Professor S.J. Grant Spring 2007

Segmentation and Targeting: Usage

BUYER BEHAVIOR, MARKETING 3250

Outline

What is segmentation? Why segment? How to segment?

TraditionalUsage based

• Non-users, current users, competitor’s users

• Benefits

Goal of Segmentation

Why segment? Segments seek different benefits and will,

therefore, respond to different positionings Segmenting allows a firm to identify which

consumers can be most effectively reached instead of employing a broad reach

Appealing to a diverse set of users with a common product is difficult, prone to failure

Market Segmentation

Market segmentation allows firms to: Take into account consumers’ diverse needs and differing

behaviors (heterogeneity) Design marketing mix to be more closely matched with

consumer needs and deliver value by precisely meeting consumer needs (i.e., consumer propositions not diluted by intra-target variance)

Improve the efficiency and effectiveness of resource allocation, boosting profitability

How to Segment

Segmentation divides diverse set of consumers into homogeneous groups that can be addressedWith common positioningWith common benefitsWith common media vehicle

How to Segment

Criteria for selecting segments as your target? Measurable (have to be able to find them) Addressable (once you find them, must

identify media to reach them) Substantial enough to support a business

Traditional segmentation Define segments on key descriptors (sex, age) Measure response differences across segments

Usage-based segmentation Identify segments that differ on key usage

dimensions Profile resulting segments on key demographic and

psychographic descriptors

Traditional vs. Usage Segmentation

Why Segment by Descriptors?

No other information is available Most useful way of addressing

specific segments

Why Segment by Usage?

Communicating with consumers about a category is facilitated when a pre-existing knowledge structure in placeAllows storage of information that is

consistent with prior notionsPersuasion is difficult when you are

contradicting beliefs

Benefit Segmentation

Segmentation acknowledges consumer heterogeneity

Heterogeneity is represented by different ideal points

Market segments are formed by clustering individual ideal points together

Gentle

Eff

ecti

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Ideal Point Segment 1

Ideal Point Segment 2

Bayer

Excedrin

Tylenol

Bufferin Private Label

Anacin

Road Warriors: Generally higher-Income, middle -aged men who drive 25,000 to 50,000 miles a year . . . buy premium with a credit card . . . purchase sandwiches and drinks from the convenience store . . . will sometimes wash their cars at the carwash.

18% of buyers

True Blues: Usually men and women with moderate to high incomes who are loyal to a brand and sometimes to a particular station . . . frequently buy premium gasoline and pay cash. 16% of buyers

Generation F3 (for fuel, food and fast): Upwardly mobile men and women-half under 25 years of age-who are constantly on the go . . . drive a lot and snack heavily from the convenience store.

27% of buyers

Homebodies: Usually housewives who shuttle their children around during the day and use whatever gasoline station is based in town or along their route of travel.

21% of buyers

Price Shoppers: Generally aren't loyal to either a brand or a particular station, and rarely buy the premium line . . . frequently on tight budgets . . . efforts to woo them have been the basis of marketing strategies for years.

20% of buyers

® Mobil Oil Company

Market Segmentation Example

Segmentation Schemes

Once the benefits underlying segments are understood, organizing segments according to usage is necessary for targeting Current users

• Heavy users• Moderate users• Light users

Competitors’ users Non-users

Current Users

Current users are the most important segment to targetCurrent users have already favorable

associations to the productCustomer retention pays off, much more

cost effective than pursuing new users• Due to high cost of customer acquisition,

relationship may be profitable only after 1 year

Current Users

Current users are most likely to sustain, increase consumption

• Heavy users account for disproportionate share of brand’s volume

• 80/20 rule applies to beer drinkers• Men, age 18-34, eat several meals a week at

McDonald’s• Heavy users of Campbell’s Soup purchase

300 cans per year

• A brand’s first obligation is to address current users

Competitors’ Users

Success of a strategy that targets a competitors’ users depends on the brand’s ability to convince consumers of its superiority Difficult to change beliefsMaking a challenging claim often

encourages consumers to rehearse their own thoughts

Non-Users

Targeting non-users may be warranted if targeting other segments do not enhance opportunities for growthPoint-of-entry strategy

• Consumers who may be considering using the category, e.g. new parents, diamond ring

Category build strategy• Consumers who buy category for uses other

than conventional ones, e.g. baking soda

Segmentation: Example 1

What is the most useful way to segment diaper market?Traditional variables

• Baby’s sex• Baby’s age• Baby’s weight

Usage variables• Benefits?

Segmentation: Diapers

Pampers aims at parents who are expecting their first child

• Premium diaper• Outstanding softness• Rash-care• Sesame Street

• First-time parents have unique mindset• Nothing but the best• Cautious• Baby is precious

Segmentation: Diapers

Luvs targets parents of 2nd or 3rd child• “No leaks” point of difference• Cheaper diaper• “Live, learn and then get Luvs”• Barney Rewards loyalty program

Segmentation: Example 2

Makers of shower gels have complex segmentation schemes Category Crazies – buy all the latest products Thrifty Concerned – want gels, but price sensitive Shower Freaks – men seeking ‘squeaky clean’ Sensible Selectors – older women seeking pH

balance, buying for families Promiscuous Practicals – brand switchers Unsophisticated Bathers – prefer baths to showers Cynical Pragmatists – soap is soap

Segmentation: Example 2