MARKET SEGMENTATION Understanding the concept of segmentation Knowing

MARKET SEGMENTATION Understanding the concept of segmentation - Knowing its implications - Identifying the relevant criteria for segmentation - Implementing market segmentation - Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 1

UNDERSTANDING THE OF SEGMENTATION Findings: When faced with a need, not all consumers adopt the same behaviour in satisfying it. THEREFORE: they choose various solutions to satisfy their need. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 2

For example in the breakfast food market � - The solutions chosen can be: Traditional bread OR pastries OR crispy bread OR cereal Or nothing at all Generic market: eating breakfast � Main markets Traditional bread Pastries Crispy bread Substitute market Laurence Chérel - Catherine Madrid Tech De Co Bordeaux Cereal Nothing 3

INTERPRETATION This means that in order to satisfy the need to eat breakfast, consumers have various solutions at their disposal. They do not therefore adopt the same behaviour. The breakfast food market is segmented. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 4

KNOWING THE IMPLICATIONS OF SEGMENTATION Segmentation consists in: -Determining the significant differences in consumer behaviour -In order to be able to group them into mutually exclusive uniform categories (= segments). Each of these segments is likely to be targeted through an appropriate marketing strategy. - Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 5

REMINDERS (course on the market) � Breakfast food market for the adult French population in relation to the project to launch honey crispbread Professional market Pre-packaged and dry bread products + bread = customers of the main markets 46. 8% eat bread or crispbread, i. e. 23, 868, 000 Relative Non. Consumers 33. 2% eat foods excluding bread/crispbread , i. e. 16, 932, 000 persons 6 630 000 Total adult population 51 million (Insee. fr) Absolute Non. Consumers 20% who do not eat breakfast, i. e. 10, 200, 000 persons

DIAGRAM OF MARKET SEGMENTATION French Adult Population (51 million) Criteria 1: attitude towards having breakfast YES = potential consumers NO = ANC (10, 200, 000 persons) (current customers + NRC) = 40, 800, 000 persons Criteria 2: type of users of breakfast products Users of spreads (23, 868, 00 persons) SEGMENT 1 Users of self-sufficient products (16, 932, 000 persons) SEGMENT 2 Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 7

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION The market is segmented by means of CRITERIA which must enable significant differences in behaviour to be identified. Several types of criteria linked to: 1 - the general characteristics of the consumer, 2 - the psychological characteristics of the consumer, 3 - goods and services consumption situations Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 8

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION 1 – Criteria linked to the general characteristics of the consumer: 1. 1 - factors of the geographic environment: . Region, type of residence, size of accommodation, climate, etc. Example: the type of vacuum cleaner chosen varies depending on the type of residence (house or apartment) Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 9

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION 1. 2 - sociodemographic factors: . Age, . Sex, . Family size, . Level of education, . Generation, . Etc. Example: the size of the family determines the choice of family car Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 10

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION 1. 3 – economic factors: . Income, . Profession. NOTE: bipolar consumption interferes with segmentation by income. The consumer is prepared, for example, to: àmake certain financial sacrifices in order to purchase products for pleasure. àbecome attached to the use value of a product when this product is only of functional value to him, independent of his income. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 11

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION 2 – Criteria linked to the psychological characteristics of the consumer: 2. 1 – factors linked to the individual: . His personality, . His values, . His beliefs, . Etc. Example: depending on the relationship the individual has with his pet, he will adopt a specific behaviour in the choice of feed. If the animal is thought of as a “child” of the family, his master will not choose an industrial feed. He will prefer to give it feed he prepares himself. If he places him in the role of family “pet”, he will instead opt for industrial feed by buying him biscuits. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 12

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION 2. 2 – factors linked to stages in the decision-making process: . Stage of becoming aware of a need Example: some men are aware of the need to use personal products. . Stage of information research to satisfy a need Example: when purchasing a computer, the information research process will vary depending on whether it is a 1 st purchase or a renewal purchase. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 13

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION 3 – Criteria linked to goods or services consumption situations: These criteria are the ones we choose most often nowadays due to the specific nature of contemporary consumption which is often bipolar. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 14

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION This segmentation is referred to as SITUATIONAL. The criteria chosen depend on the consumption situations or the use of the products. 3. 1 – factors linked to the benefits sought by the consumer: Pleasure / Functionality Example: in the mobile telephone market, some people consider mobiles as utilitarian products while others think of them as an extravagance. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 15

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION 3. 2 – factors linked to types of use of the product: . Regular use / Occasional use Example: if the consumer uses a hair iron periodically, he will choose a simple, inexpensive device; if, however, he uses one almost daily, he will prefer a sturdy, easy-to-use product. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 16

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION. Usage times Example: If the consumer wishes to eat compote: - during a break in his working day compote in cups - at the end of a family meal compote in bulk containers - at the end of a meal as a special dessert in individual containers Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 17

IDENTIFYING THE RELEVANT CRITERIA FOR SEGMENTATION NOTE: in situational segmentation, a single individual no longer belongs to one segment and one segment only; he switches between several segments depending on the situations of consumption or use. He is referred to as a “chameleon”. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 18

IMPLEMENTING OF MARKET SEGMENTATION 1 - Benefits of the segmentation process: * more adequately matches the product offerings of companies to the fulfilment of customers’ needs * optimises the allocation of marketing efforts *highlights new commercial opportunities Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 19

Highlighting new commercial opportunities: prepaid cards for nonholders of bank cards Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 20

Y 2 – Conditions for meaningful market segmentation: The. segments will be relevant and uniform and ifonly if: the groupings show actual differences in purchasing behaviours. . The relevant criteria for segmenting the market are those identified on the basis factors that influence the consumer’s behaviour. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 21

IMPLEMENTING OF MARKET SEGMENTATION 2 -(continued) Conditions for meaningful market segmentation . The segments must be accessible: the company must direct its commercial activities towards the segments. . The segment must have enough potential to justify specific commercial activities. . The segments must be stable over time: the differences in behaviour must not be short-lived. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 22

IMPLEMENTING OF MARKET SEGMENTATION 3 - Problems in choosing segmentation criteria: . The most illustrative criteria are often the least operative (i. e. , enabling the company to effectively communicate with the sectors). RELEVANCE OPERATING VALUE Personality, values, age, sex, profession, Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 23

IMPLEMENTING OF MARKET SEGMENTATION � ULTIMATELY, it consists in constructing a SEGMENTATION TREE based on segmentation CRITERIA in order to show the various market SEGMENTS. � Criteria will be chosen on the basis of their ability to highlight differences in behaviours. � Each segment will comprise individuals with like or similar behaviour in consumption or use of the product. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 24

CONSTRUCTION OF A SEGMENTATION TREE (example) Total population Segmentation criterion n° 1 Consumer group 2 Segmentation criterion n° 2 Segment 1 Segment 2 Segment 3 Segment 4 Segment 5 Segment 6 The total population is segmented on the basis of 2 criteria which identify 6 market segments and therefore 6 categories of consumers with different behaviours in the EC market. Laurence Chérel - Catherine Madrid Tech De Co Bordeaux 25