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CONSUMER BEHAVIOR

Market Segmentation &


Strategic Targeting
Chapter # 3

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1. What is Market Segmentation?

Market Segmentation
Market Segmentation can be defined as the process of
dividing a market into distinct subsets of consumers with
common needs or characteristics and selecting one or more
segments to target with a distinct marketing mix.
Segmentation studies are designed to discover the needs
and wants of specific groups of consumers, so that
specified goods and services can be developed and
promoted to satisfy each groups needs.

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Market Segmentation
Before the widespread acceptance of market
segmentation, the prevailing way of doing business
with consumers was through MASS MARKETING.
Mass Marketing that is offering the same product
and marketing mix to all consumers.
In Mass Marketing, the seller engages
in the mass production, mass distribution
and mass promotion for one product for all the buyers.

250 ml Glass Bottle

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Market Segmentation
Mass (Undifferentiated) Marketing:
If all consumers were alike, if they all had the same needs, wants,
and desires, and the same background, education, and experience,
Mass (Undifferentiated) Marketing would be a logical strategy.
Primary advantage is that it costs less. Only one advertising
campaign is needed, only one marketing strategy is developed and
usually only one standardized product is offered.
Some companies, primarily those that deal in agricultural
products or very basic manufactured goods, successfully follow a
mass marketing strategy.
Other marketers, however, see major drawbacks in an
undifferentiated marketing approach.
This strategy often means that sell the same to everyonethis
can lead to selling to no one.
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Why is Segmentation Necessary ?

Consumer needs
differs
Differentiation helps
products compete
Segmentation helps
identify media

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Who Uses Market Segmentation?

Both sides of the market place, consumer and the marketer


benefit from market segmentation.
Consumers receive products targeted to their specific
needs.
Marketers are able to offer differentiated products,
increasing profits, market share, etc.
Retailers, industrial manufacturers, and the media have
all benefited from market segmentation.
Retailers benefit from market segmentation. One company,
such as Gap, is able to deliver their goods through a diversity
of stores, Gap, Super Gap, Gap Shoe, etc., depending on the
segment and product line.

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Who Uses Market Segmentation?

Industrial, not-for-profit, and even the media also use


market segmentation.

More and more businesses today are using database


marketing programs to find out who their best customers
are, and these firms will then divide their customer base
into segments.

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2. Criteria for Targeting selected
Market Segments Effectively

Identifiable: To divide the market into separate segments on the basis


of a series of common or shared needs or characteristics that is relevant
to the product or service, a marketer must be able to identify these
relevant characteristics.
Sizeable: In order to be a viable market, as segment must consist of
enough consumers to make targeting it profitable. A segment can be
identifiable and stable but not be large enough to be profitable. To
measure a segments size and profitability, marketers use secondary data
(e.g. Census figures) and consumer surveys; such as data estimate a
given group of buyers size, spending power and buying propensity.
Stable: Most marketers prefer to target consumer segments that are
relatively stable in terms of lifestyle and consumption patterns and avoid
inconsistent segments that are unpredictable. For examples, teenagers
are a sizeable and easily identifiable market segment, easy to buy, able
to spend and easily reached.
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Criteria for Effective Targeting
of Market Segments

Accessible: To be targeted, a segment must be accessible, which


means marketers must be able to reach the market segments they want
to target in an economical way.
Congruent with the Companys Objectives and Resources: Not
every company is interested or has the means to reach every market
segment, even if that segment meets the four preceding criteria.
Therefore company must match with their research objectives and the
resources they have.

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3.Bases for Segmentation
The first step in developing a segmentation strategy is to
select the most appropriate bases on which to segment
the market. Nine major categories of consumer
characteristics provide the most popular bases for
market segmentation. These categories are:
Geographic Factors Use-related Characteristics
Demographic Factors Use-situation Factors
Psychological Factors Benefits Sought
Psychographic (Lifestyle) Hybrid Segmentation
Characteristics
Socio-cultural Variables

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Bases for Segmentation
1. Geographic Segmentation
In Geographic Segmentation, the market is divided by location. The theory
behind this strategy is that people who live in the same area share some
similar needs and wants and that these needs and wants differ from those
of people living in other areas.

SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES


GEOGRAPHIC SEGMENTATION

Region Southeast, Hill Tracks, North Bengal, Sundarbans


City Size Major Metropolitan Areas, Small Towns, Cities
Density of Area Urban, Suburban, Exurban, Rural
Climate Temperate, Hot, Humid, Rainy

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Bases for Segmentation
2. Demographic Segmentation
Demographic segmentation is the process of segmenting the market based
on demographic characteristics.

Demography refers to the vital and measurable statistics of a population.


Age, sex, marital status, income, occupation, and education, are most often
used as the basis for demographic market segmentation.

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Demographics help to locate a target
market. It is the most accessible and cost
effective way to identify a target market.
These characteristics are easy to measure.

Demographic variables reveal trends,


such as shifts in age, gender, and income
distributions that signal business
opportunities to alert marketers

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Bases for Segmentation
2. Demographic Segmentation
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
DEMOGRAPHIC SEGMENTATION

Age Under 12, 12-17, 18-34, 35-49, 50-64, 65+


Sex Male, Female
Marital Status Single, Married, Divorced, Widowed
Family Life Cycle Bachelorhood, honeymooners, parenthood, post-parenthood
and dissolution
Income Under Tk. 10,000, Tk 10,000- Tk. 25,000, Tk. 25,000-
Tk. 50,000, Tk. 50,000- Tk. 75,000, Tk. 75,000-
Tk.100,000, Tk. 100,000 and over
Education Illiterate, Primary School, High School, College,
University, Graduate Studies
Occupation Professional, Blue-collar, White-collar, Agricultural,
Military, Daily Laborers
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Bases for Segmentation
3. Psychological Segmentation
Psychological segmentation (characteristics) refers to the inner or
intrinsic qualities of the individual consumer as a basis for segmentation.
Consumers can be segmented in terms of their needs and motivation,
personality, perceptions, learning, level of involvement, and attitudes.
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
PSYCHOLOGICAL SEGMENTATION

Needs-motivation Shelter, Safety, Security, Affection, Sense of Self Worth


Personality Extroverts, Novelty (Innovation) Seekers, Aggressive,
Low Dogmatic = Rigid, Inflexible
Perception Low-risk, Moderate-risk, High-risk
Learning-involvement Low-involvement, High-involvement
Attitudes Positive Attitude, Negative Attitude
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Bases for Segmentation
4. Psychographic Segmentation
Psychographic segmentation (segmenting
based on personality and attitude measures) is
closely aligned with psychological research,
especially personality and attitude measurement.
Commonly referred to as lifestyle analysis,
psychographic segmentation has proven to be a
valuable marketing tool to help identify promising
consumer segments that are likely to be
responsive to specific marketing messages.

SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES

PSYCHOGRAPHIC
Lifestyle Segmentation Economy Minded, Couch Potatoes, Outdoors Enthusiasts,
Status Seekers
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Bases for Segmentation
5. Socio-cultural Segmentation
Socio-cultural segmentation studies sociological and anthropological group
characteristics, as opposed to individual characteristics.
Socio-cultural variables provide further bases for market segmentation.
Consumer markets have been subdivided into segments on the basis of stages
in the family life cycle, social class, core cultural values, sub-cultural
memberships, and cross-cultural affiliation.

SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES


SOCIO-CULTURAL SEGMENTATION
Culture Bangladeshi, Indian, African, European, Chinese, American
Religion Muslim, Hindu, Christianity, Buddhist, Jews
Sub-cultures Tribal, Chakma, Marma, Garo
Social Class Lower, Middle, Upper
Family Life Cycle Bachelors, Young Marrieds, Full Nesters, Empty Nesters

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Bases for Segmentation

6. Use-Related Segmentation
Use-related segmentation categorizes consumers in terms of product-
service, or brand usage characteristics such as usage rate, awareness status,
and degree of brand loyalty.
Rate of usage segmentation differentiates among heavy users, medium
users, light users, and nonusers of a specific product, service, or brand.
Brand loyalty identifies those customers who continually purchase the same
brands, as opposed to those consumers who continually switch brands.
Awareness status encompasses the notion of buyer readiness, consumer
awareness, or interest level.
Marketers need to determine whether potential customers are aware of the
product, interested in the product, or need to be informed about the product.

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Bases for Segmentation

6. Use-Related Segmentation
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
USE-RELATED SEGMENTATION

Usage Rate Heavy users, Medium Users, Light Users, Nonusers


Awareness Status Unaware, Aware, Interested, Enthusiastic
Brand Loyalty Hard Core Loyals, Split Loyals, Shifting Loyals, Switchers

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Bases for Segmentation
7. Usage Situation Segmentation
The occasion or usage situation often determines what
consumers will purchase or consume.
Some marketers try to install the idea of suitability for a
particular occasion.
Many products are promoted for special usage occasions.
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
USE-SITUATION SEGMENTATION

Time Leisure, Work, Rush, Morning, Night


Objective Personal, Gift, Snack, Fun, Achievement
Location Home, Work, Friends Home, In-store
Person Self, Family Members, Friends, Boss, Peers
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Bases for Segmentation
8. Benefit Segmentation
Marketers and advertisers seek to isolate one particular benefit that
they should communicate to the consumer.
Examples of benefits that are commonly used include: financial security
(Prudential Financial), reduced calories (Amstel Light), comfort (Bausch &
Lomb disposable contact lenses), good health (Egg Beaters egg
substitute), proper fit (Wrangler womens jeans), and backache relief
(Advil).
Changes in lifestyle play a major role in determining the key product
benefits to promote.
Benefit segmentation can be used to position various brands within the
same product line.
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
Benefit Segmentation Convenience, Social Acceptance,
Long Lasting, Economy, Value-for-the-money 21
Bases for Segmentation
9. Hybrid Segmentation Approaches
Marketers commonly segment markets by combining many segmentation
bases, rather than relying on a single base. This is called hybrid
segmentation.
Hybrid bases include psychographic/demographic profiles,
Geodemographic, VALS, and Yankelovichs Mindbase Segmentation. There
are 2 main types of hybrid segmentation are:
Psycho graphic Demographic Segmentation: Psycho graphic and
Demographic profiles are highly complementary approaches that work
best when used together.
Geodemographic Segmentation: This type of hybrid segmentation
scheme is based on the notion that people who live close to one another
are likely to have similar financial means, tastes, preferences, lifestyles
and consumption habits.

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4. Concentrated (Niche) Vs Differentiated
(Segment) Marketing
Once an organization has identified its most promising market
segment, it must then decide whether to target several segments or
just one. The premise behind market segmentation is that each
targeted segment receives a specially designed marketing mix.
Differentiated Marketing is when the marketer targets several
segments using individual marketing mixes. This strategy is highly
appropriate for financially strong companies that are well
established in a product category and competitive with other firms
that are also strong in the category.
Concentrated Marketing is when the marketer targets only one
segment with a unique marketing mix. This strategy is better for
small firms or firms new to the field.

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Concentrated Vs Differentiated Marketing

A
UNDIFFERENTIATED Company Marketing Mix Market
MARKETING

B Company Marketing Mix 1 Segment 1


DIFFERENTIATED Company Marketing Mix 2 Segment 2
MARKETING Company Marketing Mix 3 Segment 3

C Segment 1
CONCENTRATED Company Marketing Mix Segment 2
MARKETING Segment 3

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5. Targeting

The value proposition,


expressed through
promotion, stating the
products or services
capacity to deliver
specific benefits.

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Target marketing is the process of evaluating each market
segments attractiveness and selecting one or more segments to
enter.
- Characteristics for targeting effective segment:
Segment size and growth
Segment structural attractiveness
Company objectives and resources

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END OF CHAPTER # 3

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