SESSION 3

MARKET SEGMENTATION

Prepared By:

Prof. Nishant Agrawal

CHAPTER OUTLINE

• WHAT IS MARKET SEGMENTATION?

• BASES FOR SEGMENTATION

• CRITERIA FOR EFFECTIVE TARGETING OF SEGMENTS

• IMPLEMENTING SEGMENTATION STRATEGIES

MARKET SEGMENTATION

THE PROCESS OF DIVIDING A POTENTIAL MARKET INTO DIFFERENT SUBSETS OF CONSUMERS AND SELECTING ONE OR MORE SEGMENTS AS A TARGET MARKET TO BE REACHED WITH A DIFFERENT MARKETING MIX.

THREE PHASES OF MARKETING STRATEGY

Phase 2Target Market and Marketing Mix Selection

Phase 3Product/Brand Positioning

Phase 1Market Segmentation

SEGMENTATION STUDIES

• DISCOVER THE NEEDS AND WANTS OF GROUPS OF CONSUMERS TO DEVELOP SPECIALIZED PRODUCTS TO SATISFY GROUP NEEDS

• USED TO IDENTIFY THE MOST APPROPRIATE MEDIA FOR ADVERTISING

RYKA PRODUCES SNEAKERS THAT MEET

THE SPECIAL NEEDS OF WOMEN’S

FEET.

DISCUSSION QUESTION• CONSIDERING THE LARGEST BANK IN YOUR

COLLEGE’S CITY OR TOWN:• HOW MIGHT CONSUMERS’ NEEDS DIFFER?• WHAT TYPES OF PRODUCTS / SERVICE MIGHT MEET

THEIR NEEDS?

BASES FOR SEGMENTATION

Personal Feature Purchase Behaviors

•Demographic, age, gender, marital status, family life cycle. Income, education, occupation, social class•Geographic location, address

•Usage Rate•Usage Situation•Brand Loyalty•Psychographics factual behaviors

Personality , lifestyles and socio culture value

•Personality traits•Lifestyle, VALS•socio culture value

Attitude and preferences regarding the product

•Benefits wanted•Level of involvement •Awareness of product alternatives•Brand loyalty

Consumer Rooted Consumption Specific

Facts

Cognitions

BASES FOR SEGMENTATION• FACTS: WHICH CAN BE DETERMINE FROM DIRECT

QUESTIONING AND CATEGORIZED BY SINGLE

OBJECTIVE MEASURE

• COGNITIONS: WHICH ARE ABSTRACT CAN BE

DETERMINED ONLY THROUGH MORE COMPLEX

QUESTIONING AND WHERE MOST OF THE CONSTRUCT

MEASURED HAVE NO SINGLE DEFINITION

BASES FOR SEGMENTATION

• GEOGRAPHIC• DEMOGRAPHIC• PSYCHOLOGICAL • PSYCHOGRAPHIC• SOCIO CULTURAL

• USE-RELATED

• USAGE-SITUATION

• BENEFIT SOUGHT

• HYBRID

Table 3.1 Market Segmentation

Occupation

SEGMENTATION BASESEGMENTATION BASE SELECTED SEGMENTATION VARIABLESSELECTED SEGMENTATION VARIABLESGeographic Segmentation

ClimateDensity of areaCity SizeRegion Southwest, Mountain States, Alaska, Hawaii

Major metropolitan areas, small cities, townsUrban, suburban, exurban, ruralTemperate, hot, humid, rainy

Demographic Segmentation

IncomeMarital statusSexAge Under 12, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+

Male, femaleSingle, married, divorced, living together, widowedUnder $25,000, $25,000-$34,999, $35,000-$49,999, $50,000-$74,999, $75,000-$99,999, $100,000 and over

Education Some high school, high school graduate, some college, college graduate, postgraduateProfessional, blue-collar, white-collar, agricultural, military

Table 3.1, continuedSEGMENTATION BASESEGMENTATION BASE SELECTED SEGMENTATION VARIABLESSELECTED SEGMENTATION VARIABLESPsychological Segmentation

Learning-involvementPerceptionPersonalityNeeds-motivation Safety, security, affection, sense of self-worth

Extroverts, novelty seeker, aggressives, innovatorsLow-risk, moderate-risk, high-riskLow-involvement, high-involvement

Psychographic

Subcultures (Race/ethnic)ReligionCultures

(Lifestyle) Segmentation Economy-minded, couch potatoes, outdoors enthusiasts, status seekers

American, Italian, Chinese, Mexican, French, PakistaniCatholic,Hindu, Moslem, otherAfrican American,, Asian,

Family life cycleSocial class Lower, middle, upper

Bachelors, young married

Attitudes Positive attitude, negative attitude

Sociocultural Segmentation

SEGMENTATION BASESEGMENTATION BASE SELECTED SEGMENTATION VARIABLESSELECTED SEGMENTATION VARIABLESUse-Related Segmentation

Brand loyaltyAwareness statusUsage rate Heavy users, medium users, light users, non users

Unaware, aware, interested, enthusiasticNone, some, strong

Use-Situation Segmentation

LocationObjectiveTime Leisure, work, rush, morning, night

Personal, gift, snack, fun, achievementHome, work, friend’s home, in-store

Person Self, family members, friends, boss, peersBenefit Segmentation Convenience, social acceptance, long lasting, economy,

value-for-the-money

PRIZM NE Geodemographics

“Movers & Shakers,” “New Empty Nests,” “Boomtown Singles,” “Bedrock America”

Demographic/Psychographics

Combination of demographic and psychographic profiles of consumer segments profiles

SRI VALSTM Innovators, Thinkers, Believer, Achievers, Strivers, Experiencer, Makers, Survivors

Hybrid Segmentation

Table 3.1, continued

GEOGRAPHIC SEGMENTATION

• THE DIVISION OF A TOTAL POTENTIAL MARKET INTO SMALLER

SUBGROUPS ON THE BASIS OF GEOGRAPHIC VARIABLES

(E.G., REGION, STATE, OR CITY) (EX. TEA, DETERGENT, SKIN

CREAM)

• WHERE PERSON LIVES DETERMINES SOME ASPECTS OF

CONSUMPTION BEHAVIOR.

• EX. CLIMATE DETERMINE THE TYPE OF CLOTHING MOST

PEOPLE OWN, LIFE STYLE

PERSONALITY TRAITS• PERSONALITY TESTS WHICH ARE GENERALLY IN THE

FORM OF QUESTIONS OR STATEMENT PRESENTED TO

THE RESPONDENT RESEARCHER CAN DETERMINE

ONE’S PERSONALITY AND USE IT IN SEGMENTATION.

• EX. CONSUMER WHO ARE OPEN MINDED AND

GENERALLY TAKE LESS RISK THAT OTHERS IN TRYING

NEW THINGS

DEMOGRAPHIC SEGMENTATION

• AGE• SEX• MARITAL STATUS• INCOME, EDUCATION, AND OCCUPATION

PSYCHOLOGICAL SEGMENTATION

• MOTIVATIONS• PERSONALITY• PERCEPTIONS• LEARNING• ATTITUDES

TWO HIGH-END WATCHES FOR DIFFERENT PSYCHOLOGICAL

SEGMENTS

PSYCHOGRAPHIC/ LIFESTYLE ANALYSIS SEGMENTATION

• PSYCHOGRAPHIC VARIABLES INCLUDE ATTITUDES, INTERESTS, AND OPINIONS (AIO) WHERE INTEREST AND OPINIONS ARE COGNITIVE CONSTRUCT.

• AIOS GIVE AN IN-DEPTH LOOK INTO THE BUYING BEHAVIOUR OF THE SEGMENT.

• IN AIO RESEARCH, THE SUBJECT IS ASKED IF HE OR SHE AGREES OR DISAGREES WITH CERTAIN STATEMENTS DESIGNED TO EXPLORES HIS OR HER ATTITUDES, MOTIVES, NEEDS, AND PERCEPTIONS. 

Instructions: Please read each statement and place an “x” in the box that best indicates how strongly you “agree” or “disagree” with the statement.

I feel that my life is moving faster and faster, sometimes just too fast.

If I could consider the “pluses” and “minuses,” technology has been good for me.

I find that I have to pull myself away from e-mail.

Given my lifestyle, I have more of a shortage of time than money.

I like the benefits of the Internet, but I often don’t have the time to take advantage of them.

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

Agree Completely

Disagree Completely

TABLE 3.6 AIO

weblink

Opinions and Attitudes

ADBUSTERS Web site is targeted to consumers with a certain attitude toward advertisers

VALS ( VALUES ATTITUDE AND LIFESTYLE)• RESEARCH METHODOLOGY USED FOR PSYCHOGRAPHIC MARKET

SEGMENTATION. COMBINATION OF LIFESTYLE AND VALUES.

VALS ( VALUES ATTITUDE AND LIFESTYLE)

• INNOVATOR  THEY HAVE THE HIGHEST INCOMES & SUCH HIGH SELF-RESPECT AND RICH RESOURCES . THEY ARE LOCATED ABOVE THE RECTANGLE. SELF IMAGE IS IMPORTANT TO THEM AS AN EXPRESSION OF INDEPENDENCE AND CHARACTER.

• THINKERS THESE CONSUMERS ARE THE HIGH-RESOURCE GROUP OF THOSE WHO ARE MOTIVATED BY IDEALS. THEY ARE MATURE, RESPONSIBLE, WELL-EDUCATED PROFESSIONALS. WELL INFORMED ABOUT WHAT GOES ON IN THE WORLD AND ARE OPEN TO NEW IDEAS AND SOCIAL CHANGE.

• BELIEVERS THESE CONSUMERS ARE THE LOW-RESOURCE GROUP OF THOSE WHO ARE MOTIVATED BY IDEALS. THEY ARE CONSERVATIVE AND PREDICTABLE CONSUMERS WHO FAVOUR LOCAL PRODUCTS AND ESTABLISHED BRANDS.

• ACHIEVERS THESE CONSUMERS ARE THE HIGH-RESOURCE GROUP OF THOSE WHO ARE MOTIVATED BY ACHIEVEMENT. THEY ARE SUCCESSFUL WORK-ORIENTED PEOPLE WHO GET THEIR SATISFACTION FROM THEIR JOBS AND FAMILIES.

• STRIVERS / TO STRUGGLE THESE CONSUMERS ARE THE LOW-RESOURCE GROUP OF THOSE WHO ARE MOTIVATED BY ACHIEVEMENTS. THEY HAVE VALUES VERY SIMILAR TO ACHIEVERS BUT HAVE FEWER ECONOMIC, SOCIAL, AND PSYCHOLOGICAL RESOURCES. STYLE IS EXTREMELY IMPORTANT TO THEM

• EXPERIENCES THESE CONSUMERS ARE THE HIGH-RESOURCE GROUP OF THOSE WHO ARE MOTIVATED BY SELF-EXPRESSION. THEY ARE THE YOUNGEST OF ALL THE SEGMENTS, WITH A MEDIAN AGE OF 25. THEY HAVE A LOT OF ENERGY, WHICH THEY TRANSFER INTO PHYSICAL EXERCISE AND SOCIAL ACTIVITIES. THEY ARE ENTHUSIASTIC CONSUMERS, SPENDING HEAVILY ON CLOTHING, FAST-FOODS AND OTHER YOUTHFUL FAVOURITES.

• MAKERS THESE CONSUMERS ARE THE LOW-RESOURCE GROUP OF THOSE WHO ARE MOTIVATED BY SELF-EXPRESSION. THEY ARE PRACTICAL PEOPLE WHO VALUE INDEPENDENCE. THEY ARE FOCUSED ON THE FAMILIAR-FAMILY, WORK, AND HAVE LITTLE INTEREST IN THE BROADER WORLD.

• SURVIVORS. THESE CONSUMERS HAVE THE LOWEST INCOMES. THEY HAVE TOO FEW RESOURCES TO BE INCLUDED IN ANY CONSUMER SELF-ORIENTATION AND ARE THUS LOCATED BELOW THE RECTANGLE. THEY ARE THE OLDEST OF ALL THE SEGMENTS, WITH A MEDIAN AGE OF 61. WITHIN THEIR LIMITED MEANS, THEY TEND TO BE BRAND-LOYAL CONSUMERS.

• CULTURE SEGMENTATION • MARKETERS CAN SEGMENT SOME POPULATIONS ON THE BASIS OF

CULTURE BECAUSE MEMBERS OF THE SAME CULTURE TENT TO SHARE SAME VALUE,

FAMILY LIFE CYCLE ADVERTISING

Video cameras are often

purchased by young couples with children.

Target reaches out to the

Latino market.

DISCUSSION QUESTIONS

• WHAT TYPES OF MARKETERS MIGHT SEGMENT ACCORDING TO SOCIAL CLASS?

• WHAT ETHICAL ISSUES MIGHT MARKETERS HAVE WHEN MARKETING TO DIFFERENT SOCIAL CLASSES?

CONSUMPTION SPECIFIC SEGMENTATION BASE

• USAGE RATE SEGMENTATION• DIFFERENCE AMONG HEAVY, MEDIUM AND LIGHT USERS AND NON

USERS OF SPECIFIC PRODUCT, SERVICE OR BRAND. • MARKETERS OF MANY PRODUCTS SUCH AS SOUP, LAUNDRY

DETERGENT AND DOG FOOD HAVE FOUND RELATIVE SMALL GROUP OF HEAVY USERS ACCOUNT.

• USAGE SITUATION SEGMENTATION • OCCASION OR SITUATION OFTEN DETERMINE WHAT CONSUMERS

WILL PURCHASE OR CONSUME MARKETERS SOMETIMES USE THE USAGE SITUATION AS SEGMENTATION VARIABLE.

• MANY PRODUCTS ARE PROMOTED FOR SPECIAL USAGE OCCASIONS. LIKE GREETING CARD INDUSTRY

• EX. CHOCOLATE CELEBRATIONS – RAKHI, DIWALI

High

Low

Consumption

High Low

LoLows(starve)

HiHighs(stroke)

LowHighs(chase)

HiLows(tickle)

SEGMENTING CUSTOMERS BY USAGETABLE 3-8

Current Share

USAGE-SITUATION SEGMENTATION• SEGMENTING ON THE BASIS OF SPECIAL OCCASIONS OR

SITUATIONS• EXAMPLE STATEMENTS:

• WHENEVER OUR DAUGHTER JAMIE GETS A RAISE, WE ALWAYS TAKE HER OUT TO DINNER.

• WHEN I’M AWAY ON BUSINESS, I TRY TO STAY AT A SUITES HOTEL.• I ALWAYS BUY MY WIFE FLOWERS ON VALENTINE’S DAY.

BENEFIT SEGMENTATION THE BENEFITS THAT CONSUMERS SEEK FROM

PRODUCT AD SERVICE ARE THE ESSENCE THE BENEFIT SEGMENTATION. Band-aid offers

“flex” as a benefit to consumers.

HYBRID SEGMENTATION APPROACHES

• PSYCHOGRAPHIC-DEMOGRAPHIC PROFILES• GEODEMOGRAPHIC SEGMENTATION• SRI CONSULTING’S VALS

SELECTED DEMOGRAPHIC PROFILE OF USA TODAY EXCERPT FROM

TABLE 3-10 USA TODAY USA

TODAY.COMUSA TODAY NETWORK

Men 66% 70% 66%

Women 34% 30% 34%

Age 18-49 62% 73% 64%

Age 25-54 65% 78% 67%

Age 55+ 27% 18% 25%

Average Age 45 43 45

Attended college or beyond

77% 83% 77%

College graduate or beyond

55% 65% 56%

SELECTED LIFESTYLE PROFILE OF USA TODAY EXCERPT FROM TABLE 3-11

% Comp

Index

Tech Savvy ReadersUse Internet more than once a day 32% 174

Internet access at home 79% 128

Online purchase for business or personal use in past 30 days

40% 182

Household owns a PC 84% 119

Owns digital camera 22% 130

Leisure ActivitiesAttended movies in last 6 months 73% 120

Bought music CD/tapes in last 12 months 46% 126

Book reading 45% 120

Entertain friends or relatives at home in last 12 months 48% 123

Household subscribes to cable 69% 112

PRESENTATION

CRITERIA FOR EFFECTIVE TARGETING

AND

IMPLEMENTING SEGMENTATION STRATEGIES

END OF SESSION

“MISTAKES ARE THE PROOF THAT YOU ARE

TRYING”