IDENTIFYING MARKET SEGMENT & TARGETS

1. Levels of market segmentation 2. Segmenting consumer markets 3. Market targeting

MARKETS ARE NOT HOMOGENEOUS. A COMPANY CANNOT CONNECT WITH ALL CUSTOMERS IN LARGE, BROAD, OR DIVERSE MARKETS. CONSUMERS VARY ON MANY DIMENSIONS & OFTEN CAN BE GROUPED ACCORDING TO ONE OR MORE CHARACTERISTICS. A COMPANY NEEDS TO IDENTIFY WHICH MARKET SEGMENTS IT CAN SERVE EFFECTIVELY. SUCH DECISIONS REQUIRE A KEEN UNDERSTANDING OF CONSUMER BEHAVIOUR & CAREFUL STRATEGIC THINKING. MARKETERS SOMETIMES MISTAKENLY PURSUE THE SAME MARKETING SEGMENTS AS MANY OTHER FIRMS & OVERLOOK SOME POTENTIALLY MORE LUCRATIVE SEGMENTS.

LEVELS OF MARKET SEGMENTATION

Segment marketing Niche marketing Local marketing Customisation

Segment marketing
Segment & sector

A flexible market offering consists of 2 parts: - a naked solution containing the product & service elements that all segment members value & - discretionary options that some segment members value Market segments can be defined in many ways. One way is to identify preference segments - e.g., ice cream buyers preference for sweetness & creaminess: #homogeneous #diffused #clustered

Different segments
Creaminess (a) Homogeneous: buyers with same preferences Sweetness

Creaminess

. . .. .
Sweetness

(b) Diffused: consumer preferences scattered. 1st brand likely to appeal to most people, 2nd fight for market share or locate in a corner

Creaminess

..
. Sweetness

(c) Clustered: Neutral segments shows 3 options Concentrated marketing, may offer several brands

Niche marketing
An attractive niche market characterised as follows:
THE CUSTOMERS IN THE NICHE MARKET HAVE A DISTINCT SET OF NEEDS; THEY WILL PAY A PREMIUM TO THE FIRM THAT BEST SATISFIES THEIR NEEDS; THE NICHE IS NOT LIKELY TO ATTRACT OTHER COMPETITORS; THE NICHE GAINS CERTAIN ECONOMIES THROUGH SPECIALISATION; & THE NICHE HAS SIZE, PROFIT, & GROWTH PIOTENTIAL. WHEREAS SEGMENTS ARE FAIRLY LARGE & NORMALLY ATTRACT SEVERAL COMPETITORS, NICHE ARE FAIRLY SMALL & NORMALLY ATTRACT ONLY ONE OR TWO.

Local marketing
Reflects a growing trend called grassroots marketing: Marketing activities concentrate on getting as close & personally relevant to individual customers as possible: e.g. - Nikes initial foray A large part of this is experiential marketing, The idea is not to sell something, but to demonstrate how a brand can enrich a customers life Pine & Gilmore argue that we are on the threshold of the Experience Economy, a new economic era in which businesses must orchestrate memorable events for their customers Those who favour localised marketing see national advertising as a waste. Counterpoint is brands overall image gets diluted if product & messages differ across localities

Customerisation
Customerisation combines operationally driven mass customisation with customised marketing in a way that empowers consumers to design the product & service offering of their choice. Segment versus individuals

Customisation is not for every company

SEGMENTING CONSUMER MARKETS

Geographic Demographic Psychographic Behavioural

Geographic segmentation

Demographic segmentation
Age & life-cycle stage

Life stage
Gender Income Generation Social class

Psychographic segmentation
VALs II:
1. 2. 3. 4. 5. 6. 7. Innovators Thinkers Achievers Experiencers Believers Strivers Makers

8.

Survivors

VALs Segmentation Innovators

High resources High innovation

Primary motivation Ideals Achievements Self-expression

Thinkers

Achievers

Experiencers

Believers

Strivers

Makers

Low resources Low innovators

Survivors

Actualisers: Enjoy finer things Receptive to new products, technology, distribution Skeptical of advertising Frequent readers of a wide variety of publications; light TV viewers Principle oriented: Little interest in image or prestige Above-average consumer for home products Like educational & public affairs programming; read widely & often Status oriented: Attached to premium products Prime target for a variety of products Average TV watchers, read business, news, & self-help publications Action oriented: Follow fashion & fads Spend much of the disposable income in socialising Buy on impulse; attend to advertising; listen to rock music

Believers: Buy American Slow to change habits, look for bargains Watch TV more than average; read retirement, home & garden, & general interest magazines Strivers: Image conscious Limited discretionary incomes but carry credit balances Spend on clothing & personal care products; prefer TV to reading Makers: Shop for comfort, durability, value Unimpressed by luxuries Buy the basics, listen to radio; Read auto, home mechanics, fishing, outdoor magazines Strugglers: Brand loyal Use coupons & watch for sales Trust advertising; watch TV often; read tabloids & womens magazines

Behavioural segmentation
Buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or response to a product Decision roles: - initiator - influencer - decider - buyer - user Behavioural variables: - occasions

benefits: Mobile identified 5 different benefits:

1. 2. 3. 4. 5. Road warriors Generation F True blues Home bodies Price shoppers

- user status: nonusers, ex-users, potential users, first-time users, & regular users - usage rate: light, medium, heavy - buyer-readiness stage: unaware, aware, informed, interested, desire, intend to buy - loyalty status:
1. 2. 3. 4. Hard-core loyals Split loyals Shifting loyals Switchers

- attitude: 5 groups- enthusiastic, positive, indifferent, negative, & hostile

Size Age Values Employment Income Benefits sought

SEGMENT DESCRIPTION Conservative Traditional 23% of population 38% of population 16% of total sales 40% of total sales 35 55 years old 25 49 years old Conservative traditional Satisfied with Active, busy, independpresent status dent, self-confident Has job, not career Family-& job/careeroriented Limited disposable income Considerable income Price-driven, reacts to Quality-driven, will sales pay a little more Wants easy care & Wants traditional styling, comfort seeks clothes that last Not interested in Interested in newness fashion Defines value as price, Defines value as quality, quality, & fashion fashion & price B. Conservative Budget Basic styles, easy-care fabrics RETAIL OFFERING Traditional Moderate Traditional styling, good quality

A.

Update 16% of population 40% of total sale 25 49 years old Contemporary Active, busy, independent, very self-confident Family-& job/careeroriented Considerable income Fashion-driven, expresses self thru apparel Wants newness in colour & style Shops often Defines value as fashion quality, & price

Retail mix Pricing Merchandise

Brands Merchandising Approach

Update Moderate to better Fashion-forward, more selection, comfortable fit, tailored look, new colours Alice, Cable Lane Joneswear, Worthington, Claude, Mary McFadden, Russ Togs, Halston Russ Togs, Halston, Dockers Jacqueline, Ferrar Price signing, save stories Well-coordinated merchandise Colour statements, mannequins, stack-out tables collections, uncluttered displays, theme areas knowledgeable salespeople

Behavioural segmentation breakdown Target market Unaware Not tried Negative neutral favourable opinion opinion Aware Tried Repeater Not yet Rejector tried Switcher Loyal to brand Heavy user

Loyal to other brand Light user

Regular user

The conversion model: developed to measure the strength of psychological commitment between brands & consumers & their openness to change. To determine the ease with which a consumer can be converted to another choice, the model assesses commitment based on factors such as consumer attitudes toward & satisfaction with brand choices in a category & the importance of the decision to select a brand in the category. - Model segments users of brands into 4 groups:
1. Convertible 2. Shallow 3. Average 4. Entrenched Also classifies non-users, basis openness to try brand: 1. Strongly unavailable 2. Weakly unavailable 3. Ambivalent 4. Available

MARKET TARGETING
Steps in segmentation process Effective segmentation criteria Evaluating & selecting the market segments Additional considerations

Steps in segmentation process

1. 2. 3. 4. 5. Needs-based segmentation Segment identification Segment attractiveness Segment profitability Segment positioning

6.
7.

Segment Acid Test

Marketing-mix strategy

Effective segmentation criteria

Measurable Substantial Accessible Differentiable Actionable

Evaluate segments overall attractiveness & companys objectives & resources. Then look at 5 patterns of target market selection: Single-segment concentration (e.g., M1P2)

Evaluating & selecting market segments

Selective specialisation(e.g., M3P1, M1P2, M2P3)

Product specialisation(e.g., Row P2) Market specialisation(Column M1) Full market coverage Managing multiple segments

Differentiated marketing costs: product modification costs manufacturing costs administrative costs inventory costs promotion costs

M1

M2

M3

P1

P2

P3

P= Product; M= Market

Additional considerations
Segment-by-segment invasion plans

Updating segmentation schemes:

market partitioning: For example car buying: # brand-dominant hierarchy earlier # nation-dominant hierarchy now

Ethical choice of market targets