Consumer Behavior Market segmentation and target marketing Market

Consumer Behavior Market segmentation and target marketing Market Segmentation and Target Marketing

Consumer Behavior Market segmentation and target marketing Outline • The concept of market segmentation • Segmentation bases – general vs. product-specific – observable vs. latent • Data sources for segmentation • Segmentation criteria • Target marketing

Consumer Behavior Market segmentation and target marketing Market segmentation Partitioning a market that is characterized by heterogeneity in consumers’ response to the marketing mix into more homogeneous submarkets.

Consumer Behavior Market segmentation and target marketing Differences in consumer response Response B B 2 A 1 B 1 A x 1 x 2 marketing variable

Consumer Behavior Market segmentation and target marketing Segmentation bases General Observable features of the physical and social environment (esp. demographics) Latent Values, lifestyles and psychographics, personality variables Product-specific Behavioral characteristics (user status, loyalty status, usage rate) Usage situations Awareness Attitude (beliefs, evaluations) Intentions

Consumer Behavior Market segmentation and target marketing In-class exercise: Segmentation in the toothpaste market Go to the web sites for Crest and Colgate and study what types of toothpastes they offer to appeal to different market segments. Use the information provided on the web sites, or any other information that you can find, to come up with a list of variables that companies use to segment the toothpaste market.

Consumer Behavior Market segmentation and target marketing Segmentation bases General Observable features of the physical and social environment (esp. demographics) Latent Values, lifestyles and psychographics, personality variables Product-specific Behavioral characteristics (user status, loyalty status, usage rate) Usage situations Awareness Attitude (beliefs, evaluations) Intentions

Consumer Behavior Market segmentation and target marketing Segmentation by behavioral characteristics Category users • Other brand loyals • Other brand switchers Our consumers Heavy users Light users Loyals Switchers Nonusers (potential users) Nonusers (Potential users)

Consumer Behavior Market segmentation and target marketing Examples of behavioral segmentation Light Medium Heavy (% of total) (% of total/ volume) Toothpaste 4. 1 33. 5/16. 0 42. 7/48. 3 19. 8/35. 6 Cola 39. 8 21. 2/4. 0 21. 4/23. 9 17. 7/72. 1 Beer 69. 8 13. 3/1. 7 9. 6/18. 4 8. 3/79. 9 Toilet tissue 4. 8 30. 0/6. 9 23. 7/16. 5 41. 5/76. 6 Nonusers

Consumer Behavior Market segmentation and target marketing Segmentation bases General Product-specific Observable features of the physical and social environment (esp. demographics) Behavioral characteristics (user status, loyalty status, usage rate) Usage situations Latent Values, lifestyles and psychographics, personality variables Awareness Attitude (beliefs, evaluations) Intentions

Consumer Behavior Market segmentation and target marketing Attitudinal segmentation +++ - Expensive Whitens teeth Crest Colgate Gentle on gums -/+ Fights cavities Toothpaste Mentadent ++

Consumer Behavior Market segmentation and target marketing Segmentation bases General Observable features of the physical and social environment (esp. demographics) Latent Values, lifestyles and psychographics, personality variables Product-specific Behavioral characteristics (user status, loyalty status, usage rate) Usage situations Awareness Attitude (beliefs, evaluations) Intentions

Consumer Behavior Market segmentation and target marketing The VALS 2 typology

Consumer Behavior Market segmentation and target marketing VALS 2 VALS classifies consumers on the basis of two dimensions: – self-orientation (primary motivation): • Ideals (principle-oriented consumers): those who are guided in their choices by abstract, idealized criteria (quality, integrity, tradition); • Achievement (status-oriented consumers): those who are guided in their choices by the expected reactions, concerns, and desires of groups to which they belong or aspire to belong; • Self-expression (action-oriented people): those who are guided in their choices by a desire for social or physical activity, variety, and risk taking; – resources: refers to the full range of psychological, physical, demographic, and material means and capacities people have to draw upon (age, education, income, selfconfidence, energy, intellectualism, novelty seeking, innovativeness, impulsiveness, etc);

Consumer Behavior Market segmentation and target marketing A segmentation scheme for toothpastes

Consumer Behavior Market segmentation and target marketing Data sources for segmentation • Simmons Market Research Bureau – Product usage (by category and brand) – Demographics – Media behavior – Psychographics • Mediamark Research – Similar to Simmons

Consumer Behavior Market segmentation and target marketing 1998 Mediamark data for toothpaste (user status by gender) Total U. S. (‘ 000) A ‘ 000 B % down C % across D Index All adults 195, 192 187, 163 100. 0 95. 9 100 Men 93, 553 88, 936 47. 5 95. 1 99 Women 101, 639 98, 228 52. 5 96. 6 101 Base: Adults

Consumer Behavior Market segmentation and target marketing 1998 Mediamark data for toothpaste (usage rates overall and for Glamour readers) Base: Adults Total U. S. (195, 192) Glamour (12, 741) A ‘ 000 B % down C % across D Index Heavy users in general n. a. 38, 596 100. 0 19. 8 100 Heavy users, Glamour readers n. a. 3, 619 9. 4 28. 4 144 Note: Heavy users use toothpaste more than 14 times per week.

Consumer Behavior Market segmentation and target marketing 1998 Mediamark data for toothpaste (usage rates overall and for Glamour readers) Base: Adults Total U. S. (195, 192) Glamour (12, 741) A ‘ 000 B % down C % across D Index Light users in general n. a. 65, 292 100. 0 33. 5 100 Light users, Glamour readers n. a. 3, 074 4. 7 24. 1 72 Note: Light users use toothpaste fewer than 11 times per week.

Consumer Behavior Market segmentation and target marketing • A segment of consumers interested in sporty cars would like to purchase a car like the Porsche 911 at the price of a Mazda Miata. • A researcher investigating response to sales promotion offers distinguishes coupon-prone from rebate-prone shoppers, but finds that consumers in the coupon-prone segment are as responsive to rebates as to coupons. • There are two kinds of consumers who see higher prices in a positive light, those who associate higher prices with higher quality and those who feel good about being able to buy products that not everybody can afford. However, a producer of luxury goods has no way of knowing whether a given consumer belongs to the first or second group.

Consumer Behavior Market segmentation and target marketing • A company discovers that dieters are extremely fickle in their food preferences over time. • The break-even point for selling a piece of software at a profit is 100, 000 units and the company feels that there is a segment of consumers who are interested in this product. However, it proves difficult to determine how big the potential market is. • It is known that some consumers are more responsive to factual appeals and others are more responsive to emotional appeals. An advertiser has developed factual and emotional ads to target the two kinds of consumers, but cannot find print media to reach the two segments.

Consumer Behavior Market segmentation and target marketing Segmentation criteria differentiable: market response is homogeneous within segments and heterogeneous between segments; identifiable: individuals can be assigned to a segment based on a meaningful profile of segment characteristics; stable: segments and segment membership do not change in the short run; measurable: the size and purchasing power of relevant segments can be determined; actionable: the company is able to develop a marketing mix that will appeal to the members of a given segment; accessible: members of a segment can be reached with the appropriate marketing mix;

Consumer Behavior Market segmentation and target marketing Target marketing • evaluation of the attractiveness of each market segment and selection of target segments; • evaluation of market segments based on – market segment characteristics – industry competition – company objectives and resources • selection of target segments can result in – undifferentiated (mass) marketing – differentiated marketing – concentrated marketing