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Learning objectives. Describe the characteristics of markets and market segments Explain the importance of market segmentation List the steps involved in segmenting markets Describe the bases commonly used to segment consumer markets Describe the bases for segmenting business markets.
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Learning objectives • Describe the characteristics of markets and market segments • Explain the importance of market segmentation • List the steps involved in segmenting markets • Describe the bases commonly used to segment consumer markets • Describe the bases for segmenting business markets
Learning objectives (cont.) • Discuss the criteria for successful market segmentation • Discuss alternative strategies for selecting target markets • Explain one-to-one marketing • Discuss privacy issues related to one-to-one marketing • Explain how and why organisations implement positioning strategies and how product differentiation plays a role • Discuss global market segmentation and targeting issues
Learning objective 1 Describe the characteristics of markets and market segments
1 Market segmentation Market People or organisations with needs or wants and the ability and willingness to buy. Market segment A subgroup of people or organisations sharing one or more characteristics that cause them to have similar product needs. Market segmentation The process of dividing a market into meaningful, relatively similar and identifiable segments or groups.
Learning objective 2 Explain the importance of market segmentation
2 The importance of market segmentation • Nearly all markets include people with different product needs and preferences. • It helps to define needs and wants more precisely. • Decision-makers can define objectives and allocate resources more accurately. • More precise objectives = better evaluation of performance.
Learning objective 3 List the steps involved in segmenting markets
3 Steps in segmenting a market • Select a market or product for study • Choose bases for segmentation • Select descriptors • Profile and analyse segments • Select target markets • Design, implement and maintain marketing mix.
3 Two types of markets There are two basic types of markets each are discusses in turn. • Consumer products: • goods or services purchased by an ultimate consumer for personal use (see objective 4) • Business products: • goods or services purchased for use either directly or indirectly in the production of other goods and services for resale (see objective 5) • The key to classification is to identify the purchaser and the reasons for buying the goods.
Learning objective 4 Describe the bases commonly used to segment consumer markets
4 Segmentation bases • Characteristics of individuals, groups or organisations used to divide a total market into segments (variables).
4 Bases for segmentation • Geography • Demographics • Psychographics • Benefits sought • Usage rate
4 Geographic segmentation • Segmenting markets by region of the country or world, market size, market density or climate.
4 Geographic segmentation • Region of the country or world • Market size • Market density • Climate
4 Benefits of regional segmentation • New ways to generate sales in sluggish and competitive markets • Scanner data allows assessment of best-selling brands in region • Regional brands appeal to local preferences • React more quickly to competition.
4 Demographic segmentation • Segmenting markets by age, gender, income, ethnic background and family life cycle.
4 Family life cycle • A series of stages determined by a combination of: • Age • Marital status and • Children
4 Psychographic segmentation • Market segmentation on the basis of personality, motives, lifestyles and geodemographics.
4 Bases for psychographic segmentation • Personality • Motives • Lifestyles • Geodemographics
4 Lifestyle segmentation • How time is spent • Beliefs • Socioeconomic characteristics
4 Geodemographic segmentation • Segmenting potential customers into neighborhood lifestyle categories. • Combines geographic, demographic and lifestyle segmentation.
4 Benefit segmentation • The process of grouping customers into market segments according to the benefits they seek from the product.
4 Usage-rate segmentation • Dividing a market by the amount of product bought or consumed.
4 The 80/20 principle • A principle holding that: 20 per cent of all customers generate 80 per cent of the demand.
Learning objective 5 Describe the bases for segmenting business markets
5 Macrosegmentation • The process of dividing business markets into segments based on general characteristics, such as geographic location, customer type, customer size and product use.
5 Microsegmentation • The process of dividing business markets into segments based on the characteristics of decision-making units within a macrosegment.
5 Business marketing segmentation Geographic Customer type Macro- segmentation Customer size Business markets Product use Purchasing criteria Purchasing strategy Micro- segmentation Importance Personal characteristics
Learning objective 6 Discuss the criteria for successful market segmentation
6 Criteria for successful segmentation • Substantiality • Identifiability • Accessibility • Responsiveness
6 Criteria for segmentation Substantiality Segment must be large enough to warrant a special marketing mix. Identifiability/ measurability Segments must be identifiable and their size measurable. Accessibility Members of targeted segments must be reachable with marketing mix. Responsiveness Unless segment responds to a marketing mix differently, no separate treatment is needed.
Learning objective 7Discuss alternative strategies for selecting target markets
7 Target market • A group of people or organisations for which an organisation designs, implements and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.
7 Strategies for selectingtarget markets Undifferentiated strategy Concentrated strategy Multi-segment strategy
7 Undifferentiated targeting strategy • A marketing approach that views the market as one big market with no individual segments and; therefore, requires a single marketing mix.
7 Undifferentiated targeting strategy (cont.) • Advantages: • Potential savings on production and marketing costs • Disadvantages: • Unimaginative product offerings • Company more susceptible to competition.
7 Concentrated targeting strategy • A strategy used to select one segment of a market for targeting marketing efforts.
7 Niche • One segment of a market.
7 Concentrated targeting strategy (cont.) • Advantages: • Concentration of resources • Meets narrowly defined segment • Small firms can compete • Strong positioning • Disadvantages: • Segments too small or changing • Large competitors may market to niche segment
7 Multi-segment targeting strategy • A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.
7 Multi-segment targeting strategy(cont.) • Advantages: • greater financial success • economies of scale • Disadvantages: • high costs • cannibalisation
7 Costs of multi-segment targeting • Product design costs • Production costs • Promotion costs • Inventory costs • Marketing research costs • Management costs • Cannibalisation
Learning objective 8 Explain one-to-one marketing
8 Advantages of one-to-one marketing • To build a long-term, personalised and profitable two-way relationship with each customer • The goal is to reduce costs through customer retention and increase revenue through customer loyalty.
Learning objective 9 Discuss privacy issues related to one-to-one marketing
9 Privacy and one-to-one marketing • One-to-one marketing requires the collection of information for each customer. Masses of personal data could be collected by all businesses • The management, currency and unauthorised use of this information is of concern. • Having collected the information customers expect better service
Learning objective 10 Explain how and why organisations implement positioning strategies and how product differentiation plays a role
10 Positioning • Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line or organisation in general.
