ones 1. Identify possible ones: raw material, can size, can design, cutomer size, customer industry, customer location 2. Reduce the number of segmentation variables; which are most significant? Which are closely correlated and can be combined? Type of can, customer industry, customer location 3. Identify discrete categories for each segmentation variable Type of can: steel 3 piece, steel 2 piece, aluminium 2 piece, general cans, composite cans, aerosols, Type of customer: food processing, fruit juice, pet food, soft drink, toiletries, beer, oil. Location: France, Germany, Spain, Italy, UK, Benelux

2. Construct Segmentation Matrix European Metal Can Industry (Source: Grant) France Spain Germany Italy

European Metal Can Industry (Source: Grant) 3. Analyse Segment Attractiveness Apply five forces analysis to individual segments. For example, the market for aliminum 2 piece cans to soft drink canners in Italy may be analysed as follows: Internal rivalry Few companies Low differentiation Little excess capacity Buyer Power Influence of a few large soft drink bottlers Buyer Power Influence of a few large soft drink bottlers Substitutes Steel cans not viable Plastic unattractive in small sizes Glass heavy Barriers to Mobility High cost of aluminum can lines

European Metal Can Industry (Source: Grant) 4. Identify Key sucess factors in each segment How do customers choose in each segment? What is needed to survive competition? 5. Analyse attractions of broad versus narrow segment scope What is the potential to share costs and transfer skills across segments? How similar are key sucess factors across segments? Are there benefits of segment specialization?