8/6/2019 3. Market Segmentation

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As a Technical Collaborator of for B. Sc. Degree inCatering Science & Hospitality Management

Marketing & FinanceMarketing & Finance

Year 2 Unit I3. Market Segmentation

8/6/2019 3. Market Segmentation

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As a Technical Collaborator of for B. Sc. Degree inCatering Science & Hospitality Management

Session ObjectivesSession Objectives

By the end of the session you will be able to:

Describe the different variables of market segment Understand the requirements for effective segment Evaluate the market segment

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Topics Covered Topics Covered

Market Segment

Levels of Market SegmentationMarket Segmentation VariablesRequirement for Effective SegmentationEvaluating Market Segments

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Market SegmentationMarket Segmentation

Dividing a market into smaller groups of

buyers with distinct needs, characteristics, orbehaviours, who might require separate products or marketing mixes

The key is their response to a differentmarketing mixIf all consumers respond the same way, thenthere should be no need to segment a market

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Mass marketing

Segment marketing

Niche marketing

Micromarketing

Treats all customers the same

Isolating broad segments &Isolating broad segments &adapting marketing to match 1+adapting marketing to match 1+

segmentsegment

Focusing on subFocusing on sub --segments thatsegments thatmay seek a special combination of may seek a special combination of

benefitsbenefits

Tailoring products & market Tailoring products & market programs to specific individuals & programs to specific individuals &

local groupslocal groups

Levels of Market SegmentationLevels of Market Segmentation

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Market Segmentation VariablesMarket Segmentation Variables

Geographic Dividing a market into

different geographical units,such as national, regional,local, city size, density of

population, and climate

Demographic Dividing the market into

groups based ondemographic variables suchas age, sex, family size/ lifecycle, income, occupation,education, religion, andethnic origin

Psychographic Dividing a market into

different groups based onsocial class, lifestyle, or

personality characteristics

Behavioural Dividing a market into

groups based on purchaseoccasion, benefits sought,user status, usage rate,loyalty status, readinessstate, and attitude towardsthe product

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Requirement for Effective SegmentationRequirement for Effective Segmentation

Measurability

Accessibility

Substantiality

Actionability

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Evaluating Market SegmentsEvaluating Market Segments

Segment size & growth

Segment structural attractiveness

Company objective and resources

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Criteria for Effective SegmentationCriteria for Effective Segmentation

Market segmentation cannot be used in all

cases. To be effective, segmentation mustmeet the following basic requirements. The market segments must be measurable in terms of

both purchasing power and size Marketers must be able to effectively promote to and

serve a market segment

Market segments must be sufficiently large to be potentially profitable

The number of segments must match the firms

capabilities

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Segmenting Consumer MarketsSegmenting Consumer Markets

Geographic Segmentation

Dividing an overall market into homogeneous groupson the basis of their locations Does not ensure that all consumers in a location will

make the same buying decision Help in identifying some general patterns

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Market Segmentation StrategiesMarket Segmentation StrategiesUndifferentiated StrategyUndifferentiated Strategy

OneMarketing

MixMassMarket Rs.

Q(one product) (everyone) (one demand)

curve

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Undifferentiated StrategyUndifferentiated Strategy

Advantages Disadvantages

Cost Economies Hyper competitionMajority - FallacyImprecise - Inefficient

a mass marketing effort, Offer one product tothe total market (everybody) E.g., Coca-Cola

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Concentrated StrategyConcentrated Strategy

One Marketing

Mix(one or more) products

Segment 2and

subdivision 2A, 2B

Segment 1

Segment 3

Q

Rs.

Q

Rs.

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Concentrated Strategy Concentrated Strategy

Advantages Disadvantages

Precise - Efficient High Risk

(Knowledge of Consumer) One Market SegmentCost Economies(80-20 principle)

Choose & focus on one segment E.g., Mercedes, VW

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Differentiated StrategyDifferentiated Strategy

Marketing Mix 1(Product 1)

Marketing Mix 2(Product 2)

Marketing Mix 3(Product 3)

Segment 1

Segment 2

Segment 3

Stimuli Target AudienceBlack Box

Responses

demand curve 1

demand curve 2

demand curve 3

Q

Q

Q

Rs

Rs

Rs

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Differentiated StrategyDifferentiated Strategy

Potential Advantages:- Precision - Efficiency Sales IncreasePotential Disadvantages:

- Cost DiseconomiesPotential Social Issue:- Product Proliferation

Cross segments: Offer same productacross different segments.

E.g., Duponts Teflon

Target two or more segments with one or more brands.

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Custom MarketingCustom Marketing

One-to-one marketingUses data based-marketing

and information technologyFor example... GATEWAY,DELL

Your name

Room preferences

Special requests

Smoking or non smoking

Credit card number

Frequent hotel user discount

FOR R EPEAT HOTEL GUESTS

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RetrenchingRetrenching -- Another Approach to Another Approach toSegmentationSegmentation

Counter segmentation:

Consolidate severalsegments and launch orreposition a product to

cover all segments. E.g., Nissan and Toyota

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RecapRecap

Now ! you are able to:

Describe the different variables of market segment Understand the requirements for effective segment Evaluate the market segment