4-1 Topic #3: Strategic Market Segmentation Dr. Ehsanul Huda Chowdhury

4-2 Segmentation and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING STRATEGY

4-3 From Mass Markets to Micro Markets OLDNEW CONSUMERSPassively receiveEmpowered media users whatever TVcontrol and shape content networksthanks to TiVo, iPod and broadcastInternet ASPIRATIONSTo keep up withTo standout from the the crowdcrowd TV CHOICEThree networksHundreds of channels plus maybe aplus video on demand PBS station MAGAZINESAge of the bigAge of the special interest glossies: Time,magazine for every age Life, Newsweekand affinity group ADSEveryone humsTalking to a group of the Alka-Seltzerone, ads go ever jinglenarrower BRANDS Rise of the big,Niche brands, product ubiquitous brandsextensions and mass from Coca-Colacustomization mean many to Tideproduct variations Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July , 58-62

4-4 Identifying the Health and Beauty Supplies Market Segments Level of Competition Generic Product Type Product VariantProductDefinition Health & Beauty Aids Shaving Equipment Electric RazorsIllustrativeCompetitors Consumer Product Companies Gillette, Remington, Bic Braun, Norelco, Remington, PanasonicNeed/WantSatisfied Enhancement of Health & Beauty Shaving Electric Shaving

4-5 Exhibit 4-3 Market Segmentation Activities and Decisions Market to be Segmented Decide How to Segment Form Segments Finer Segmentation Strategies Strategic Analysis of Segments

4-6 Purchase Behavior Characteristics of People/ Organizations Use Situation Buyers’ Needs/ Preferences Segmentation Variables

4-7 Illustrative Segmentation Variables Characteristics of people/ organizations Consumer Markets Industrial/ Organizational Markets Age, gender, income, family size, lifecycle stage, geographic location, lifestyle Type of industry, size, geographic location, corporate culture, stage of development, producer/ intermediary Use situation Occasion, importance of purchase, prior experience with product, user status Application, purchasing procedure (new task, modified rebuy, straight rebuy Buyers’ needs/ preferences Brand loyalty status, brand preference, benefits sought, quality, proneness to make a deal Performance requirements, brand preferences, desired features, service requirements Purchase behavior Size of purchase, frequency of purchase Volume, frequency of purchase

4-8 Requirements for Segmentation Segmentation Requirements Response differences Identifiable segments Actionable segments Favorable cost/benefit Stability over time

4-9 Approaches to Segment Identification IDENTIFIERS OF CUSTOMER GROUPS CUSTOMER RESPONSE PROFILE  Characteristics of People and Organizations  Use Situation  Buyers Needs and Preferences  Purchase Behavior and Loyalty

4-10 Segment Dimensions for Hotel Lodging Services

4-11 Illustrative Example: Gasoline Buyers Road Warriors True Blues Generation F3 (Fuel, Food & Fast) Homebodies Price Shoppers Higher-income, middle-aged men, drive miles a year … buy premium with a credit card … purchase sandwiches and drinks from the convenience store … will sometimes use carwash 16% of buyers Men and women with moderate to high incomes, loyal to a brand and sometimes a particular station … frequently buy premium, pay in cash 16% of buyers Upwardly mobile men and women - half under 25 years of age - constantly on the go … drive a lot snack heavily from the convenience store 27% of buyers Usually housewives who shuttle children around during the day and use whatever gas station is based on town or on route of travel 21% of buyers Not loyal to brand or station and rarely buy premium … frequently on tight budgets. 20% of buyers

4-12 Illustrative Consumer Perception Map Low Quality High Quality Expensive Inexpensive GROUP I GROUP V GROUP III GROUP II GROUP IV Brand E Brand D Brand C Brand B Brand A

4-13 Finer Segmentation Strategies  Logic of finer segments – customized offerings – diverse customer base – close customer relationships  Finer segmentation strategies – microsegmentation – mass customization – variety-seeking strategy

4-14 SELECTING THE SEGMENTATION STRATEGY  Deciding how to segment  Strategic analysis of market segments –Customer analysis –Competitor analysis –Positioning analysis –Estimating segment attractiveness –Segmentation “fit” and implementation

4-15 Customer Analysis Positioning Analysis Financial and Market Attractiveness Competitor Analysis Strategic Analysis of Market Segments

4-16 Segmentation “Fit” for Implementation Segment Attractiveness and Internal Compatibility Internal Compatibility Market Segment Attractiveness HighLow High Low Attractive segments that match with company capabilities Attractive segments but with poor match with company capabilities Unattractive segments that do not match with company capabilities Unattractive segments but with match to company capabilities