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