4/8/2011
In this chapter, we
address the following
questions:
Chapter
8
IDENTIFYING
1.
Market Segments & Targets
2.
3.
4.
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What are the different levels of market
segmentation?
How can a company divide a market
into segments?
How should a company choose the most
attractive target markets?
What are the requirements for effective
segmentation?
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Levels of Market Segmentation
China is an
attractive target
market for many
companies
because of its
huge population
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In Mass marketing, seller engages in mass
production of one product for all
Now, consumers want to stand out from
crowd
Turn to micromarketing – segments,
niches, local areas or individuals
8-3
In Hong Kong, ICI Paints
recognized key role women
play as influencers in
purchase of house paints.
Targeted at women, it
wanted a campaign that is
unique. The campaign
portrayed ICI Dulux
supreme as the “best make
up for your walls.”
The visuals – stunning brought home message that
paint, like make up, is
smooth, water resistant &
has longlasting color.8-5
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Levels of Market Segmentation
- Segment Marketing
Market segment – a group of consumers who
share similar set of needs & wants
Segment marketing – better design, price,
communicate, deliver to target market
Al applied
Also
li d tto bi
bigger-ticket
ti k t it
items
A flexible market offering has 2 parts:
– a naked solution – whole segment value,
– discretionary options – some value
Market segments defined in many ways
One way - identify preference segments
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4/8/2011
Figure 8.1 Basic Market-Preference Patterns
Although Vietnam is becoming more modernized, selling
products by using traditional baskets balanced over one’s
shoulder is still a common feature
ice cream attributes -sweetness &
creaminess
Homogeneous preferences
– Figure 8.1(a) - all consumers roughly
same preferences - no segments
Diffused preferences
– Figure 8.1(b) - consumers vary
greatly in their preferences
Clustered preferences
– reveal distinct preference clusters,
called natural market segments
Figure 8.1(c)
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Levels of Market Segmentation
- Niche Marketing
Levels of Market Segmentation
- Niche Marketing
A niche - narrowly defined customer
group - mix of benefits.
An attractive niche:
Niche marketers understand customers’
needs that they willingly pay a premium
for products
–
–
–
–
–
di ti t sett off needs
distinct
d
will pay a premium for it
niche do not attract competitors
niche gains economies through specialization
niche has size, profit & growth potential
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Globalization has facilitated niche
marketing
Global niche players tend to be found in
stable markets, typically family-owned &
are long-lived
8-9
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Levels of Market Segmentation
- Niche Marketing
Levels of Market Segmentation
- Local Marketing
Eg : Ostrichesonline.com
– Webpreneur Steve Warrington earns a
6-figure income
– sell ostriches & every product derived
from them online
– Since 1996, > 20,000 clients - >125
countries >17,500 ostrich-related
products such as ostrich meat,
feathers, videos, eggshells & leather
jackets
Target marketing is leading to marketing
programs tailored to needs & wants of
local customer groups
Local marketing important in countries
with strong regional differences
Reflects trend- grassroots marketing - get
as close & personally relevant to
individual customers as possible
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8-12
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Experiential Marketing
Marketers can provide experiences for customers
through a set of experience providers:
Customer Experience Management (CEM)
process of strategically managing a customer’s
entire experience with a product or company
The CEM framework is made up of 5 basic steps
Communications
Visual/verbal identity
Product presence
Co-branding
Environments
Web sites & electronic media
People
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Experiential Marketing
Analyze customer’s
customer s experiential world
Building experiential platform
Designing brand experience
Structuring customer interface
Engaging in continuous innovation
8-13
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Figure 8.2 Examples of Marketing Customization
Levels of Market Segmentation
- Customerization
Ultimate form of segmentation –
customization – one-to-one marketing
Customerization – operationally driven
mass customization & marketing
Online firms provide Choiceboard:
customer design own products
customize its products to each customer
on one-to-one basis
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Segmenting Consumer Markets
-Geographic Segmentation
Segmenting Consumer Markets
-Demographic Segmentation
divide market into different geographical
units - nations, cities or neighborhoods
pay attention to local variations
M
Mapping
i software
ft
can show
h
d
densestt areas
–can resort to customer cloning, assuming
that best prospects live where most of
customers come from
Geoclustering=geographic + demographic
data
Market divided into groups based on
demographic variables – popular –WHY?
consumer needs, preferences often
associated with demographic variables
demographic variables - easy to measure
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8-18
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Segmenting Consumer Markets
-Demographic Segmentation
Segmenting Consumer Markets
-Demographic Segmentation
Age & Life cycles: Consumer wants &
abilities change with age.
But, target market for products may be
psychologically young
Persons in same part of life-cycle may
differ in their life stage
Life stage - a person’s major concern,
such as a divorce
divorce, a new home
Present opportunities for marketers who
can help people cope with their major
concerns
– Eg Honda tried to target 21-year-olds with
Element, described as a ‘dorm room on
wheels.”
– average age of buyers turned out to be 42!
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Segmenting Consumer Markets
-Demographic Segmentation
Segmenting Consumer Markets
-Demographic Segmentation
Gender - Men & women tend to have
different attitudinal & behavioral
orientations, based partly on genetic
makeup & partly on socialization.
Some more male-oriented markets
beginning to recognize gender
segmentation
Income segmentation - automobiles, clothing,
cosmetics & travel
May not predict best customers for product
Firms need to reinvent - huge potential market
for those trading up
If not – risk being “trapped in the middle” &
market share steadily decline
– Eg Banks now find women a lucrative
segment in Japan
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– Eg General Motors caught in middle of German
imports in luxury market & high-value Japanese
models in economy class
8-21
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Segmenting Consumer Markets
-Demographic Segmentation
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8-22
Marketing to Generation Y
Growing up times have profound
influence on each generation – cohorts share same major cultural, economic
experiences - similar outlooks & values
Marketers often advertise to a cohort
group by using icons & images prominent
in their experiences
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8-20
Generation Y ≈ 78 million Americans
spending power ≈ $187 billion annually
53 yrs life expectancy: $10 trillion range
i consumer spending
in
di
turned off by “hard sell” approaches
important to marketers – Gen Y is the
force that will shape consumer & business
markets for years to come
8-23
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4/8/2011
Marketing to Generation Y
Different approaches to reach Generation Y
Online buzz
Student ambassadors
Unconventional sports
Cool events
Computer games
Videos
Street teams
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Segmenting Consumer Markets
-Demographic Segmentation
Lifestage Analytic Matrix - combines
information on cohorts, life stages,
physiographics, emotional effects &
socio-economics in analyzing a
segment/individual
2 individuals from same cohort may differ
in their life stages
This analysis may lead to more efficient
targeting & messages
8-25
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An Asian Perspective
Segmenting Consumer Markets
-Demographic Segmentation
Segmenting Consumer Markets
-Psychographic Segmentation
Social class has a strong influence on
preference in cars, clothing, leisure
activities & retailers
Manyy companies
p
design
g p
products &
services for specific social classes which
change with the years
1990s - greed & ostentation for upper
classes.
Affluent tastes now - more conservative
Psychographics - science of using
psychology & demographics to better
understand consumers
In psychographic segmentation,
segmentation buyers
are divided into different groups on basis
of lifestyle/personality/values
Same demographic group can exhibit very
different psychographic profiles
Find out which VALS type you are at SRIC-BI’s Website: www.sric-bi.com
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An Asian Perspective
Figure 8.3 The VALS Segmentation System: An 8- Part Typology
Segmenting Consumer Markets
-Psychographic Segmentation
Innovators
upscale, niche-oriented
Thinkers
durability, functionality
A popular classification systems using
psychographic measurements SRIC-BI
VALSTM
classifies adults into 8 primary groups
based on personality traits & key
demographics
Achievers
established & prestige
Experiencers
fashion, entertainment
Believers
familiar & established
Strivers
stylish products
Makers
Find out which VALS type you are at SRIC-BI’s Website: www.sric-bi.com
basic, practical
Strugglers
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Loyal to favorite brands
8-30
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Segmenting Consumer Markets
-Psychographic Segmentation
Psychographic
segmentation often
customized by
culture
The Japanese VALS
2 key dimensions:
life orientation
& attitudes to
social change
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Japanese society can be divided
into 10 segments:
Integrators
Self Innovators
Self Adopters
Ryoshiki Innovators
Ryoshiki Adapters
Tradition Innovators
Tradition Adapters
High Pragmatics
Low Pragmatics
Sustainers
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8-31
Segmenting Consumer Markets
-Behavioral Segmentation
buyers are divided into groups based on
knowledge/attitude/use/response to a
product
Decision roles: People play 5 roles in a
buying decision: Initiator, Influencer,
Decider, Buyer & User
Behavioral variables: best starting points
to construct market segments
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Segmenting Consumer Markets
-Behavioral Segmentation
Segmenting Consumer Markets
-Behavioral Segmentation
Occasions: time of day, week, month, year or
other defined aspects of consumer’s life
Buyers distinguished according to occasions
when they develop a need or buy a product
Benefits: Buyers classified based on benefits
they seek
User Status: Markets segmented into non-users,
ex-users, potential users, first time users &
regular users of a product
Market-share leaders - attract potential users
Small firms - attract users from market leader
Usage Rate: Markets segmented into light,
medium & heavy product users
Heavy users: small % of market but high % total
p
consumption
Heavy users - loyal to 1 brand/lowest price
Buyer-Readiness Stage: A market consists of
people in different stages of readiness to buy a
product - Some unaware of product, some
interested, some intend to buy etc
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Segmenting Consumer Markets
-Behavioral Segmentation
brand loyalty status:
What firms can learn:
1. Hard-core loyals
Hard-cores : product strengths
1 brand all the time
Spliters: competitive brands
2 Split loyals
2.
Shifters: marketing
g weakness
loyal to 2/3 brands
3. Shifting loyals
from 1 brand to another
4. Switchers
No loyalty to any brand
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Segmenting Consumer Markets
-Behavioral Segmentation
5 attitude groups found in market:
enthusiastic, positive, indifferent,
negative
g
& hostile
brand-loyal purchase patterns
may reflect habit, low price
indifference, high switching
cost or non-availability of
other brands
Marketing Management
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8-32
8-35
Combining different behavioral bases can
help to provide a more comprehensive &
cohesive view of a market & its segments
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Figure 8.4
Behavioral
Segmentation
Breakdown
Segmenting Consumer Markets
-Behavioral Segmentation
THE CONVERSION MODEL measures
psychological commitment strength
between brands & consumers & their
openness to change
h
Assess commitment using satisfaction
with current brand & likelihood to select
brand
One way to break down target
market by various behavioral
segmentation bases
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An Asian Perspective
Segmenting Consumer Markets
-Behavioral Segmentation
THE CONVERSION MODEL
4 users groups:
Low-high commitment
1. Convertible
most likely to defect
2. Shallow
uncommitted to brand
3. Average
committed to brand in
short-term
4. Entrenched
strongly committed to
brand
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Bases for Segmenting Business
Markets – Marketing to Small Businesses
4 non-users groups:
Low-high openness to try brand
1. Strongly Unavailable
strongly current brands
2 Weakly
2.
W kl Unavailable
U
il bl
current brand
3. Ambivalent
new & current brands
4. Available
Business markets can be segmented with
some variables in consumer market
But also business ones like demographic
variables are the most important
p
Small businesses, have become a Holy
Grail for business marketers
Within given target industry & customer
size, a company can segment by purchase
criteria
strongly new brand
Marketing Management
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8-39
Purchasing Approaches
7. Purchasing-function organization: Serve highly centralized or decentralized?
8. Power structure: Serve companies that are engineering or financially dominated?
9. Nature of existing relationships: Strong relationships or most desirable ones?
10. General purchase policies: Serve those that prefer leasing? Service contracts?
11. Purchasing criteria: Serve those seeking quality? Service? Price?
Buyers seek different
benefit bundles
3 groups:
Situational Factors
12. Urgency: Serve those that need quick & sudden delivery or service?
13. Specific application: Focus on certain applications of our product rather than all?
14. Size of order: Focus on large or small orders?
First-time
prospects
Personal Characteristics
15. Buyer-seller similarity: Should we serve those with values similar to ours?
16. Attitudes toward risk: Should we serve risk-taking or risk-avoiding customers?
17. Loyalty: Should we serve companies that show high loyalty to their suppliers?
An Asian Perspective
Marketing Management
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8-40
Business marketers generally identify segments
through a sequential process
Operating Variables
4. Technology: What customer technologies to focus on?
5. User or nonuser status: Should we serve heavy, medium, light users, or nonusers?
6. Customer capabilities: Should we serve customers needing many or few services?
Marketing Management
Table 8.2 Major Segmentation
Variables for Business Markets
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Bases for Segmenting Business
Markets – Sequential Segmentation
Demographic
1. Industry: Which industries to serve?
2. Company size: What size companies to serve?
3. Location: What geographical areas?
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Novices
Sophisticates
8-41
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Buyers seek different
selling types
3 groups
1. Price-oriented customers
(transactional selling)
2. Solution-oriented
customers
(consultative selling)
3. Strategic-value customers
(enterprise selling)
8-42
Marketing Management
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Roger Best
Market Targeting
Table 8.3 Steps in the Segmentation Process
– Effective Segmentation Criteria
Description
1. Needs-Based
Group customers into similar needs & benefits segments
Segmentation
Once firm has identified its marketsegment opportunities, it has to decide
how many & which ones to target.
Marketers are increasingly combining
several variables in an effort to identify
smaller, better-defined target groups.
This has led to a needs-based market
segmentation approach
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7-step Needs-based market segmentation approach
8-43
2. Segment
Identification
Each needs-based segment, which demographics, lifestyles, &
usage behaviors make segment distinct & identifiable (actionable)
3. Segment
Attractiveness
Att
ti
Use predetermined segment attractiveness criteria to rate overall
attractiveness
tt ti
off each
h segmentt
4. Segment
Profitability
Determine segment profitability
5. Segment
Positioning
Each segment, create a “value proposition” & product-price
positioning strategy based on segment’s unique customer needs &
characteristics
6. Segment
“Acid Test”
Create “segment storyboards” to test attractiveness of each
segment’s positioning strategy
7. MarketingMix Strategy
Expand segment positioning strategy to include all aspects of
marketing mix: product, price, promotion, & place
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Market Targeting
Market Targeting
– Effective Segmentation Criteria
– Evaluating & Selecting the Market Segments
5 key criteria for useful market segments
In evaluating different market segments,
firm must look at 2 factors:
Measurable size, purchasing power can be measured
8-44
– segment’s overall attractiveness and
– company
company’ss objectives & resources
Substantial segments large & profitable enough
Accessible segments can be reached & served
How well does a potential segment score on
the 5 criteria?
Does investing in segment make sense given
firm’s objectives & resources?
Differentiable segments distinguishable & respond
differently to different marketing-mix programs
Actionable
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effective programs can be formulated to
attract & serve segments
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8-45
• Concentrated marketing -strong segment
knowledge & market presence
• enjoys operating economies
• If lead segment, high return on investment
• Risks: segment turn sour or competitors
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Figure 8.5 Five Patterns of Target Market Selection
• Firm concentrates on serving many needs of
particular customer group
• Firm - strong reputation - a channel for
other products
• Risk: customer group may suffer budget cuts
or shrink in size
• Attractive & appropriate segments selected
• Firm attempts to serve all customer groups
with
ith allll products
d t they
th might
i ht need
d
• Large firms cover whole market in 2 ways:
1. Undifferentiated marketing, firm ignores
segment differences & goes after whole
market with one offer
2. Differentiated marketing, firm operates in
several market segments & designs
different products for each segment
• Little or no synergy among segments
• This multi-segment strategy diversify risk
• Firm makes a certain product & sells to
several different market segments
• Risk: Product may be replaced by an entirely
new technology
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Marketing
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Figure
8.5
5 Patterns of Target Market Selection
8-47
An Asian Perspective
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Market Targeting
Market Targeting
– Evaluating & Selecting the Market Segments
– Evaluating & Selecting the Market Segments
The best way to manage MULTIPLE SEGMENTS is to
appoint segment managers with sufficient authority &
responsibility to build business - encourage
cooperating with other groups in company
DIFFERENTIATED MARKETING COSTS - Differentiated
marketing creates more total sales than
undifferentiated marketing
But, the following costs are higher:
1. Product modification costs
2. Manufacturing costs
3. Administrative costs
4. Promotion costs
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To be cautious about over-segmenting
their market. If this happens, they may
want to turn to counter segmentation to
broaden customer base
Eg Johnson & Johnson broadened its
target market for its baby shampoo to
include adults
8-49
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Marketing Management
A - all computer needs of airlines
B - large computer to all 3 sectors
C - personal computers to truckers
Market Targeting
– Additional Considerations
8-50
An Asian Perspective
Where should C move next?
Figure 8.6
Segment-by-Segment
Invasion Plan
3 other considerations must be taken into
account in evaluating & selecting
segments:
SEGMENT BY SEGMENT INVASION PLANS
SEGMENT-BY-SEGMENT
- A company would be wise to enter one
segment at a time
Competitors must not know to what
segment(s) firm will move next
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8-52
A Pepsi ad from India. To enter Indian market, Pepsi used
megamarketing. With aid of an Indian business group, it
offered a package of benefits that gained its acceptance
Market Targeting
– Additional Considerations
Too many companies fail to develop a long-term
invasion plan
A company’s invasion plans can be thwarted when it
confronts blocked markets
Problem of entering blocked markets calls for a
megamarketing approach
Megamarketing - strategic coordination of economic,
psychological, political & public relations skills, to gain
cooperation of of parties in order to enter/operate in
given market
Once in, a multinational must be on its best behavior calls for well-thought-out civic positioning
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Market Targeting
Market Targeting
– Additional Considerations
– Additional Considerations
Hierarchy of attributes can reveal customer
segments
Buyers who first decide on price - price
dominant
Those who are type/price/brand dominant
make up a segment
Those who are quality/service/type dominant
make up another segment
Each segment- distinct demographics,
psychographics & mediagraphics
UPDATING SEGMENTATION SCHEMES - Market
segmentation analysis - done periodically
because segments change
Investigate hierarchy of attributes
consumers examine in choosing brand if
they use phased decision strategies Market partitioning
Monitor shifts in consumers’ hierarchy of
attributes & adjust to changing priorities
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Market Targeting
Market Targeting
– Additional Considerations
– Additional Considerations
ETHICAL CHOICE OF MARKET TARGETS –
Issue is not who is targeted, but rather,
how & for what
Market targeting generates public
controversy
The p
public is concerned - marketers take
unfair advantage of vulnerable,
disadvantaged groups or promote
potentially harmful products
Sociallyy responsible
p
marketing
g calls for
targeting that serves not only company’s
interests, but also interests of those
targeted
– Eg The fast-food industry has been heavily
criticized for marketing efforts directed
toward children
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8-57
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Final discussion
Marketing Debate - Is Mass Marketing Dead?
With marketers increasingly adopting more & more refined market
segmentation schemes—fueled by the Internet & other customization
efforts—some critics claim that mass marketing is dead. Others counter
that there will always be room for large brands that employ marketing
programs targeting the mass market.
Take a position: Mass marketing is dead versus Mass marketing is still a
viable way to build a profitable brand.
Marketing Discussion
—Descriptive versus Behavioral Market Segmentation Schemes
Think of various product categories. How would you classify yourself in
terms of the various segmentation schemes? How would marketing be
more or less effective for you depending on the segment involved? How
would you contrast demographic versus behavioral segment schemes?
Which ones do you think would be most effective for marketers trying
to sell to you?
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