Identifying Market Segments and Targets

Chapter Questions
What are the different levels of market segmentation? How can a company divide a market into segments? How should a company choose the most attractive target markets? What are the requirements for effective segmentation?

Market
Market = People * Purchasing power * Willingness to
buy

MASS MARKETING ONE PRODUCT FOR ALL BUYERS HENRY FORD Coke

creaminess

sweetness

Homogeneous Preference -no natural segments -all buyers have same preference

creaminess

sweetness

Diffused Preference -no pattern (or poor research)

creaminess

sweetness

Clustered Preference -natural segments

Three Phases (S.T.P) of Marketing Strategy

Phase 1: Market Segmentation Phase 2: Target Market and Marketing Mix Selection Phase 3: Product/Brand Positioning

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

Market Segmentation
The process of dividing a potential market into distinct subsets of consumers and selecting one or more segments as a target market to be reached with a distinct marketing mix. division of the total market into smaller, relatively homogeneous groups

FOUR LEVELS OF SEGMENTING THE MARKET

Segmentation bases

Niches

Local Marketing

Customization/ Individualization

Niche marketing
Niche is a more narrowly defined customer group seeking a distinctive mix of benefits. Niche Marketers presumably understand their customers needs so well that customers are willing to pay a premium .

Characteristics of Niche Market

Customers have distinct needs Relatively less competition Small in size , but profitable

Local marketing
Local Marketing is leading to marketing programs tailored to the needs and wants of local customer groups. Specialized Branches: NRI, Small scale Industries. In-city Courier Services/city taxies/logistics operators

Customerization
The ultimate level of segmentation Segment of one One-to-one marketing Mass Customization

SEGMENTING CONSUMER MARKETS

SEGMENTING CONSUMER MARKETS

8-17

SEGMENTING CONSUMER MARKETS

Geographic Segmentatio n

The division of a total potential market into smaller subgroups on the basis of geographic variables (e.g., region, state, or city).

 Division of Rural and Urban areas Suitable Products and Packaging Emergence of Rs.5 coke/Pepsi- tapping rural market. Distribution is the key (HUL Project Sakthi) Food Preferences Beverages Market
MTR&ITC different product varieties to address the changing food preferences

Air-cooler Northern Parts of India Air-conditioner- Goa and Kerala

SEGMENTING CONSUMER MARKETS

Demographic Segmentation
Age and Life Cycle
Life Stage Gender Income Generation Social Class

Demographic Segmentation
Dividing consumer groups according to characteristics such as sex, age, income, occupation, education, household size, and stage in the family life cycle

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Demographic Segmentation
Generation Y
people born between 1979 and 1994 Also called echo boomers (to account for the fact that they are often the children of baby boomers) Overwhelming majority have mothers who work outside the home Highly computer-literate Practical and cynical

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Demographic Segmentation
Generation Y
people born between 1965 to the late 1970s Were the first large group to experience the effects of widespread parental divorce React strongly to peer influences Delay marriage and careers, accept cultural diversity, and value the quality of personal life over work life

Generation X

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Demographic Segmentation
Generation Y
people born between 1946 and 1965 materialistic, careeroriented drive An affluent market Their behavior is often difficult to predict Different subgroups within this generation must be recognized and targeted

Generation X

Baby Boomers

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Demographic Segmentation
Generation Y
Most major industrialized nations are seeing similar trends Seniors are a powerful economic force Their discretionary incomes and rate of home ownership are the highest of all age groups

Generation X

Baby Boomers

Seniors
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TARGETING SENIOR CONSUMERS

LIFE STAGE
LIFE STAGE defnes a persons major concern such as getting married , deciding to buy a house, sending the child to the school,taking care of parents,childerns marriage,planning for retirment and so on. Oppurtunities for Financial firms (Insurance)

Not Notfor fora aBaby BabyFor Fora aKid Kid

GENDER

INCOME - Meaning
PERSONAL INCOME : is the income from wages, salaries, dividends, rent, interest, businesses and professions DISPOSABLE PERSONAL INCOME: is the amount available, after deducting taxes, for personal-consumption expenditures and saving DISCRETIONARY INCOME : is the income available for spending after deducting expenditures for necessities or fixed items such as food,clothing,tarnsportation,shelter and utilities.

INCOME

SEGMENTING CONSUMER MARKETS

Psychographic Segmentation
Psychographics is the science of using psychology and demographics to better understand consumers. Buyers are divided into different groups on the basis of psychological/personality traits, Lifestyles, Values. People within same demographic group can exhibit different psychological profiles When attitudes, motivations, personality characteristics and belief systems are analyzed statistically to determine groups with substantially different attitudes, the result is psychographic segmentation psychographic segmentation will help advertisers to target the most receptive audience for their message VALS One of the Most suitable tools

 VALS is a way of viewing people on the basis of their attitudes, needs,wants,beliefs and demographics Values is an abstract & complex construct which will have strong influence on consumer behaviour. Values & emotions are intertwined in consumption Lifestyle: peoples decisions about how to live their daily lives, including family, job, social, and consumer activities

ACTUALIZERS

High Resources

Principle Oriented Status Oriented Action Oriented

FULFILLEDS

ACHIEVERS EXPERIENCERS

BELIEVERS

STRIVERS

MAKERS

STRUGGLERS

Low Resources

ACTUALISERS (INNOVATORS)
Abundant resources Image is important, Sophisticated Receptive to new products & technologies Frequent Readers, but light TV viewers Open to social change

THINKERS
Little interest in Prestige/image Like to spend their leisure time at home Well educated. Like Educational/public affairs programming Read widely and often Purchase criteriaDurablity,Functionality

BELIEVERS
Conservative High Ethnocentric Deeply rooted Moral codes Established routine of life Slow to change Habits Watch TV More

ACHIEVERS
Status oriented, high Economic and social status Target for Premium products Seek recognition and self-identity through achievement

STRIVERS
Self-definition based on approval & opinion of others Impulsive, Got easily bored Carrying credit balances

EXPERIENCERS
Follow fashions and fads Young, Enthusiastic, rebellious Disregard for authority Seek variety&Excitement in their life Spending heavily on Clothing, Music and fast food

MAKERS
Like to self-sufficient Traditional family values Like physical recreation Suspicious about the new ideas Respect Government Not impressed by Possessions

STRUGGLERS
Brand loyal Heavy TV viewers & read Women magazines low-skilled, less-educated concerned about declining health Trust ad

SEGMENTING CONSUMER MARKETS

Product-Related Segmentation
Occasions Benefits Usage Rates Brand Loyalty

Product-related segmentation: dividing a consumer population into homogeneous groups based on characteristics of their relationships to the product Can take the form of segmenting based on:
Usage rates for a product Consumers brand loyalty toward a product Using the Product in Different situations Benefits that people seek when they buy

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Usage-Situation Segmentation Segmenting on the basis of special occasions or situations

Benefit Segmentation
TOOTH DECAY PREVENTION

FRESHNESS

GUM PROTECTION

ECONOMICAL

HERBAL

The Brand FUSER STATUS Non-users

Develop awareness &invlovement Ex-users - Getting Feedback Potential users Sales Promotion to induce trail First time users Ensure Satisfaction Regular users - Loyalty Programmes
Bonus Points/Hero Honda Passport programme

Loyalty Status

Hard-core

Shifting loyals Split loyals Switchers

Usage Rate Heavy Users Medium Users Light Users Industrial Segments/Media

Figure 8.3 Behavioral Segmentation Breakdown

Effective Segmentation Criteria

Measurable Substantial

Accessible
Differentiable Actionable

 All types/bases of segmentation are not useful. Recognize the marketer needs to use relevant variables to segment the market Product Category like Salt: Age Usage Habits and Lifestyle

Evaluation and Selection of the Market Segments

The Segments overall attractiveness and the company objectives and resources. How does a potential segment score n the 5 point criteria? Is it attractive in terms low risk, growth and profitability? Does investing in the segment make sense for Firm's Objectives

Patterns of Target Market Selection

Concentrated Marketing Specialized in one product & one product category Specialty Hospitals Segment leadership High ROI Threat for the market/product

 Selects number of different segments and target with different products Diversification of risk

 Targets with certain product that it sells to several different market segments Microscope ManufacturesVariations of product- Collegeslabs-Government Downsizing the risk

Figure 8.4 Patterns of Target Market Selection

Serving many needs of a particular customer group. Selling assortment of products(stationary) only to university/colleges Risk factor threat to the market

 Serve all customer groups with all the products they might need Dominance in the Market Coke(Soft-drinks) GM (Vehicle Market)

Figure 8.4 Patterns of Target Market Selection

COUNTER SEGMENTATION
Merging of different segments into one segment Cautious about over segmentation J&J broadened the segment to include adults

Segment-by-Segment Invasion Plan

Pepsi used Mega marketing in India

Develop Long-term Invasion Plan Pepsi invaded gradually into the market Grocery, Fast-food Mega Marketing is the strategic coordination of economic, psychological, political and public relation skills to gain the cooperating of a number of parties in order to enter the market.

PROMISES?
Offered to help India export some agricultural products in a volume. Helping rural areas for their economic development Offered food-processing and water treatment technology