Segmentation

Market SegmentationMarketSet of existing and potential customersMarketSegmentA group of people or organizations sharing one or more characteristics that cause them to have similar product needs/wants.

Market Segmentation Market Segmentation – is the process of dividing a total market into groups, or segments, consisting of people or organizations with relatively similar product needs/wants. The purpose is to enable a marketer to design a marketing mix (mm) that more precisely matches the needs of customers in the selected market segments.

Consumer Preferences for Ice CreamHomogeneous PatternConsumers have relatively similar needs and desires for a good or service category.Clustered PatternConsumer needs and desires can be grouped into two or more identical clusters (segments), each with its own set of purchase criteria. Diffused PatternConsumer needs and desires are so diverse that no clear clusters (segments) can be identified.

Levels of Market SegmentationSegment marketingNiche marketing*Local marketingCustomized/one-to-one/micro marketingA Niche is more narrowly defined customer group seeking a distinctive mix of benefits. Niches are fairly small and normally attract only one or two competitors whereas segments are fairly large and normally attract several competitors.

Benefits of SegmentationEffective use of resourcesGain a focusCreate Value for a target marketPositioning

Major Steps in Target MarketingSegmentation

PositioningBases for Segmenting Consumer Markets

Segmenting Consumer MarketsGeographicRegion, city, Rural and semi-rural areasDemographicAge, gender, income, occupation, education, family size, Religion, NationalityPsychographicSocial class, lifestyle, personalityBehavioralOccasions, benefits, user status, usage rate, loyalty status, readiness stage, attitude toward product

Segmenting Consumer MarketsGeographicRegion South India, Western Region, North, EastCityClass-I Cities, Class-II Cities, Cities with a population of 0.5 million to 1 Million, Cities with a population of over 1 millionRural and Semi-Urban Areas Rural villages with a population of over 10,000, small towns with a population between 20,000 and 50,000

Segmenting Consumer MarketsDemographicAgeUnder 6, 6-11, 12-19, 20-34, 35-49, 50-60, 60+Family SizeYoung single; young, married, no children; young, married, youngest child under 6; young, married, youngest child under 6 or over; older, married, no children under 18; older, singleGenderMale, Female

Segmenting Consumer MarketsDemographicIncomeLow (upto Rs. 40,000 p.a.), lower middle (Rs. 40,001-80,000 p.a.), middle (Rs. 80,001-1,20,000 p.a.), upper middle (Rs. Rs. 1,20,001-1,60,000 p.a.) and high (above Rs. 1,60,000 p.a.)Annual Household Income Rupees at 1999-2000 PricesSource: Kotler, Keller, Koshy and Jha, 12/e, Pearson, pp.151-209

Segmenting Consumer MarketsDemographicOccupationUnskilled worker, skilled worker, petty traders, shop owners, businessman/industrialist, self-employed (professionals), clerical/salespersons, supervisory levels, officers/junior executives, middle/senior executives

Segmenting Consumer MarketsDemographicEducationIlliterate, school upto 4 years, school between 5 and 9 years, SSC/HSC, nongraduate, graduate/postgraduate (general), graduate/postgraduate (professional)

Segmenting Consumer MarketsPsychographicLifestyleCulture-oriented, sports-oriented, outdoor-orientedPersonalityCompulsive, gregarious(sociable/outgoing/extrovert), authoritarian, ambitious

Segmenting Consumer MarketsBehaviouralOccasionsRegular, specialBenefitsQuality, service, economyUser statusNon-user, ex-user, potential user, first-time user, regular user

Segmenting Consumer MarketsBehaviouralUsage rateLight, medium, heavyLoyalty statusNone, medium, strong, absoluteReadiness stageUnaware, aware, informed, interested, desirous, intending to buyAttitude toward the productEnthusiastic, positive, indifferent, negative, hostile

Bases for Segmenting Business Markets

Segmenting Business MarketsDemographic segmentationIndustry, company size, locationOperating variablesTechnology, user or non-user status, customer capabilitiesPurchasing approachesPurchasing-function organisation, power structure, nature of existing relationships, general purchase policies, purchasing criteriaSituational factorsUrgency, specific application, size of orderPersonal characteristicsBuyer-seller similarity, attitudes toward risk, loyalty

Market Segmentation ProcedureSurvey StageAnalysis StageProfiling Stage

Requirements for Effective Segmentation

MeasurableAccessible Size, purchasing power, profiles of segments can be measured. Substantial Segments must be effectively reached and served.

Segments must be large or profitable enough to serve.Differential Segments must respond differently to different marketing mix elements & actions.Actionable Must be able to attract and serve the segments.Market Targeting Process

Steps in the Market Targeting ProcessEvaluating Market SegmentsSelecting Target Market Segments

Evaluating Market SegmentsSegment Size and GrowthAnalyze current segment sales, growth rates, and expected profitability.Segment Structural AttractivenessConsider effects of: competitors, existence of substitute products, and the power of buyers & suppliers.Company Objectives and ResourcesExamine company skills & resources needed to succeed in that segment.Offer superior value and gain advantages over competitors.

Selecting Target Market Segments

Market Coverage ApproachesUndifferentiated Marketing(Mass Marketing) The firm tries to reach a wide range of consumers with one basic marketing plan. These consumers are assumed to have a desire for similar goods and service attributes.One product for everybody.Concentrated Marketing The firm concentrates on one group of consumers with a distinct set of needs and uses a tailor-mademarketing plan to attract this single segment. Differentiated Marketing The firm aims at two or more different market segments, each of which has a distinct set of needs, and offers a tailor-made marketing plan for each segment. Two or more products to two or more groups.

Target MarketingMarket Coverage StrategiesMarketCompanyMarketingMixCompanyMarketing Mix 1Segment 1CompanyMarketing Mix 2Segment 2A. Undifferentiated MarketingSegment 3CompanyMarketing Mix 3Segment 2CompanyMarketingMixB. Differentiated MarketingC. Concentrated Marketing

PositioningThe act of designing the company’s offering and image to occupy a distinctive place in the minds of the target market.Result is the creation of a customer-focused value proposition:A cogent reason why the target market should buy the product.

Four cornerstones of positioning Who am I?What am I?For whom am I?Why me?

Four cornerstones of positioning…contd.Who am I?Positioning by corporate IdentityPositioning by brand endorsementWhat am I?Category related positioningBenefit related positioningUsage occasion and time related positioningPrice-Quality positioningFor whom am I?Positioning by Target segmentWhy me?Positioning by unique attributesPositioning by competitors

Four elements or components of a positioning statement: Target Audience - the attitudinal and demographic description of the core prospect to whom the brand is intended to appeal; the group of customers that most closely represents the brand’s most fervent users.Frame of Reference - the category in which the brand competes; the context that gives the brand relevance to the customer.

Benefit/Point of Difference- the most compelling and motivating benefit that the brand can own in the hearts and minds of its target audience relative to the competition.Reason to Believe - the most convincing proof that the brand delivers what it promises.

Segmentation

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Segmentation