Marketing Quality Circle 8 Identifying Market Segments and Targets Marketing Quality Circle

LEARNING OBJECTIVES After reading this chapter, students should: Know what are the different levels of market segmentation Know how a company can divide a market into segments Know how a company should choose the most attractive target markets Know what are the requirements for effective segmentation

What is Segmentation

Why Segmentation? © Malcolm McDonald

Market Segmentation Continuum of Market Segmentation Size Mass Market Segment Marketing Micro-marketing Niche The Individual Continuum of Market Segmentation Size Personalization Micro-marketing Niche Segmentation Standardized Marketing Mix

Flexible Marketing Offerings Naked solution: Product and service elements that all segment members value Discretionary options: Some segment members value options but not all

Preference Segments Homogeneous preferences exist when consumers want the same things Diffused preferences exist when consumers want very different things Clustered preferences reveal natural segments from groups with shared preferences

The Long Tail Chris Anderson explains the long tail equation: The lower the cost of distribution, the more you can economically offer without having to predict demand; The more you can offer, the greater the chance that you will be able to tap latent demand for minority tastes; and Aggregate enough minority taste, and you may find a new market.

What is Customerization? Customerization combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice.

Segmenting Consumer Markets Geographic Demographic Psychographic Behavioral

Geographic Segmentation

Demographic Segmentation Age and life cycle Life stage Gender Income Generation Social class

Psychographic Segmentation

Behavioral Segmentation Decision Roles Initiator Influencer Decider Buyer User Behavioral Variables Occasions Benefits User Status Usage Rate Buyer-Readiness Loyalty Status Attitude

Conversion Model Convertible Strongly Unavailable Low Low Strength of commitment Balance of Disposition Shallow Weakly Unavailable Users Average Ambivalent Non Users Entrenched Available High High

Segmenting for Business Markets Demographic Operating variable Purchasing approaches Situational factors Personal characteristics

Steps in Segmentation Process Need-based segmentation Segment identification Segment attractiveness Segment profitability Segment positioning Segment acid test Market mix strategy

Effective Segmentation Criteria Measurable Substantial Accessible Differentiable Actionable

What is Targeting?

Effective Targeting Requires… Identify and profile distinct groups of buyers who differ in their needs and preferences Select one or more market segments to enter Establish and communicate the distinctive benefits of the market offering

Evaluating and Selecting the Marketing Segments Single Segment Concentration Selective Specialization Product Specialization Market Specialization Full Market Coverage

Additional Considerations Segment by Segment Invasion Plans

What is Positioning?

Identifies the target market Niches Adam Smith Segments Naked Solutions Discretionary options Distinct set of needs Willingness to pay premium. Less likely to attract competitors Micro marketing Why Segmentation? BASES FOR SEGMENTING Buyer Readiness Aware Ever tried Recent trial Occasional user Regular user Most often used Identifies the target market Competition related Demographic Enduse Operating Variable Situational Factors Purchasing Approaches Personal Characteristics Segmenting Industrial Business Markets Location Size Effective Segmentation Criteria Local areas Individuals Scientific Management Customer based Geographic location Demographics of Customers Psychographic Variables Product related Product Use situations Benefits Segmentation Quantity consumed Hard core Split Shifting Switchers Behavioral Decision Roles Initiator Influencer Decider Buyer User Behavioural Variables Occasions Benefits User Status Usage Rate Buyer-Readiness Loyalty Status Attitude SESSION 5 CHAPTER 8