MK201 Chapter 7

Consequences of poor segmentation and targeting

- Difficulties to reach the potential market → loss of potential customers *Most important* - Lower sales - Lower profits - Damage to the brand/product image among consumers which reduces the number of potential customers - Lead the firm to recall the product as they may think that "there is no market for it" - In 2017, 85% of 50,000 new product launches in the US failed because of poor market segmentation

Steps in the Segmentation Process

1. Select a market for study 2. Choose a basis for segmentation 3. Select descriptors 4. Profile and analyze segments 5. Select target markets 6. Design implement, and maintain marketing mix

What is a perceptual map?

A perceptual map is a chart that displays locations of products or brands in customers minds, by comparing two or more attributes or dimensions.

Market Segment

A subgroup of people or organizations sharing one or more characteristics that make them to have similar product needs.

Demographic Segemntation

Age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, generation Examples: clothing, laptop, cars

Competitive advantage

An advantage over competitors gained by offering greater customer value

Repositioning

Changing consumers' perceptions of a brand in relation to competing brands.

Loyalty status

Consumers can be loyal to brands, stores, and companies

4. Profile and analyze segments

Describe each segment in detail

Actionable

Effective programs can be designed to attract and serve the members if segment

3. Select descriptors

Ex. For demographic segmentation: age or gender?

Why is market segmentation important?

It helps marketers tailor marketing mixes (4 P's) to meet the needs and wants of one or more specific segments.

Usage rate

Markets can be segmented into light, medium, and heavy users.

User status

Markets can be segmented into non users, users, potential users, first time users, and regular users. - It helps marketers focus efforts on heavy-users of the products (ex . frequent fliers) - 80/20 Principle: A principle holding that 20 percent of all customers generate 80 percent of the demand

Accessible

Members of segments must be reachable and effectively served

Measurable

Memebers of segments must be able to quantify

Geographic Segmentation

Nations, regions, stages, countries, cities, neighborhoods, population density, climate Example: skis, snow boots, snowblower

Behavioral Segmentation

Occasions, benefits, user statuses, usage rates, loyalty status

Market

People or organizations with needs or wants and with the ability and the willingness to buy.

What is a brands positioning?

Positioning answers this question: How do i want my product, brand, and/or company to be perceived by potential customers, relative to the competition?

Benefit segmentation

Segements divided according tot he different beenfits that consumers seek from the product

Substantial

Segment must be large or profitable enough to be served

Occasional Segmentation

Segments divided according to occasions, when the buyers get the idea to buy, make their purchase, or use the purchased item

Differentiable

Segments must be differentiated from other segments (i.e they respond differently)

What is targeting?

Selecting 1 or more market segments for which the firm will direct its marketing efforts (i.e. marketing mix or mixes). Such segments represent the firm's target markets.

Psychographic Segmentation

Social class, lifestyle, personality, motives (emotional, rational, or status)

Strategies for market targeting

Targeting broadly: Undifferentiated (mass) marketing → Differentiated (segmented) marketing → Concentrated (niche) marketing → Micromarketing (local or individual marketing) : Targeting narrowly

Differentiation

The most used positioning strategy is differentiation.

Market Segmentation

The process if dividing the market into meaningful, similar, and identifiable segments or groups.

Positioning

The process of influencing consumers; overall perception of a product, brand, product line, or organization

2. Choose a basis for segementation

a. Geographic segmentation b. Demographic segmentation c. Psychographic segmentation d. Behavioral segmentation

Bases for Market Segmentation

a. Geographic segmentation b. Demographic segmentation c. Psychographic segmentation d. Behavioral segmentation: occasion segmentation, benefits segmentation and usage-rate segmentation

Requirements for affective segmentation

a. Measurability b. Accessibility c. Substantiality d. Differentiability e. Actionability