IDENTIFYING MARKET SEGMENT & TARGETS

1. Levels of market segmentation

2. Segmenting consumer markets

3. Market targeting

MARKETS ARE NOT HOMOGENEOUS. A COMPANY CANNOT CONNECT WITH ALL CUSTOMERS IN

LARGE, BROAD, OR DIVERSE MARKETS. CONSUMERS VARY ON MANY DIMENSIONS &

OFTEN CAN BE GROUPED ACCORDING TO ONE OR MORE CHARACTERISTICS.

A COMPANY NEEDS TO IDENTIFY WHICH MARKET SEGMENTS IT CAN SERVE EFFECTIVELY.

SUCH DECISIONS REQUIRE A KEEN UNDERSTANDING OF CONSUMER BEHAVIOUR &

CAREFUL STRATEGIC THINKING.

MARKETERS SOMETIMES MISTAKENLY PURSUE THE SAME MARKETING SEGMENTS AS MANY OTHER FIRMS

& OVERLOOK SOME POTENTIALLY MORE LUCRATIVE SEGMENTS.

LEVELS OF MARKET SEGMENTATION

• Segment marketing

• Niche marketing

• Local marketing

• Customisation

Segment marketing• Segment & sector

• A flexible market offering consists of 2 parts:- a naked solution containing the product & service elements that all segment members value &- discretionary options that some segment members value

• Market segments can be defined in many ways. One way is to identify preference segments- e.g., ice cream buyers preference for sweetness & creaminess:

#homogeneous #diffused #clustered

Different segmentsCreaminess (a) Homogeneous: buyers with same preferences

Sweetness

Creaminess (b) Diffused: consumer preferences scattered.

1st brand likely to appeal to most people, 2nd fight for market share or locate in a corner

Sweetness

Creaminess (c) Clustered: Neutral segments – shows 3 options

Concentrated marketing, may offer several

. brands

Sweetness

… … ..… … ……… ….…. ….…. ….

... .

Niche marketingAn attractive niche market characterised as follows:

THE CUSTOMERS IN THE NICHE MARKET HAVE A

DISTINCT SET OF NEEDS;

THEY WILL PAY A PREMIUM TO THE FIRM THAT BEST

SATISFIES THEIR NEEDS;

THE NICHE IS NOT LIKELY TO ATTRACT OTHER COMPETITORS;

THE NICHE GAINS CERTAIN ECONOMIES THROUGH SPECIALISATION; & THE NICHE HAS SIZE, PROFIT, & GROWTH PIOTENTIAL.

WHEREAS SEGMENTS ARE FAIRLY LARGE & NORMALLY

ATTRACT SEVERAL COMPETITORS, NICHE ARE FAIRLY SMALL

& NORMALLY ATTRACT ONLY ONE OR TWO.

Local marketingReflects a growing trend called grassroots marketing:• Marketing activities concentrate on getting as close & personally relevant

to individual customers as possible: e.g. - Nike’s initial foray

• A large part of this is experiential marketing, “The idea is not to sell something, but to demonstrate how a brand can enrich a customer’s life”

• Pine & Gilmore argue that we are on the threshold of the “Experience Economy,” a new economic era in which businesses must orchestrate memorable events for their customers

• Those who favour localised marketing see national advertising as a waste. Counterpoint is brands overall image gets diluted if product & messages differ across localities

CustomerisationCustomerisation combines operationally driven mass customisation

with customised marketing in a way that empowers consumers to design the product & service offering of their choice.

• Segment versus individuals

• Customisation is not for every company

SEGMENTING CONSUMER MARKETS

• Geographic

• Demographic

• Psychographic

• Behavioural

Geographic segmentation

Demographic segmentation• Age & life-cycle stage

• Life stage

• Gender

• Income

• Generation

• Social class

Psychographic segmentation• VALs II:

1. Innovators

2. Thinkers

3. Achievers

4. Experiencers

5. Believers

6. Strivers

7. Makers

8. Survivors

VALs SegmentationInnovators

High resources High innovation

Primary motivation

Ideals Achievements Self-expression

Thinkers Achievers Experiencers

Believers Strivers Makers

Low resourcesLow innovators

Survivors

Actualisers:• Enjoy finer things• Receptive to new products, technology, distribution• Skeptical of advertising• Frequent readers of a wide variety of publications; light TV viewersPrinciple oriented:• Little interest in image or prestige• Above-average consumer for home products• Like educational & public affairs programming; read widely & oftenStatus oriented:• Attached to premium products• Prime target for a variety of products• Average TV watchers, read business, news, & self-help publicationsAction oriented:• Follow fashion & fads• Spend much of the disposable income in socialising• Buy on impulse; attend to advertising; listen to rock music

Believers:• Buy American• Slow to change habits, look for bargains• Watch TV more than average; read retirement, home & garden, & general

interest magazinesStrivers:• Image conscious• Limited discretionary incomes but carry credit balances• Spend on clothing & personal care products; prefer TV to readingMakers:• Shop for comfort, durability, value• Unimpressed by luxuries• Buy the basics, listen to radio;• Read auto, home mechanics, fishing, outdoor magazinesStrugglers:• Brand loyal• Use coupons & watch for sales• Trust advertising; watch TV often; read tabloids & women’s magazines

Behavioural segmentationBuyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or response to a product

• Decision roles:- initiator- influencer- decider- buyer- user

• Behavioural variables:- occasions

- benefits: Mobile identified 5 different benefits:1. Road warriors2. Generation F3. True blues4. Home bodies5. Price shoppers

- user status: nonusers, ex-users, potential users, first-time users, & regular users

- usage rate: light, medium, heavy

- buyer-readiness stage: unaware, aware, informed, interested, desire, intend to buy

- loyalty status:1. Hard-core loyals2. Split loyals3. Shifting loyals4. Switchers

- attitude: 5 groups- enthusiastic, positive, indifferent, negative, & hostile

A. SEGMENT DESCRIPTIONConservative Traditional Update

Size 23% of population 38% of population 16% of population16% of total sales 40% of total sales 40% of total sale

Age 35 – 55 years old 25 – 49 years old 25 – 49 years oldValues Conservative traditional Contemporary

Satisfied with Active, busy, independ- Active, busy, independent,present status dent, self-confident very self-confident

Employment Has job, not career Family-& job/career- Family-& job/career- oriented oriented

Income Limited disposable income Considerable income Considerable incomeBenefits sought Price-driven, reacts to Quality-driven, will Fashion-driven, expresses

sales pay a little more self thru’ apparel Wants easy care & Wants traditional styling, Wants newness in colourcomfort seeks clothes that last & styleNot interested in Interested in newness Shops oftenfashion Defines value as price, Defines value as quality, Defines value as fashionquality, & fashion fashion & price quality, & price

B. RETAIL OFFERING

Retail mix Conservative Traditional UpdatePricing Budget Moderate Moderate to betterMerchandise Basic styles, easy-care Traditional styling, good Fashion-forward, more selection,

fabrics quality comfortable fit, tailored look,

new coloursBrands Alice, Cable Lane Joneswear, Worthington, Claude, Mary McFadden,

Russ Togs, Halston Russ Togs, Halston, Dockers Jacqueline, FerrarMerchandising Price signing, “save stories” Well-coordinated merchandise Colour statements, mannequins, Approach stack-out tables collections, uncluttered displays, theme areas

knowledgeable salespeople

Behavioural segmentation breakdownTarget market

Unaware Aware

Not tried Tried

Negative neutral favourable Repeater Not yet Rejector opinion opinion tried

Loyal to Switcher Loyal to other brand brand

Light Regular Heavyuser user user

• The conversion model: developed to measure the strength of psychological commitment between brands & consumers & their openness to change. To determine the ease with which a consumer can be converted to another choice, the model assesses commitment based on factors such as consumer attitudes toward & satisfaction with brand choices in a category & the importance of the decision to select a brand in the category.- Model segments users of brands into 4 groups:

1. Convertible2. Shallow3. Average4. EntrenchedAlso classifies non-users, basis openness to try brand:1. Strongly unavailable2. Weakly unavailable3. Ambivalent4. Available

MARKET TARGETING

• Steps in segmentation process

• Effective segmentation criteria

• Evaluating & selecting the market segments

• Additional considerations

Steps in segmentation process1. Needs-based segmentation

2. Segment identification

3. Segment attractiveness

4. Segment profitability

5. Segment positioning

6. Segment “Acid Test”

7. Marketing-mix strategy

Effective segmentation criteria

• Measurable

• Substantial

• Accessible

• Differentiable

• Actionable

Evaluating & selecting market segmentsEvaluate segment’s overall attractiveness & company’s objectives & resources. Then look at 5 patterns

of target market selection:

• Single-segment concentration (e.g., M1P2)

• Selective specialisation(e.g., M3P1, M1P2, M2P3)

• Product specialisation(e.g., Row P2)

• Market specialisation(Column M1)

• Full market coverage

• Managing multiple segments

• Differentiated marketing costs:

- product modification costs

- manufacturing costs

- administrative costs

- inventory costs

- promotion costs

M1 M2 M3

P1

P2

P3

P= Product; M= Market

Additional considerations• Segment-by-segment invasion plans

• Updating segmentation schemes:

- market partitioning: For example car buying:# brand-dominant hierarchy earlier# nation-dominant hierarchy now

• Ethical choice of market targets