Lecture Marketing Segmentation

MARKETING SEGMENTATION

• A market is a group of people or organizations with wants and needs that can be satisfied by particular product categories. A market has the ability to purchase these products and is willing to exchange resources for the products. •

A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.  

MARKET SEGMENTATION • Dividing a market into distinct groups of buyers on the basis of need, characteristics, or behavior who might require separate product or marketing mix.

MASS MARKETING(until the 1960s) • mass marketing is the mass production mass distribution and mass promotion of the mass product to all customers. • Thirty years ago marketers were raving about mass marketing. The rationale behind mass marketing included the economies of scale you achieve in both manufacturing and communication by reaching a large group of people with the same product and message

Mass market Product

Price

Distribution

Promotion

Single Marketing Mix

All Customers in the Market

– Companies that adopt mass marketing assume that all customers in the product market have similar needs, and that these needs can be reasonably satisfied with a single marketing mix. – This marketing mix typically consists of a single product (or, in the case of retailers, a homogeneous set of products), one price, one promotional program, and one distribution system.

Level of marketing segmentation • Segment marketing:isolating broad segment that make up a market and adapting the market to match the needs of one or more segments. • It offer several benefits over mass marketing. • Company can create more fine product and price it appropriately the target audience. • Choice of distribution and communication channels.

Segment marketing Product

Price

Distribution

Promotion

Product

Price

Distribution

Promotion

Multiple Marketing Mixes

More Than One Market Segment

NICHE MARKETING

• narrows the market concentration approach even more and focuses all marketing efforts on one small, well-defined market segment that has a unique, specific set of needs • More narrowly defined group, typically a small market whose needs are not being well served. • Niche customers have a distinct and complete set of needs. • They will pay a price premium to have their special needs met. • The niche is not likely to attract very many competitors. • Should have sufficient size, profit, and growth potential.

Niche Marketing

Product

Price

Distribution

Promotion

Single Marketing Mix

Focused on a Small Niche Market Segment

• LOCAL MARKETING • tailoring brand and promotion to the needs and wants of local customer group—cities, neighborhood and even specific stores. • Pronounced regional differences often exist in communities’ demographics and lifestyles. • Local marketing can drive up manufacturing & marketing costs by reducing economies of scale.

• INDIVIDUAL MARKETING: • Tailoring products and marketing programs to the needs and preferences of individual customers – also labeled one- to-one marketing, customized marketing, and markets-of-one marketing. • The ultimate level of segmentation. Each customer is a “segment of one.” – This approach is common in business-to-business marketing where unique programs and/or systems are designed for each and every customer.

• Such "one-on-one" marketing is more rare in consumer marketing.

Customized or individual Marketing Product

Price

Distribution

Promotion

Product

Price

Distribution

Promotion

Unique Marketing Mixes

Individual Customers

SELF MARKETING Form of individual marketing. Customer takes more responsibility in determining which products/brands to buy Much less reliance upon salespeople

PATTERNS OF MARKETING SEGMENTATION • PREFERENCE SEGMENTS: • Segment the market on preferences basis. • Three different patterns emerges.

• HOMOGENEOUS PREFERENCES: • Market where all consumer have roughly the same preference.

• DIFFUSED PREFERENCES: • Consumer preferences may be scattered through out the space.if several brands are in the market they are likely to position throughout the space and show real differences to match consumer preference difference.

CLUSTERED PREFERENCES: Natural market. It has three option. Take position in center, hoping to appeal all group. • Concentrated marketing. • Develop several brands each position in a different segment. • • • •

Segmenting consumer market • Two broad groups of variable are used to segment consumer market. • Consumer characteristics • Geographic • Demographic • Psycho graphic • Consumer response: • Benefits sought • Use occasions or brand

GEOGRAPGIC SEGMENTATION •

GEOGRAPGIC SEGMENTATION • Dividing a market into different Geographic units. Such as nations, states, region ,countries , cities or neighborhoods. • Geographic. Geographic segmentation usually involves dividing up geographic markets by using existing political boundaries, natural climatic zones, or population boundaries.

Demographic Segmentation

Demographic Segmentation • Demographic market segments are created by dividing a market into groups based on differences in demographic traits such as occupation • age, education • gender, religion • family size, race • family life cycle, nationality • income

Age and life –cycle segmentation

Age and life –cycle segmentation • Dividing a market into different ages and life- cycle groups. • Markets can be • segmented based • on age differences. Consumer wants and ability change with age.

• family life cycle is a 'composite demographic' trait. When segmenting based on stage of the family life cycle, firms specifically recognize that individuals progress through a series of life cycle stages.  The life cycle begins with individuals who are young and single.  It ends with people who are older and unmarried as a result of the death of a spouse. Each of the stages in the family life cycle essentially amounts to a market segment possessing different wants and needs.  Marketers can develop products and tailor their marketing programs to serve these differences. 

GENDER

• Gender has long been used for segmenting markets for clothing, hair dressing products, cosmetics and magazines. This seems natural.  Men and women have different preferences for such products. Marketers take advantage of differences in tastes between genders by tailoring different products and promotional

Income segmentation • Income segmentation is employed for products such as automobiles, boats, clothing, cosmetics and travel. For such products, marketers are primarily interested in identifying and targeting higher income customer groups because these consumers often have the greatest purchasing power.  Moreover, consumers in these groups are most likely to be attracted to innovations in these product categories.

GENERATION SEGMENTATION • Many researchers are now turning to generation segmentation. • The idea is that each generation is profoundly by the milieu in which it grows up. • The music, movies, politics and events of the time. • Some marketers target baby boomer(born b/w 1946-64) • Generation X-(born b/w1964-1984)

SOCIAL CLASS • Social class has a strong influences on a a person’s preference on car , clothing , home, leisure activities, reading habits and so on.many companies design product for specific social class.

Psychographics Segments • Dividing a market into different groups based on life style or personality characteristics.

Life style • Segmenting markets based on lifestyle amounts to creating segments based on differences in how people choose to live their lives. Because life style is highly predictive of many purchase behaviors, marketers attempt to characterize consumers' life style patterns by asking them questions about their activities, interests, and opinions. 

1. Lifestyle segmentation groups individuals according to how they spend their time, importance of things in their surroundings, beliefs about themselves and broad issues, and some demographic characteristics. 2. This variable encompasses numerous characteristics related to people’s activities, interests, and opinions.

personality • Market have used personality variables to segment markets. They endow their product with brand personalities that correspond To consumer personality.

BEHAVIOR SEGMENTATION Dividing a market into groups based on  consumer knowledge,  attitude,  use or response to a product. Many marketers believes that behaviors variables occasion, benefits, user status, usage rate, loyalty status, buyerreadiness stage, and attitude are the best understanding point for building market segmentation.

OCCASIONS • Dividing a market into groups according to occasions when buyers gets the idea to buy, actually make their purchases or used purchased item. • Mother’s day • Christmas • Eid

BENEFITS • Dividing a market into groups buyers according to different benefits that consumer seek from the product.

User status • Marketing can be segmented into groups of non-user, ex user, potential user, first time user, and regular user of product.

Marketers try to differentiate between users and non-users of product categories when consumer characteristics are tied to the need for the product itself rather than to the use of different brands. 

Usage rate • Markets can be segmented in the light of light, medium, or heavy use of a product. • Marketers usually attract one heavy user of the product rather than several light user.

Loyalty status • Firms can learn a lot by analyzing the loyalty patterns of customers in markets.  By finding the characteristics of loyal and nonloyal customers for their brand and those of major competitors, firms can find ways to keep their customers loyal and attract nonloyal customers away from competitors.  Brand loyalty often is defined based solely on consumers' patterns of repeat purchase behavior. 

• Buyer can be divide into four groups according to brand loyalty • HARD-CORE LOYALS:consumer buy one brand all the time. • SPLIT –LOYALS:consumer who are loyal to two or three brands. • SBIFTING LOYALS:consumer who shift from favoring one brand to another. • SWITCHERS:who show no loyalty to any brands.

Buyer –readiness stage A market consist of people in different stages of readiness to buy a product. Some are unaware, somr are unaware, some are informed aome are interested.

MULTI-ATTRIBUTION SEGMENTATION • Marketer do not limit their analysis to only few market segmentation.they crossing several variables in an effort to identify smaller, better defined target groups.

BASES FOR SEGMENTATION BUSINESS MARKETS • Business market can be segmented with many of the same variable employed in consumer market. Such as • geography • Benefit sought • Usage rate etc

• DEMOGRAPHIC: • INDUSTRY:which industry should we serve? • COMPANY SIZE:what size companies should we serve? • LOCATION: which geographical area should we serve?

OPERATING VARIABLES • TECHNOLOGY:what customer’s technology should we focus on? • USER-STATUS:should we serve users medium users, light users, or non user? • CUSTOMER CAPIBOILITIES:should we serve Customers needing many or few services?

Purchasing approaches • Purchasing-function organization:should we serve companies with highly centralized or decentralized purchasing organization? • POWER STRUCTURED:should we serve companies that are financial y dominated ,marketing dominated. • NATURE OF EXISTING RELATIONSHIPS: should we serve companies with which we have strong relationship or simply go after the most desirable companies?

• PURCHASING CRITERIA: should we serve companies that are seeking qualities? Services? Prices?

SITUATIONAL FACTORS • URGENCY: should we serve companies that need quick and sudden delivery or services? • SPECIFIC APPLICATION: should we focus on certain application of our products rather than all applications. • SIZE OF ORDER: should we focus on large or small orders?

PERSONAL CHARACTERISTICS • BUYER –SELLER SIMLLARLLY: should we serve companies whose people and values are similar to ours? • ATTITUDES TOWARDS RISKS: should we serve risk – taking or risk- avoiding customers? • LOYALTY: should we serve companies that show high loyalty to the supplier ?

Four business segments •

Segment 1 : Programmed Buyers. Customers in

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Segment 2 : Relationship Buyers. Customers in this

the micro segment were small and viewed the product as a routine purchase item. They had the lowest average sales of any group and were not particularly price or service sensitive.. micro segment were also relatively small. The product it self was moderately important in their operations, and unlike the programmed buyers of segment 1, they were more knowledge about competitive offerings

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Segment 3 : Transaction Buyers.

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Segment 4 : Bargain Hunters. Customer in

Customer in the segment se the product as very important to their operation.. They received price discounts averaging about 10% and an above-average service level;. the micro segment were large-volume customers that received the largest price discount (averaging 11.3%) as well as the highest level of services.customer know the alternative supplier and ready to switch.

Effective segmentation • The useful market segment must be: • measurable Segments must be identifiable and their size measurable :(we can estimate how many people or organizations are in the segment. Data about the population within geographic boundaries, the number of people in various age categories, and other social and demographic characteristics are often easy to get, and they provide fairly concrete measures of segment size.

Accessibility: • The firm must be able to reach members of targeted segments and served.

Substantiality • A segment must be large and profitable enough to serve. This criterion does not necessarily mean that a segment must have many potential customers. develop marketing programs tailored to each potential customer’s needs.

differentiable • The segment are conceptually distinguishable and respond differently to different marketing mix element and programs.