Market Segmentation

Market Segmentation What is a market segment? Why is it important?

What is a “Market Segment”?   

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Set of potential customers Who have similar needs Who reference each other when buying Are alike in the way they:  Perceive

value  View products and services  Purchase products and services

Why Define a Market Segment? 

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Easier to understand customer needs Focus “whole solution” to a narrower set of customer needs Easier to become a leader in a smaller market (Big fish in small pond) More effective use of marketing dollars Generally more profitable

Market Segmentation “Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several sub-market or segments, each of which tends to be homogeneous in full significant aspects.” - William J Stanton

“ Whenever a market for a product or service consists of two or more buyers, the market is capable of being segmented, that is divided into meaningful buyer groups. The purpose of segmentation is to determine differences among buyers which may be consequential in choosing away then or marketing to them.” - Philip Kotler

Markets: Geographic Variables Region

City or Metro Size

Pacific, Mountain, West North Central, West South Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New England

Under 4,999; 5,000-19,999; 20,000-49,999 . . . 1,000,000-3,999,999; 4,000,000 and over

Density

Urban, rural, suburban

Climate

Northern, southern, tropical

Markets: Demographic Variables Age Gender Occupation Family Size Education Nationality Religion Income Ethnicity

Markets: Psychographic Variables Lifestyle Hobbies TV viewing habits Social Activities Club Memberships Vacation Preferences

Personality

Compulsive Outgoing Authoritarian Ambitious

Markets: Usage Variables Occasions Regular occasion, special occasion Benefits

Quality, service, economy, speed

Nonuser, ex-user, potential, User status first-time, regular Light user, medium user, Usage rate heavy user Loyalty statusNone, medium, strong, absolute

Buyerreadiness stage Attitude toward product

Unaware, aware, informed, interested, intends to buy Enthusiastic, positive, indifferent, negative, hostile

Strategic Segmentation Differentiated Marketing

Undifferentiated Marketing / Mass Marketing

Concentrated Marketing

• different marketing strategies for multiple segments • increased penetration into each segment • higher sales and higher costs • market aggregation • one strategy for entire market • opposite of segmentation

•target a small market •go after a large share •small firm survival strategy

Requirements to Segment: Sizeable

(substantial in Text)

in terms of dollars

Identifiable

(measurable plus differentiable in Text)

surrogate variables exist

Reachable

(accessible plus actionable in Text)

by a marketing strategy

Stability avoidance of fads

Importance Of Market Segmentation 

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Adjustment of Product & Marketing Appeals Better positions to spot marketing opportunities Allocation of marketing budget Making the competition effectively Effective marketing programme Evaluation of marketing activities Increase in sales volume