08. market segmentation

7/29/2019 08. Market Segmentation

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Market Segmentation.

Small opportunities are often the beginning ofgreat enterprises.

Stages of marketing strategy

o Mass marketing.o Product variety marketing.

o Target marketing.

o Niche marketing.o Individual marketing.


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1. Market segmentation consists of taking thetotal heterogeneous market for a product &dividing it into several submarket or segments,

each of which tends to be homogeneous in allsignificant aspects.

2. Market segmentation is the subdivision of amarket into homogeneous subsets of customerwhere subset may conceivably selected as amarket target to be reached with distinctmarketing mix. The power of this concept is

that in an age if intense competition for themass market individual seller may prosperthrough creatively serving specific marketsegment whose needs are imperfectly satisfied

by mass market offering.


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STP Process.

Market

segmentation

Target

marketing

Market

positioning

1. Identifyingsegmentation

variable &

segment the

market.

3. Evaluate theattractiveness of

each segment.

5. Identify possiblepositioning

concept of each

target segment.

2. Develop profiles

of resulting

segment.

4. Select the target

markets.

6. Select, develop

& communicate

positioning

concept.


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A. Market segmentation.

1. The general approach to segmenting the market.

No market segment Complete segment Segment by income

Segment by age Segment by age & income


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II. Markets, market segment & niches.

III. Pattern of market segmentation.

o Homogeneous preference.

o Diffused preference.

o Clustered preference.

Three options

o Undifferentiated.

o Concentrated.

o Differentiated.


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IV. Market segmentation procedure

a. Survey stage.

o Attributes & their important ratings.o Brand awareness & brand rating.

o Product usage pattern.

o Attributes towards the product category.

o Demographics, psychographics, mediagraphics.

b. Analysis stage.

c. Profiling stageDemographics, psychographics, mediahabits.


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V. Bases for segmenting consumer markets -

a. Consumer characteristicsi. Geographic segmentation

o Region.

o City or metro.

o Density Urban, suburban, rural.

o Climate.

ii. Demographic segmentation

o Age. o Family size.

o Gender. o Family life cycle.

o Income. o Occupation.


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o Education. o Religion.

o Race. o Nationality.

iii. Psychographic segmentation

o Social class. o Life style.o Personality.

b. Consumer responses

i. Behavioral segmentation

o Occasion regular, special.

o Benefits.

o User status Nonusers, ex-users, potentialusers, first time & regular.

o Usage rate.

o Loyalty status.

o Readiness stage.

o Attitudes towards the product


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VI. Bases for segmenting business market

a. Demographic

o Industry which industry should we focus on?o Company size what size companies should we

focus on?

o Location what geographical areas should we

focus on?b. Operating variables

o Technology what customer technology shouldwe focus on?

o User/Nonuser status Should we focus onheavy, medium, light users or nonusers?

o Customer capabilities Should we focus oncustomers needing many or few services?


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c. Purchasing approaches

o Highly centralized or decentralized purchasingorganization purchasing functionorganization.

o Engineering dominated, financially dominated

power structure.o Strong relationships or go after most desirable

companies.

o Leasing, service contracts, system purchase,

sealed bidding General purchase policies.o Companies seeking qualities, service, price

purchasing criteria.


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d. Situational factors

o Urgency needing quick & sudden delivery or

service.o Specific application certain application or all

application.

o Size of order large or small orders.

e. Personal characteristics

o Buyer sellers similarity companies whosepeople & values are similar to ours.

o Attitude towards risk risk taking or riskavoiding companies.

o Loyalty companies that show high loyalty totheir suppliers.


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Developing customer segment profile.

Requirements for effective segmentation.

o Measurable.

o Substantial.

o Accessible.

o Differentiable.


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B. Market targeting.

3. Evaluating the attractiveness of marketsegment

a. Segment size & growth.

b. Segment structure & attractiveness.

The company has to appraise the impact oflong run profitability of five groups

Threat of intense segment rivalry.

Threat of new entrants.

Threat of substitute products.

Threat of bargaining power of buyer.

Threat of bargaining power of supplier.

c. Company objectives & resources.


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Attractiveness of the segment.

Low High

Low Low & stablereturns.

Low & riskyreturns.

High High & stable

returns.

High & risky

returns.

Exit barrier


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Large firms can cover whole market by two ways -

- Undifferentiated marketing.- Differentiated marketing.

Following costs are likely to be higher

- Product modification cost.

- Manufacturing cost.

- Administrative cost.

- Inventory cost.

Cautions- Over segmentation.

- Counter segmentation or broadening customer base.


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Additional considerations in evaluating &

selecting segments

a. Ethical choice of market targets.

b. Segment interrelationships & super segments.

o On cost, performance & technology.

o Synergy as raw materials, manufacturing facilities ordistribution channels.

o Segment by segment invasion plan.


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C. Market positioning.

Positioning is the act of designing the companysimage & value offer so that the segments

customers understand & appreciate what the

company stands in relation to its competitors.

How can the firm identify sources of potential

competitive advantage?

What are the major differentiating attributes available to

firm?

How can the firm choose an effective positioning in themarket?

How can the firm communicate its positioning to the

market?


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5. Tools for competitive differentiation

a. Product differentiation.

Features are characteristics that supplement theproduct basic functioning.

Performance quality refers to the levels at which

the product primary characteristics operate.

Conformance is the degree to which the products

design & operating characteristics come close to

the target standards.

Durability is a measure of the products operating

life.

Reliability is a measure of the probability that aproduct will not malfunction or fail within a specified

time period.

R bilit i f th f fi i d t


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Reparability is a measure of the ease of fixing a product

that malfunction or fails.

Style describes how well product looks & feels to the

buyer.

Design integrated force all foregoing qualities are

design parameters.

b. Service differentiation

Delivery speed, accuracy & care attending delivery.

Installation work done to make a product operational in

its planned location.

Customer training training to customer employees.

Consulting service refers to data information, systems &advising services at free or price to buyers.

Repair quality of repair service available to buyer.

Miscellaneous warranty, maintenance & patronage

awards.


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c. Personnel differentiation

Competence employees skill & knowledge.

Courtesy friendly, respectful & considerate.

Credibility performance of service with consistency& accuracy.

Responsiveness responding quickly to requests &problems.

Communication understanding customer &communicating clearly.

d. Image differentiation

- Identity v/s image

o Identity the ways that company aims to identify

itself to its public.

o Image is the way the public perceives the

company.


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Symbols logo, object, color, sound/music.

Written & audio-visual media advertisement.Atmosphere physical space.

Events types of events sponsored.


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6. Developing a positioning strategy

- A difference is worth establishing to the extent that it

satisfies the following criteria Importance valued benefit to buyer.

Distinctive not offered by others or offered in a

more distinctive way.

Superior superior to others to obtain samebenefit.

Communicable communicable or visible to buyer.

Preemptive not easily copied by competitors.

Affordable afford to pay for the difference.

Profitable profitable to introduce the difference.


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Differentiation is the act of designing a set of

meaningful differences to distinguish the

companys offer from competitors offer. Positioning is the act of designing companys

offer & image so that it occupies a distinct &

valued place in the target customers mind.

How many differences to promote?

- Single benefit.

- Double benefit.

- Triple benefit.

Unique selling proposition.


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Avoid positioning errors Under positioning vague idea about the brand.

Over positioning too narrow image about the brand.

Confused positioning confused image of the brand.

Doubtful positioninghard to believe brands claim.

Which differences to promote Companys standing, competitors standing, importance

of improving, affordability & speed, competitors ability.

Communicating the companys positioning.

08. market segmentation

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