Marketing and

Segmentation

Suppose a teenage girl is looking for a pair of jeans.What influences her?

1. Demographics2. Psychographics3. Perceptual clues4. Symbolism5. Past experience6. Group dynamics

RitualsFamilyReference groupsRace & ethnic factorsSocial classSubcultureCulture

Market Segmentation

“Smart marketing starts with smart segmentation.”

Jeffrey J. Fox

Target Market: A group of people or organizations which a business creates and maintains a marketing mix specifically designed to satisfy the needs of group members

Market Segment: Individuals, groups, or organizations with one or more similar characteristics that cause them to have similar product needs

Market Segmentation: The process of dividing a total market into groups with relatively similar product needs to design a marketing mix that matches those needs

Marketing Concept:“All marketing strategies shouldbe based on known customerneeds and or wants.”

Segmentation is the practical application ofmarketing research and consumer behavior.

Reminder:The “marketing mix” consists of:

ProductPricePromotionDistribution (Place)

Almost no one tries to sellto everyone!

Undifferentiated

Concentrated

Major kinds:

1.Undifferentiated marketing strategy:Generic DifferentiationSame marketing mix for ALL segmentsOverlooks segment differences4-Ps designed for everyoneAdvantage:

Concentrated resources

Major kinds:

1.Undifferentiated marketing strategy:Generic DifferentiationSame marketing mix for ALL segmentsOverlooks segment differences4-Ps designed for everyoneDisadvantage:

4-Ps for everyone?Competing against focused firms

Major kinds:

2. Single Marketing Strategy:Targeted Differentiation Niche MarketingGo after one segment (ethnic marketing)Advantage: Sharp focus… good expertise

efficiency… high profitsgives smaller firms a chancegood place to start

Major kinds:

2. Single Marketing Strategy:Targeted Differentiation Niche MarketingGo after one segment (ethnic marketing)Disadvantage:

More risk… eggs in one basketCompetition can wipe you out

Major kinds:

3. Full-coverage marketing strategy:Segmented DifferentiationTreat each segment as separate market4-Ps designed for every marketAdvantage:

Focus…

Major kinds:

3. Full-coverage marketing strategy:Segmented DifferentiationTreat each segment as separate market4-Ps designed for every marketDisadvantage:

Development costs(must weigh increased costsincreased sale)

Major kinds:

4. Concentrated marketing strategy:Hybrid DifferentiationSingle product to several segment

5. MicromarketingLocal marketing and individual marketing

Mass CustomizationBuild-to-Order (BTO)

To work, segments must have:

1. Substantiality Must be large enough

enough money, customers, etc

enough room to grow

Basic marketing rule:

The best product, best prices, andbest business in the world

will fail if there are no customers!

To work, segments must have:

2. Identifiablity Must be able to identify segment

and measure it

To work, segments must have:

3. Reachability Must be accessible

must be actionable

(can action be taken?)

The Segmentation Tradeoff:Synergies vs. Cannibalization

• Organizational Synergy

• Cannibalization

• “Tiffany/Walmart” Strategiestwo-tier products

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Increased customer value through efficientmarketing and manufacturing

The five key steps in segmenting and targeting markets that link market needs to a

firm’s marketing program

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Criteria to Use in Forming the Segments

• Simplicity and Cost-Effectiveness of assigningpotential buyers to Segments

• Potential for increased Profit

• Similarity of needs of potential buyerswithin a Segment

• Potential of a marketing action to reacha Segment

• Difference of needs of buyers among Segments

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Step 1.

Common Segments

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Step 1.

GeographicalClimate

RegionCity sizePopulation density

Market Segmentation

1.Geographic

Market Segmentation

1.Geographic2.Demographic

Common Segments

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Step 1.

DemographicsAge (Generational marketing)

Gender (?)Marital statusIncomeEducationOccupationRacial and Ethnic

Market Segmentation

1.Geographic2.Demographic3.Psychographic

Common Segments

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Step 1.

PsychographicsPerceptionGender (?)MotivationPersonalityAttitudes

http://www.expedia.com/Waterloo-Hotels-Baymont-Inn-Suites-Waterloo.h17890.Hotel-Information?chkin=10%2F29%2F2013&chkout=10%2F30%2F2013&rm1=a2&hwrqCacheKey=3ac1ed16-2067-4bf3-b2a0-8b521c84be7aHWRQ1381949822543&c=30126d42-02ed-4261-9ade-64b0ef193af1

&

Market Segmentation

1.Geographic2.Demographic3.Psychographic

The Nine Nations

Common Segments

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Step 1.

LifestyleCombination of:

PlacePersonProducts

VALs

Common Segments

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Step 1.

UsageUse-related

usage ratebrand loyaltyawareness

Use-situationwhere… when… why… with whom

http://www.youtube.com/watch?v=vbsyEI78m5s

Common Segments

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Step 1.

BehavioralProduct featuresUsage rates (frequency)80/20 ruleLong tail

Selling small amounts to few customers,

BUT have lots of things to sell (Netflix)

Common Segments

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Step 1.

Socio-culturalCulture and subcultureSocial classReligion

Social class may be hard to define, but we all know it when we see it.

Segmentation bases, variables, and breakdowns for U.S. consumer markets

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The five key steps in segmenting and targeting markets that link market needs to a

firm’s marketing program

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Target Marketing

The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

Step 2:

Marketing positioning

Arranging for a product to occupy a clear, distinctive , and desirable place relative to competing products in the minds of target consumers.

Product positioning: is theplace an offering occupies in a consumer’s mind on important

attributes relative to competitive products.

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Product differentiation: is a marketing strategy that involvesa firm using different marketing mix activities to help consumers perceive the product as being

different and better than competing products.

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Prince Sports targets racquets at specific market segments

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Market-product grids show alternative strategies for a lawnmower manufacturer

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Step 3

The five key steps in segmenting and targeting markets that link market needs to a

firm’s marketing program

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Criteria to Use in SelectingTarget Markets

Those that divide a market into Segments

• Two Types of Criteria

Those that actually pick the Target Segments

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STEP 4: SELECT TARGET MARKETS

Criteria to Use in Selecting Target Markets

• Market Size

• Expected Growth

• Competitive Position

• Cost of reaching the Segment

• Compatibility with organizationalobjectives and resources

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Perceptual Map Example

A Perceptual Map to Repositionchocolate milk for adults:

• Identify Important Attributes for Adult Drinks

• Discover How Customers See Chocolate Milk

• Reposition Chocolate Milk to Make ItMore Appealing to Adults

• Discover How Adults See Competing Drinks

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A perceptual map: is a means of displaying or graphing in two

dimensions the location of products or brands in the minds of consumers to

enable a manager to see how consumers perceive competing

products or brands, as well as the firm’s own product or brand.

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A perceptual map of the location of beverages in the minds of American adults

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The strategy American dairies are using to reposition chocolate milk to reach adults

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Step 5

Do it!