Segmentation & Targeting

SEGMENTATION

WHY ?

•ORGANISATIONS CANNOT SERVE ALL CUSTOMERS

•CUSTOMERS ALSO VARY/ DISPERESED / DIFFER

•OVER A PERIOD MARKETS DIVIDE INTO “NUMEROUS MICRO MARKETS”

Building the Right Relationships with the Right CustomersBuilding the Right Relationships with the Right Customers

A market segment consists of a group of customers who share a similar set of needs and wants.

Geographic

Demographic

Psychographic

Behavioral

12000 < x < 50000

< 12,000> = 50,000

Age < = 30 yrs

30 < x < 40

By income By Age

Income

Race

Occupation Education

Nationality

Age

Religion Family size

Gender

DemographicSegmentation

Social class

Male/femaleLower class

Middle classUpper class

1-2; 3-4; 10+

6yrs; 18-25

Indians, Americans

Post graduateSchool Dropouts

FarmersHomemakersSales people

Asian; White; Parsis

GEOGRAPHIC SEGMENTATION

• REGION (Mountain, Coastal, Urban/Rural)• DENSITY (high density)• CLIMATE (climatic conditions)

PSYCHOGRAPHIC SEGMENTATION

• LIFE STYLE (culture/profession oriented etc.,)• PERSONALITY (ambitious, aggressive, Gregarious)

Psychographic Segmentation and The VALS Framework

Consumer’s Individual resources

Consumer motivation

• Innovators – Successful, Sophisticated, active, “take charge” – relatively upscale

• Thinkers – Mature, Satisfied – seek durability, functionality & value

• Achievers – Successful, goal oriented• Experiencers – young, enthusiastic, impulsive – seek

variety and excitement

• Believers - Conservative, conventional• Strivers – Trendy and success oriented – constrained by

resources• Makers – Practical• Survivors – Passive people

BEHAVIOURALSEGMENTATION

Loyalty Status (strong, low)

Occasions (Regular, special)

R Readiness Stage(Buyer readiness-

only aware?)

User-status (first time users, potential users)

Usage Rate (High usage; Low usage)

Benefits (quality, service, economy, comfort)

Attitude towards pdt (enthusiastic, positive)

• Loyalty status – • Hard-core – who buy one brand all the time• Split loyals: loyal to two or three brands• Shifting loyals: who shift from one brand to other and stay with that for

a while• Switchers: No loyalty to any brand; they switch

• Measurable– Size, purchasing power, and profile of segment

• Accessible– Can be reached and served

• Substantial– Large and profitable enough to serve

• Differentiable– Respond differently from other markets

• Actionable– Effective programs can be developed

Requirements of effective segmentation

>100000 & Metros Niche

Segment on Income, Urban

Market

Niche Marketing—a narrowly defined smaller group whose needs not currently met effectively

NICHE: Special combination of benefits; Consumers have a complex set of needs; leader is not easily attacked by competitor

…..any 3 segmentsIndicate Profile of the segment?

• PERSONAL CARE• Automobiles• RESTAURANTS• GARMENTS• Insurance or Financial products• Retail outlets

1. Identify Bases for Segmenting the market

2. Develop profiles of resulting segments

3. Develop measures to evaluate Segment Attractiveness

4. Select Target Segments

5. Develop positioning for each Target segment

6. Develop Marketing Mix for eachTarget segment

Market segmentation

Market Targeting

positioning

Steps in STP

Steps in STP• Identify segmentation variables & segment the

market. • Develop profiles of Resulting Segments

• Evaluate attractiveness of each segment • Select the target segment(s)

• Identify possible positioning concepts.

• Evaluating Market Segments– Segment size and growth– Segment structural attractiveness

• Level of competition• Substitute products• Power of buyers• Powerful suppliers

– Company objectives and resources

Target Marketing

Competitors(segment rivalry)

Substitutes(Threat)

Suppliers Buyers

Potential EntrantsPorters’ five force model

Selecting the Market Segments• Single segment concentration (concentrated mktg)

• Volkswagen-small car segment & Porsche on sports car segment

• Through concentrated mktg firm gains strong knowledge of segment’s needs. Specialises in production, distribution and promotion.

• Risks – segment may turn sour

P1

P2

P3

M3M1M1

• Selective specialization —select number of segments

• There can exist no synergy among segments but each promises to be a money maker

—multi-segment coverage

• Risks – is diversified & so less risk

• Ex: ITC – classic menthol; Gold flake• Maruti – Ertiga, Celerio, Alto, Swift

P1

P2

P3

M3M1M1

• Market specialization• Serving many needs of a particular consumer group • Firm that sells assortment of products to only Institution

customers

• Ex: Identifying property, Home loan, Legal & architect consulting, Facilities Management for NRIs

• Risks – If that customer group gets affected • Johnson & Johnson baby care

P1

P2

P3

M3M1M1

Selecting the Market Segments

Product specialization—

LPG fuel-Super gas—projects, commercial, households• Risk – substitute pdts

P1

P2

P3

M3M1M1

Selecting the Market Segments

Full coverage—

Firm attempts to serve all customer groups with all the products they might need.

Ex: coca-cola (beverage mkt) Spencer's Hyper (house hold )

Organisations can cover full markets by 2 ways – differentiated Mktg and Undifferntiated mktg

P1

P2

P3

M3M1M1

Company Mktg mix 1Company Mktg mix 2Company Mktg mix 3

Segment 1

Segment 2

Segment 3

Differentiated Marketing

Differentiated marketing – operates in several mkts and designs different products or use different marketing mix to different segments

GM says it produces car for every

“purse, purpose and personality”

Company Marketing Mix

MarketUndifferentiated

Marketing(ignores mkt segment

differences)

Ignores segment differences & goes with one type of offer for the whole market

Designs product & mktg program that appeal broadest number of buyers

Mass distribution & mass advertising

Additional considerations….

• Ethical choice of market targets—liquor publicly available, cigarettes, etc.,

• Segment interrelationships (cost, performance, technology sharing) & Super segments (segment which wants more benefits in one—ex: Aqua fresh tooth paste-white teeth, fresh breath, cavity protection)

--economies of scale; to have synergy