CHAPTER 5 MARKET SEGMENTATION 10312020 1 Market Segmentation

CHAPTER 5 MARKET SEGMENTATION 10/31/2020 1

Market Segmentation Market is where the product sold and profit is generated, and consists of all the potential group of customers sharing needs and wants. n To understand the market, marketers must understand the customers, and marketing research is an effective tool in this process. n Channels play important role in segmentation decision. n 10/31/2020 2

Market Boundaries Market can be defined by the following factors: n Product and service category: actual product n Geography: location of seller n Physical customer groupings: suppliers in industrial market n Intangibles: price as a differentiation factor 10/31/2020 3

Market Boundaries (Cont. ) Customers: Current buyers as well as those who have switched. n Users: End users rather than purchasers n Prospects: potential customers. n Penetration: percentage of users. n Brand share: sales of a brand in a particular market n The pareto, 80: 20 effect n 10/31/2020 4

Market Segmentation By use: 1. occasional, 2. benefits, 3. loyalty 4. frequency n By price and quality n By consumer characteristics: 1. geographic, 2. demographic, 3. socio-economic(income, social class), 4. life styles(culture). n By product benefit n 10/31/2020 5

Market Segmentation (Cont. ) Segmentation across national boundariesset of socio-economic, political and cultural criteria. n Market segmentation is dividing market into groups of similar characteristics, and selecting the most appropriate group(s) to serve n 10/31/2020 6

A Model of Market Segmentation Process n Delineate firm’s current situation » opportunities, resources, objectives and constraints n Determine customers needs and wants » Marketing research is used for this purpose n Divide market on relevant dimensions » A prior or post hoc segmentation n segmentation decision before and after market research » Relevance of segmentation Dimensions n n managers’ expertise and experience play an important role All variables should be included in segmentation 10/31/2020 7

A Model of Market Segmentation Process (cont. ) » Basis for segmentation n n Benefit sought – attempts to measure consumers’ value system. It is a market-oriented approach that seeks to identify consumer needs and wants to develop product and satisfy the desired benefits. Psychographic segmentation – VALS 2 model: values and life styles. Vertical dimensions represent resources such as income, education, health and intelligence, the horizontal dimensions are self-orientations such as principle, action and self orientations. They represent 9 to 17 percent of the US adult population. 10/31/2020 8

» Basis for segmentation (cont. ) n Psychographic segmentation (cont. ) – VALS 2: (1)Principle oriented consumer-guided by their views of how the world is, or should be (2)Status oriented consumers-guided by the action and opinion of others (3)Action oriented consumers-guided by a desire for social or physical activity, variety and risk taking 10/31/2020 9

VALS 2 Model 10/31/2020 10

A Model of Market Segmentation (cont. ) Develop product positioning n Decide segmentation strategy n » Measurable » Meaningful-large enough » Marketable-reachable n Design marketing mix strategy 10/31/2020 11

Segmentation Methods Background investigation: hypotheses about which segments are viable n Qualitative research: focus group n Quantitative research: n Analysis: discriminant analysis, factor analysis, cluster analysis n Segmentation/positioning: positioning map. n 10/31/2020 12

Product/Service Positioning Homogeneous n Diffuse n Clustered n Positioning/Perceptual maps n » graphic indication of firm’s product against to competitors. n It shows: – competitors which are closer to your product – positioning gap – a sound base for re-positioning. 10/31/2020 13

Positioning Process Market segmentation n Target marketing n Product positioning n segmentation targeting 10/31/2020 positioning 14

Possible Approaches to Segmentation n Single segment » concentration and specialization(niche market) n Multiple segment » one or more product, two or more segments. n Cross segment » same product for different segment n Full coverage » undifferentiated(coca cola) » differentiated(IBM). 10/31/2020 15

Branding and Policies Product differentiation n Effect consumers’ perception n Brand monopoly n » trademarks, registration n Branding policies » company name » family branding » individual branding 10/31/2020 16

Branding and Policies (Cont. ) n Brand extension » a strong brand name can be used for a new product(Diet Coke) n Multibrand » one company, several brands. n Co-branding » two different brands from two different companies may be team up. n Private and generic brand 10/31/2020 17