NA_CMM 2015
Instructor ANDREJ MAZAN
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MARKET SEGMENT
GROUP OF INDIVIDUALS, FAMILIES, BUSINESSES, OR
ORGANIZATIONS, SHARING ONE OR MORE CHARACTERISTICS OR
NEEDS.
Instructor ANDREJ MAZAN
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SEGMENTATION
THE PROCESS OF DEFINING AND SUBDIVIDING A MARKET INTO
CLEARLY IDENTIFIABLE SEGMENTS HAVING SIMILAR NEEDS, WANTS, OR
DEMAND CHARACTERISTICS.
ITS OBJECTIVE IS TO DESIGN A MARKETING MIX THAT PRECISELY
MATCHES THE EXPECTATIONS OF CUSTOMERS IN THE TARGETED
SEGMENT.
Instructor ANDREJ MAZAN
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SEGMENTATION – CUSTOMER PERSPECTIVE?
Why do businesses need to segment their markets?
Because customers differ in the…
 Benefits they want
 Amount they are able to or willing to pay
 Media (e.g. television, newspapers, and magazines) they see
 Quantities they buy
 Time and place that they buy
Instructor ANDREJ MAZAN
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SEGMENTATION – COMPANY PERSPECTIVE?
Why do businesses need to segment their markets? Because
they want…
 Increased understanding of customer needs & wants
 Different products for different groups
 Better match between customer wants and product benefits
 Maximize the use of available resources
 Invest Marketing money effectively = ROI
 Sustainable Competitive advantage
Instructor ANDREJ MAZAN
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TYPES OF MARKET SEGMENTATION
GEOGRAPHY
(WHERE)
DEMOGRAPHICS
(WHO)
PSYCHOGRAPHICS
(WHAT)
BEHAVIORAL
(WHERE/WHEN/HOW)
COUNTRIES
NATIONS
STATES
REGIONS
CITIES
AGE
GENDER
SEX
MARITAL
STATUS
FAMILY SIZE
EDUCATION
OCCUPATION
ETHNICITY
LIFESTYLE
SOCIAL CLASS
PRICE
SENSITIVITY
VALUES
INTERESTS
NEEDS
INTERNET USAGE
PRODUCT USAGE
RATE
BENEFITS SOUGHT
BRAND LOYALTY
INFORMATION
SOURCES
READINESS TO BUY
Instructor ANDREJ MAZAN
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WHAT IS THE BEST WAY TO SEGMENT A MARKET?
GEOGRAPHY
(WHERE)
DEMOGRAPHICS
(WHO)
PSYCHOLOGICAL
(WHAT)
BEHAVIORAL
(HOW)
EASIEST
EASY
SCIENTIFIC
REALITY!
ALMOST
ALWAYS & AT
LEAST
PARTIALLY
IRRELEVENT
MISLEADING
INEFFECTIVE
THEORETHICAL
MOST
POWERFUL
AND
RELIABLE
ALMOST
NEVER TRUE
TO LIFE
Instructor ANDREJ MAZAN
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DEMOGRAPHIC VARIABLES: AGE
By 2025
 Age groups
under 55
expected to
decrease
 Age groups 55
and older
expected to
increase
BA_CRM_B - Instructor Andrej Mazan
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DEMOGRAPHIC VARIABLES: GENDER
 Harley-Davidson
segments a few
products to women but
targets mostly men
BA_CRM_B - Instructor Andrej Mazan
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GEOGRAPHIC SEGMENTATION: CLIMATE
Customers’
needs for
automotive
accessories,
such as tires,
vary based on
climate
? Can you think of examples of other products
affected by climate?
BA_CRM_B - Instructor Andrej Mazan
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PSYCHOGRAPHIC VARIABLES: LIFESTYLE
Lifestyle segmentation
groups people by:



How they spend their
time
The importance of
things in their
surroundings
Beliefs about
themselves and broad
issues
BA_CRM_B - Instructor Andrej Mazan
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PSYCHOGRAPHIC VARIABLES: VALS
 One of the most popular lifestyle frameworks is VALSTM
 A survey developed by SRI Consulting Business
Intelligence
 VALS classifies consumers based on psychological
characteristics correlated with purchase behavior and
key demographics
 VALS can be used to determine lifestyle choices
 VALS research is used to create new products as well
as segment existing markets
BA_CRM_B - Instructor Andrej Mazan
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PSYCHOGRAPHIC VARIABLES: VALS TYPES
BA_CRM_B - Instructor Andrej Mazan
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BEHAVIORISTIC VARIABLES
 Markets can be divided according to some feature of
consumer behavior toward a product, usually some
aspect of product use

Such as heavy, moderate or light use and nonusers
 Benefit segmentation is the division of a market
according to benefits consumers want from the product

If used, the segment must be identifiable, recognizable and
accessible to marketing efforts
BA_CRM_B - Instructor Andrej Mazan
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BEHAVIORAL (NEEDS) SEGMENTATION
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MORE SPECIFIC KNOWLEDGE =
PREDICTABLE BEHAVIOR
DIFFICULT & HIGH
PSYCHOLOGICAL
DEMOGRAPHICS
MORE SPECIFIC KNOWLEDGE =
DIFFICULT & COSTLY TO ACQUIRE
EASY & LOW
EASE & COSTS OF MEASUREMENT
BEHAVIORAL
LOW
HIGH
PREDICTABILITY OF CONSUMER CHOICE BEHAVIOR
Instructor ANDREJ MAZAN
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LEVELS OF MARKET SEGMENTATION
MASS
MARKETING
ONE PRODUCT TO SERVE MASS MARKET
SEGMENT
MARKETING
RECOGNIZES THAT BUYERS VARY IN THEIR
NEEDS, BEHAVIOR, PERCEPTION
NICHE
MARKETING
FOCUSING LIMITED RESOURCES ON SERVING
SUB-SEGMENTS (NICHES) THAT MAY BE
OVERLOOKED BY LARGER COMPETITORS.
MICRO
MARKETING
ADOPTING PRODUCTS AND MARKETING
PROGRAMS TO MATCH THE TASTE OF
SPECIFIC LOCALITIES AND INDIVIDUALS.
Instructor ANDREJ MAZAN
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BENEFITS OF MARKET SEGMENTATION
SELECTION OF THE OPTIMAL PRODUCT PORTFOLIO TO
MEET THE NEEDS OF THE MARKETPLACE.
DEVELOPMENT OF SUPERIOR, COST-EFFICIENT
ADVERTISING & PROMOTION.
IMPROVING LONG-TERM MARKET POSITION - IMAGE,
CUSTOMER SATISFACTION, COMPETITIVE ADVANTAGE
AND COST-EFFECTIVENESS.
BETTER CORPORATE PLANNING AND DEVELOPMENT OF
MARKETING STRATEGIES.
Instructor ANDREJ MAZAN
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5 CRITERIA TO SELECT VIABLE TARGET MARKET
SIZE
HOW LARGE
IS THIS
TARGET
MARKET?
EXPECTED
GROWTH
ARE THERE
INDICATIONS
THAT IT WILL
GROW?
COMPETITIVE
POSITION
LOW LEVEL OF
COMPETITION?
IT EQUALS
ATTRACTIVE
MARKET.
Instructor ANDREJ MAZAN
COST TO REACH
COMPATIBILITY
IS THE
MARKET
ACCESSIBLE
WITH THE
DEFINED
MARKETING
TACTICS?
HOW ALIGNED
IS THIS
MARKET WITH
THE COMPANY
STRATEGY &
GOALS?
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SELECTING VIABLE TARGET MARKET (extended)
BA_CRM_B - Instructor Andrej Mazan
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CUSTOMER SEGMENTATION
CUSTOMER SEGMENTATION REFERS TO THE DIVISION OF THE
CUSTOMER BASE INTO SPECIFIC TYPES ACCORDING TO PURCHASING
BEHAVIOR PATTERNS.
Instructor ANDREJ MAZAN
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THE FUNDAMENTAL PHILOSOPHY BEHIND CUSTOMER
SEGMENTATION IS THAT CUSTOMERS WILL BE MORE INCLINED
TO BUY SOMETHING THAT ADDRESSES THEIR NEEDS.
Instructor ANDREJ MAZAN
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CUSTOMER SEGMENTATION PROCESS
Analyze the features of
your products and
services. Determine
the benefits that your
customers get from
your products and how
your products fill the
needs of those
customers.
Instructor ANDREJ MAZAN
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5 TYPES OF CUSTOMER (BEHAVIORAL) SEGMENTATION
NEEDS-BASED
(Ready-2-buy)
DISCOUNT
CUSTOMERS
LOYAL (REPEAT)
CUSTOMERS
POTENTIAL
CUSTOMERS
(Wandering)
IMPULSE BUYING
CUSTOMERS
Instructor ANDREJ MAZAN
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Market Segmentation – The 80/20 Rule
Pareto’s Principle => the 80-20 Rule => The “Vital Few and Trivial Many Rule.”
THE RULE PREDICTS THAT 80% OF THE PROFITS ARE
DERIVED FROM 20% OF THE SEGMENTS.
IF COSTS ARE ALLOCATED TO SEGMENTS AND THE SEGMENTS
ARE THEN RANK-ORDERED BY PROFIT, OVERALL PROFITS
WILL INCREASE IF THE LESS PROFITABLE SEGMENTS ARE
DISCONTINUED, SOLD, OR TRADED.
BA_CRM_B - Instructor Andrej Mazan
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CUSTOMER SEGMENTS – TELEFÓNICA
DIGITAL
NATIVES
TRADITIO
NALISTS
HIGH
FLIERS
CREATIVE
COMMUNITIES
PLAYFUL
HECTICS
STEADY
SCEPTICS
SMALL
TOWN
SAVERS
Instructor ANDREJ MAZAN
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Instructor ANDREJ MAZAN
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Instructor ANDREJ MAZAN
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Instructor ANDREJ MAZAN
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MORE DETAILS ON OTHER SEGMENTS OF TELEFÓNICA:
http://customer-segment.o2.co.uk/segments/17
Instructor ANDREJ MAZAN
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CUSTOMER SEGMENTATION – INSURANCE
NON-TRADITIONALISTS
interested in using the Internet
to buy their insurance as
opposed to going directly
through an agent.
HASSLE - FREE
prefer using an agent and don't
require any extra marketing
persuasion to secure the sell.
Insurance companies segment
their market to better allocate
agents to specific locations or
consumer bases.
Instructor ANDREJ MAZAN
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CUSTOMER SEGMENTATION – CREDIT CARD COMPANIES
INNOVATORS
interested in broad services and
who display extreme loyalty to a
company.
Credit card companies often segment
their target market based on the
various types of cards they are
offering. Some cards are geared
toward higher-income customers,
others to those who are looking for
cash back or rewards and still others
to those who want to build their
credit score.
TRADITIONALISTS
prefer to remain risk averse.
Instructor ANDREJ MAZAN
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CUSTOMER SEGMENTATION – BANKS
COMMITED
have high account balances, are
likely to have more than one
account and are also likely to
invest in certificates of deposit
or bonds.
PARKERS
use the bank as a place to stash
money but aren't necessarily
those who spend the money or
invest it heavily for aggressive
growth.
Looking at things such as account
activity, amount held in savings
and willingness to invest helps the
bank to segment its customers into
categories.
Instructor ANDREJ MAZAN
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CUSTOMER SEGMENTATION – LUXURY CLOTHING RETAILERS
ONE-OFFS
might buy an expensive
handbag as a present or for a
special occasion, but they won't
be likely to be a regular or semiregular customer.
BIG SPENDERS
Repeat loyal buyers.
Luxury clothing brands will
often subdivide their customers
into various categories based on
how likely those customers are
to buy again in the future.
Instructor ANDREJ MAZAN
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CUSTOMER
SEGMENTATION –
RESTAURANTS
Instructor ANDREJ MAZAN
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Instructor ANDREJ MAZAN
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Market Segmentation in the „Age of Customer“
Instructor ANDREJ MAZAN
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Market Segmentation for the 21 Century
 Technology has made segmentation much more effective.
 Tesco can design personalized marketing campaigns based on club
card data, while Facebook will select adverts to show after
analyzing users’ profiles.
 Now technology is starting to allow outdoor media segment its
audience.
 This short video clip explains how a facial recognition software can
detect viewers’ age and even their gender to show them
advertisements appropriate to them.
Instructor ANDREJ MAZAN
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Instructor ANDREJ MAZAN
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STP PROCESS
SEGMENTATION
( Make a Choice )
TARGETING
POSITIONING
( Increase Relevance)
( In the Consumer Mind)
Instructor ANDREJ MAZAN
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Targeting Strategies
One type of product
One promotional program
One price
One distribution channel
Effective for homogeneous markets where a large proportion of
people in a target market have similar needs for a product.
Instructor ANDREJ MAZAN
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Targeting Strategies
Advantages
Disadvantages
Allows specialization
Profits fall with demand
A small firm can compete
Difficult to diversify
BA_CRM_B - Instructor Andrej Mazan
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Both Mont Blanc and Bic use a
concentrated targeting strategy to aim at a
different, single market segment
BA_CRM_B - Instructor Andrej Mazan
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Targeting Strategies
Advantages
Could mean increased sales
Disadvantages
Production costs are higher
Uses excess production capacity
BA_CRM_B - Instructor Andrej Mazan
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PRODUCT POSITIONING EXAMPLES
Instructor ANDREJ MAZAN
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Toothpaste
Product
Positions
BA_CRM_B - Instructor Andrej Mazan
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SUMMARY
CUSTOMERS CAN BE SEGMENTED, CLASSIFIED AND APPROACHED
IN MANY WAYS.
THE CHOICE DEPENDS ON INDUSTRY / BUSINESS SECTOR THAT A
COMPANY OPERATES IN AND ON THE PRODUCT OR SERVICE
FEATURES / BENEFITS.
USUALLY COMBINATION OF SEVERAL SEGMENTATION CRITERIA
ARE USED TO ESTABLISH EASILY DESCRIBABLE AND MESURABLE
CLIENT SEGMENTS.
CONSUMERS DIFFER IN THEIR CHARACTERISTICS AND BEHAVIOR
AND SO COMPANIES HAVE TO USE SEPARATE MARKETING MIXES
TO TARGET DIFFERENT SEGMENTS EFFECTIVELY.
Instructor ANDREJ MAZAN
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RECOMMENDED READINGS:
Importance of Segmentation and how to create one?
http://www.analyticsvidhya.com/blog/2013/08/importance-segmentationcreate/
Plug the Leak in the Full Service Bucket by Recognizing
and Reaching Unique Consumer Segments
http://www.restaurantindustrytrends.com/briefs_sep12b.html
Instructor ANDREJ MAZAN
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SOURCES:
http://www.businessdictionary.com/definition/market-segmentation.html#ixzz3KTomowBX
Market segmentation, http://www.marketsegmentation.co.uk/segmentation_tmsc.htm
http://www.launchengineering.com/Market_Segmentation.htm
http://www.thehomeofknowledge.com/the-importance-of-market-segmentation/
Levels of Market Segmentation, http://www.studylecturenotes.com/managementsciences/marketing/90-levels-of-market-segmentationmass-segment-niche-micro-marketing
Spaces, Asia and Customer Segmentation,
http://mozwork.wordpress.com/2005/04/29/spaces-asia-and-customer-segmentation/
What Are the Five Types of Customer Segmentation?, http://smallbusiness.chron.com/fivetypes-customer-segmentation-10566.html
http://www.segmentationstudyguide.com/understanding-target-markets/target-marketselection/
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