Identifying Market Segments

1. Identifying Market Segments By Agung Utama

2. Back grounds • A company cannot serve all customers in a broad market • The customers are too numerous and diverse in their buying requirements • A company need to identify the market segments it can serve effectively

3. Levels of Segmentation • Mass marketing • The starting point for discussing segmentation is mass marketing • Mass production, mass distribution and mass promotions of one product for all buyers • Pro : creates the largest potential market, which leads to lowest cost, lower price or higher margins. • Contra : The proliferations of advertising media and distribution channel is making it difficult and increasingly expensive to reach a mass audience.

4. Micro marketing • Segment marketing • Segment market : consists of a group of customers who share a similar set of wants. • Segment differ from sector • The marketer’s task : Identify the segment and decide which one (s) to target. • The benefits : • Can create a more fine tuned product or service • Can price it appropriately fot the target segment • Can more easily select the best distribution and communication channels • Have a clear picture of its competitors

5. Niche marketing • A more narrowly defined group seeking a distinctive mix of benefits. • Identified by dividing segments into sub segments • Example : heavy smokers includes two niches : trying to stop and who do not care. • Characterization of attractive niche • Have a distinctive of needs • Pay a premium • Has size, profit and growth potential • Gains certain economies through specialization.

6. Local Marketing • Target marketing is leading to marketing programs tailored to the needs and wants of local customer groups. • Citibank provide different mixes of banking services in its branches, depending on neighborhood or demographics. • Pro: see national advertising as wasteful because it fails to local needs • Contra : It drives up manufacturing and marketing cost by reducing economics of scale.

7. Individual customer marketing • Ultimately every individual has a unique set of wants and needs. • I the past centuries, producers customized their offering to each customer . • The tailor fitted a suit and a cobbler made shoes for each individual. • Mass customization : ability of a company to prepare a mass basis individually designed products, services, program, and communications to meet each customers requirements.

8. Pattern of Market Segmentations • Homogenous preferences • A market where all consumers have roughly the same preferences. • The market shows no natural segments. The existing brands would be similar and cluster around the middle of the market • Diffused preferences • A market where consumer preferences may be scattered throughout the space, indicating that customers vary greatly in their preferences • The first brand to enter the market is likely to position in the centre to appeal to the most people. A second competitor could locate nect to the first customer group tnd and fight for market share or it could locate in a corner to attract a

9. Diffused preferences • A market where consumer preferences may be scattered throughout the space, indicating that customers vary greatly in their preferences • The first brand to enter the market is likely to position in the centre to appeal to the most people. A second competitor could locate next to the first brand and fight for market share or it could locate in a corner to attract a customer group that was not satisfied with the centre brand

10. Clustered preference The market might reveal distinct preferences clusters, called natural market segments. The first firm in this market has three options. It might position in the centre, hoping to appeal to all groups. It might position in the largest market segment, or it might develop several brands, each positioned in a different segment.

11. Market Segmentations Procedures • Needs Based Segmentation group customers in to segments based on similar needs and benefits sought by customer. • Segment Identification For each needs based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable.

12. Segment Attractiveness Determine the overall attractiveness of each segment using criteria such as: market growth, competitive intensity and market access. • Segment Profitability • Segment Potitioning for each segment, create a value proposition and product price positioning strategy based on that segment’s unique customer needs and characteristics. • Segment Acid Test Create a test attractiveness of each segment’s positioning strategy • Marketing Mix strategy

13. Effective Segmentation • Measurable The size, purchasing power and characterisric of the segments can be measured. • Substantial The segments are large and profitable enough. • Accesible The segments can be effectively reached and served. • Differentiable conceptually distiguishable and respondiffrently to different marketing mix elements and programs. • Actionable Effective programs can be formulated for attracting and serving the segments

14. Segmenting Consumer And Business Markets • Basis for segmenting consumer markets • geographic segmentation Dividing the market into different geographical unit such as nations, state, regions, counties, cities, or neighborhood • Demographic segmentation The market is divided into groups on the basis of variable such as : age, famili size, famili life cycle, gender, income, occupation, education, religion, generation, nationality, social class, etc.

15. Pcycographic Segmentation Buyers divided into different groups on the basis of lifestyle, or personality or values. • Behavioral Segmentation Buyers are divided into groups on the basis of their knowledge, attitude toward use of or response to a product. Other behahioral variables : ocasions, user status, usage rate, loyalty status, buyer readiness, and attitude.

16. Market targeting • Once the firm has identified its market segment opportunities, it has to decide how many and which ones to target. • Market targeting related to select one or more market segments to enter. • Five patterns of target market selection: • Single-segment concentration /concentrated marketing. The firms make a single product that it sells to a single segment. The company gains a strong knowledge of the segment’s needs and strong market pressence. Example: VolksWagen concentrates on the small car market and Porsche on the sport car market.

17. Single segment concentration M1 M2 M3 P1 P1 P1

18. Selective Specialization/Multi Segment Strategy • The firm selects a number of segments, each objectively attractive and appropriate. • This strategy has the advantage of diversifying the firm’s risk • There may be little or no synergy among the segments, but each promises to be a money maker

19. Selective Specialization M1 M2 M3 P1 P1 P1

20. Product Specialization The firms make a certain product that it sells to several segments. The advantages of the strategy is a strong reputation in the specific product area.

21. Product Specialization M1 M2 M3 P1 P1 P1

22. Market Specialization • The firm concentrates on serving many needs of particular customer group. The advantage of this strategy is gaining a strong reputation in serving this customer group and became a channel for additional products the customer groups can use.

23. Market Specialization M1 M2 M3 P1 P1 P1

24. Full Market Coverage • The firms attempts to serve all customer groups with all the products they might need. Only very large firms such IBM, Coca Cola, General Motors, Toyota can undertake a full market coverage strategy. • Large firm can cover a whole market in two broad ways: undifferentiated marketing and differentiated marketing. • In undifferentiated marketing, the firms ignores segment differences and goes after the whole market with one offer. • In differentiated marketing, the firms operates in several market segments and design different products for each segment.

25. Full Market Coverage M1 M2 M3 P1 P1 P1