Chapter 6: Market Segmentation

Substantiality

The segment should be large enough that investment will yield a profit

Differential response

The segment should respond differently to strategies than other segments

Stability

The stability of consumer segment preferences over time

Experiencers

Young, enthusiastic, and impulsive, they seek variety and excitement and spend substantially on fashion, entertainment, and socializing

Undifferentiated

-A targeting strategy aiming the product at the entire market using a single marketing strategy, regardless of the number of segments. -Offers economies of scale, but may not satisfy segment needs as well as possible.

Brand positioning strategies

-Attribute/Benefits -Price/quality -Use or application -Product user -Product class -Competitor

Benefit segmentation

-Based on important differences between the benefits sought -You need to understand the consumer's motivation to send the right signals

Buyer-readiness stage segmentation

-Based on individual's stage of readiness to buy the product -Some consumers might not even be aware of the product, some can't afford it, others don't need it, etc.

Demographic Segmentation

-Based on statistics that describe the population, e.g., age, gender, life-cycle stage, ethnicity, income, education, and occupation. -Purpose: Identify customers who respond in a similar way to marketing strategies. -Reasoning: Segments respond differently to different combinations of the 4 P's. Therefore, in order to target segments more efficiently, marketers need to know their characteristics. -Example: Clothing, cosmetics, and hair products are tailored based on gender and age, as well as income. -Two major variables used in demographic segmentation are age and life-cycle stage. As individuals move through these stages, their product preferences change accordingly. -Different products use different demographic segments

Usage rate segmentation

-Based on the extent to which consumers are nonusers, occasional users, medium users, and heavy users -Allocate resources for new products primarily to heavy users (prime target)

Different products use different demographic segments

-Botox uses age segmentation. -Clothing retailers segment based on gender.

Attribute/Benefits positioning

-Defined as positioning that communicates product attributes and benefits, differentiating each brand form other company brands and those of competitors -Consumers' perceived position of product relative to competitors' product

Loyalty status segmentation

-Degree of brand preference, commitment, retention, allegiance, and the extent to which consumers engage in repeat purchase -By consistently providing high quality, a company can gain valuable customers.

Psychological Segmentation

-Demographics are closely linked to psychographics, which include lifestyle, values, attitudes, interests, and opinions. -The VALS2 typology provided by SRI Consulting Business Intelligence segments consumers psychographically

Target Marketing Decisions

-Differentiated -Concentrated -Undifferentiated

Bases of segmentation

-Geographic -Demographic -Psychographic -Behaviorial

Positioning entails

-Identifying competitors -Determining how the competitors are perceived and evaluated by target consumers -Determining the competitors' positions in the consumer's mind -Analyzing the customers -Selecting the position -Monitoring position

Segment Marketing

-Identifying consumers who are similar with regard to key traits who would respond well to a similar marketing mix. -Often the most efficient strategy because it appeals to many people with a specifically targeted trait.

Market segmentation

-Identifying potential consumer segments -Consumers are numerous and their needs and wants are too diverse. -Involves identifying consumers who are similar with regard to key traits, such as product-related needs and wants, and who would respond well to a similar marketing mix. -The company can then produce products that meet the precise needs and wants of target consumers.

Mass Marketing

-Identifying product preferences of consumers in order to target the product broadly to all consumers. -Shotgun approach.

VALS categories

-Innovators -Thinkers -Achievers -Experiencers -Believers -Strivers -Makers -Survivors

Micro Marketing

-Involves a microanalysis of the customer, and it involves customer-specific marketing. -Involves the use databases customer information. -In its most extreme form, micromarketing involves marketing to the individual, effectively customizing the marketing mix to them.

Requirements for Successful Segmentation

-Measurability -Substantiality -Stability -Accessibility -Actionability -Differential response

Important for market segmentation success

-Segment has to be large enough to warrant investment. -Segment has to be homogenous, but clearly different from the rest of the segments. -Segment should be stable over time.

Geographical Segmentation

-Segmentation is based on geographic location, such as region, state, or city. -Often used by retailers and small businesses. -Small companies normally focus on markets in close proximity. -Large companies may target various regions or regional segments differently. -Some firms are organized geographically with different divisions or regions specializing in different products.

Concentrated

-The process of selecting one market segment and targeting it with several product variations of only one brand. -Not all companies can afford to compete in a mature market, so they use this strategy and find a niche

Behavioral Segmentation

-Used to identify segments based on differences between benefits sought by the target market. -Benefit segmentation -Usage rate segmentation -User status segmentation -Loyalty status segmentation -Buyer-readiness stage segmentation -Occasion segmentation

User status segmentation

-Users of competitors' products, ex-users, potential users, first- time users, and regular users -Don't focus marketing efforts on regular users only new users can offer great potential

Multiattribute Segmentation

-Using multiple variables to segment the market. -Most companies use more than one type of segmentation. -Permits better targeting of consumers. -Allows for narrower market segments with many more descriptors for potential customers. -i.e., Upper-income empty nesters, or single mobile city-dwellers.

Product User Positioning

A positioning strategy that focuses on the product user, rather than on the product itself.

Product Class Positioning

A positioning strategy used to differentiate a company as a leader in a product category.

Price/Quality Positioning

A strategy whereby products are positioned as to offer the best value for the money

Differentiated

A targeting strategy identifying segments with different preferences for a specific product category and targeting each segment with different brands and different marketing strategies.

Occasion segmentation

Based on the time or the occasion when the product should be purchased or consumed

Segmenting Business Markets

Business markets can also be segmented according to geographic location, behavioral dimensions, buyer readiness stage, degree of loyalty, and other dimensions

Market targeting

Choosing a way to reach the target or segment

Survivors

Concerned with safety and security, they focus on investing needs rather than fulfilling desires, are brand loyal, and purchase discounted products

Believers

Conservative, conventional, focusing on tradition, family, religion, and community, they prefer established brands, forcing American products

Thinkers

Educated, conservative, and practical consumers, they value knowledge and responsibility and look for durability, functionality, and value

Positioning

Entails placing the brand in the consumer's mind in relation to other competing products

Levels of Segmentation

Firms categorize potential consumers into segments. Companies cannot efficiently target individuals, so they must market to those consumers (segments) whose needs are most effectively met by their offering. 1. Mass Marketing 2. Segment Marketing 3. Micro Marketing

Achievers

Goal-oriented, conservative, and committed to career and family, they favor established, prestige products that demonstrate success to peers

Market positioning

Perceived view of the brand in the consumer's mind in relation to competitors' products.

Competitor Positioning

Process of comparing the firm's brand directly or indirectly with those of competitors.

Use or Application Positioning

Process of marketing a very precise product application that differentiates the product in consumers' minds from other products that have a more general use.

Makers

Self-sufficient, they have the skill and energy to carry out projects, respect authority, and are unimpressed by materials possessions

Innovators

Successful, sophisticated, and receptive to new technologies, their purchases reflect cultivated tastes for upscale products

Accessibility

The ability of the company to communicate with the target market

Actionability

The ability of the company to design programs that can effectively serve the market.

Measurability

The ability to estimate segment size

Customer focus need segments

These segments are ready to pay for higher than average service that is tailored to their needs.

Relationship-seeking segments

These segments believe in the importance of relationships and have realistic expectations regarding the level of service or price.

High-expectation service segments

These segments need extensive customer focus, and demand low prices as well as high quality service providers.

Price-sensitive segments

These segments want work done at lowest possible cost.

Strivers

Trendy and fun, loving, they are concerned about others' opinions and approval