Marketing Management Identifying Market Segments & Target Customers Questions ❑ 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? Market Segmentation Market segmentation is the process of aggregating prospective buyers into groups or segments with common needs and who respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another. Marketing Paradigm shift – From mass to segments Effective Targeting Requires… Identify and profile distinct groups of buyers who differ in their needs and preferences Select one or more market segments to enter Establish and communicate the distinctive benefits of the market offering Four levels of Micromarketing Segments Niches Local areas Individuals What is a Market Segment? A market segment consists of a group of customers who share a similar set of needs and wants. Flexible Marketing Offerings • Naked solution: Product and service elements that all segment members value • Discretionary options: Some segment members value options but not all Preference Segments Homogeneous preferences exist when consumers want the same things Diffused preferences exist when consumers want very different things Clustered preferences reveal natural segments from groups with shared preferences Gather.com: A Niche Social Networking Site Niche Marketers Enterprise Rent-A-Car targets the insurancereplacement market Baskin Robbins Focuses on Local Marketing Bharat Matrimony - Local Marketing The Long Tail Chris Anderson explains the long tail equation: ▪ The lower the cost of distribution, the more you can economically offer without having to predict demand; ▪ The more you can offer, the greater the chance that you will be able to tap latent demand for minority tastes; and ▪ Aggregate enough minority taste, and you may find a new market. Individual Marketing - Customerization Customerization combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice. Individual Marketing - Customerization Segmenting Consumer Markets Geographic Demographic Psychographic Behavioral Geographic Segmentation ✓ Rural Vs Urban markets ✓ Town and Country framework by Madison media ✓ Socio-economic Rural segments classification • • • • Landlord farmers (R1) Rich farmers (R2) Marginal farmers (R3) Agricultural labourers (R4) • MICA’s Rural market ratings framework Demographic Segmentation Age and Life Cycle Life Stage Gender Income Generation Social Class Demographic Segmentation ❖ Claritas’ Prizm ✓ ✓ ✓ ✓ ✓ Education and affluence Family life cycle Urbanization Race and ethnicity Mobility Toyota Scion Targets Gen Y Consumers Dove Targets Women Psychographic Segmentation The VALS framework Psychographic Segmentation The VALS Framework ✓ Innovators: Successful, sophisticated, active, "take-charge" people with high self esteem. Purchases often reflect cultivated tastes for relatively upscale, niche-oriented products and services. ✓ Thinkers: Mature, satisfied, and reflective people who are motivated by ideals and who value order, knowledge, and responsibility. They seek durability, functionality, and value in products. ✓ Achievers: Successful, goal-oriented people who focus on career and family. They favor premium products that demonstrate success to their peers. ✓ Experiencers: Young, enthusiastic, impulsive people who seek variety and excitement. They spend a comparatively high proportion of income on fashion, entertainment, and socializing. The VALS Framework ✓ Believers: Conservative, conventional, and traditional people with concrete beliefs. They prefer familiar, U.S. products and are loyal to established brands. ✓ Strivers: Trendy and fun-loving people who are resource constrained. They favor stylish products that emulate the purchases of those with greater material wealth. ✓ Makers: Practical, down-to-earth, self sufficient people who like to work with their hands. They seek U.S.-made products with a practical or functional purpose. ✓ Survivors: Elderly, passive people who are concerned about change. They are loyal to their favorite brands. Behavioral Segmentation Decision Roles • Initiator • Influencer • Decider • Buyer • User Behavioral Variables • Occasions • Benefits • User Status • Usage Rate • Buyer-Readiness • Loyalty Status • Attitude The Brand Funnel Illustrates Variations in the Buyer-Readiness Stage • Aware • Ever tried • Recent trial • Occasional user • Regular user • Most often used Loyalty Status Hard-core Split loyals Shifting loyals Switchers Behavioral Segmentation Breakdown The Conversion Model Convertible Shallow Users Strongly unavailable Weakly unavailable Average Entrenched Nonusers Ambivalent Available The Conversion Model ❑ Strength of Commitment ✓ ✓ ✓ ✓ Convertible Shallow Average Entrenched ❑ Balance of Disposition ✓ ✓ ✓ ✓ Strongly unavailable Weakly unavailable Ambivalent Available Segmenting for Business Markets Demographic Operating Variable Purchasing Approaches Situational Factors Personal Characteristics Steps in Segmentation Process Needs-based segmentation Segment identification Segment attractiveness Marketing-Mix Strategy Segment profitability Segment positioning Segment acid test Effective Segmentation Criteria Measurable Substantial Accessible Differentiable Actionable Patterns of Target Market Selection Patterns of Target Market Selection Patterns of Target Market Selection Segment-by-Segment Invasion Plan Pepsi used Mega-marketing in India Questions?