Segmentation

Segmentation

• 1.
  SEGMENTATION
• 2.
  Segmentation • It isoften the key to developing a sustainable competitive advantage. In a strategic context, segmentation means the identification of customer groups that respond differently from other groups to competitive offerings. • A segmentation strategy couples the identified segments with a programme to deliver an offering to those segments.
• 3.
  The development ofa successful segmentation strategy requires the conceptualization, development, and evaluation of a targeted competitive offering. Who are the biggest customers? The most profitable? The most attractive potential customers?
• 4.
  3 dimensions forJudging a segmentation strategy • Can a competitive offering be developed and implemented that will be appealing to the target segment ? • Can the appeal of the offering and the subsequent relationship with the target segment be maintained over time despite competitive responses ?
• 5.
  • Is theresulting business from the target segment worthwhile given the investment required to develop and market an offering tailored to it ? • The concept of a successful segmentation strategy is that within a reduced market space, it is possible to create a dominant position that competitors will be unwilling or unable to attack successfully.
• 6.
  Chapter 2 -External and Customer Analysis PPT 2-6 Examples of Approaches to Defining Segments Customer Characteristics • Geographic • Type of organization • Size of firm • Lifestyle • Sex • Age • Occupation Figure 2.3
• 7.
  Chapter 2 -External and Customer Analysis PPT 2-7 Examples of Approaches to Defining Segments Product-Related Approaches • User type • Usage • Benefits sought • Price sensitivity • Competitor • Application • Brand loyalty Figure 2.3
• 8.
  The first setof variables describes segments in terms of general characteristics unrelated to the product involved. Eg a consulting company may specialize in the hospitality industry. A fast food firm may focus on a particular fast growing ethnic group. A bakery may confine itself to geographically defined segments eg . to a particular community or neighbourhood.
• 9.
  • Demographics areparticularly powerful for defining segments largely because a person’s life stage affects his or her activities, interests and brand loyalty. Another reason is that demographic trends are predictable. • Eg the US population over 65 is expected to grow to 50 million in 2020 when more than 5 million people will be 85 or older. Gold Violin recognizing this trend, has established itself as a source of products designed for the active elderly. • Thus they have a talking watch, a bed- vibrating alarm clock, a doorknob turner, a lighted hands- free magnifier ( all with attractive designs ) are just some of the Gold Violin products that appeal to this long – ignored demographic segment.
• 10.
  The second categoryof variables includes those that are related to the product. One of the most frequently used is usage. A manufacturer of lawn equipment may design a special line for a large consumer like Walmart, but sell through distributors using another brand name for other outlets. A bakery may follow a very different strategy in serving restaurants that rely very heavily on bakery products than in serving those with fewer such products.
• 11.
  Chapter 2 -External and Customer Analysis PPT 2-11 Segmentation How should segments be defined? – Benefit Segmentation – Price Sensitivity – Loyalty – Applications – Multiple Segments versus Focus Strategy
• 12.
  Benefits • Benefits soughtfrom products is a very useful segmentation variable, as selection of benefits can determine a total business strategy. Eg. for gourmet frozen dinners/entrees we can segment the market into those who are calorie- conscious, those who focus on nutrition and health and those interested in taste. Each segment would require a very different marketing strategy.
• 13.
  Price sensitivity • Inmany product classes , there is a well - defined breakdown between customers concerned first about price and others who are willing to pay extra for higher quality and features. • Eg general merchandise stores form a well defined hierarchy from the discounters to the prestige department stores. • Automobiles span the spectrum from Honda Civic to the Lexus to the Rolls Royce. • Airlines have first class, business class and economy. • In each case the segment dictates the strategy
• 14.
  Loyalty • Brand loyaltycan be structured using a loyalty matrix. Each cell represents a very different strategic priority and can justify a very different programme. • Generally. Loyal customers are taken for granted. However, a study by Bain shows that a 5 % increase in customer loyalty can nearly double the lifetime profits generated by customers in several industries including banking, insurance, automobile service, publishing and credit cards.
• 15.
  • The keyis often to reward the loyal customers by living up to expectations consistently, providing an ongoing relationship, and offering extras that surprise and delight. • The loyalty matrix suggests that the brand fence sitters , including those of competitors, should also have high priority. • Using the matrix involves estimating the size of each of the six cells, identifying the customers in each group and designing programmes that will influence their brand choice and loyalty level
• 16.
  Chapter 2 -External and Customer Analysis PPT 2-16 The Brand Loyalty Matrix: Priorities Low Loyalty Moderate Loyalty Loyal Customer Non-customer Medium Low to Medium High Highest Zero High Figure 3.4
• 17.
  Applications • Some productsand services, particularly industrial products can best be segmented by use or application. A portable computer may be needed by some for use while travelling, whereas others may need a computer at the office that can be conveniently stored when not in use. One segment may use a computer for word processing . • Some might use a 4 wheel drive for light industrial hauling and others may be buying it primarily for recreation.
• 18.
  • The athleticshoe industry segments into : • A) Serious athletes ( small in number, but influential) • B) The Weekend warriors ( weekend users) • C) The casual wearers ( using them for street wear)
• 19.
  • 80% ofthe market being composed of the casual wearer segment and not really needing performance, several shoe firms have adopted a style focus strategy as an alternative to the performance strategy adopted by firms such as NIKe.
• 20.
  Multiple Segments vsFocus Strategy Walmart, the largest US retailer started by concentrating on cities with populations under 25,000 in eleven south central states, a hitherto totally neglected segment by its competitors the large discount chains. This rural geographic focus gave it several significant SCAs viz. • an efficient and responsive warehouse supply system, • a low-cost motivated workforce • relatively inexpensive retail space • a lean and mean hands on management style.
• 21.
  Union Bank, California’s8 eighth largest bank makes no effort to serve individual customers. Instead it provides a service operation tailored to business accounts that is more committed and comprehensive than those of its competitors.
• 22.
  On the otherhand…. Aggressive industries in many firms are moving towards multiple segment strategies. Campbell Soup makes its nacho cheese soup spicier for customers in Texas and California. It offers a Creole Soup for Southern markets and a red- bean soup for Hispanic markets. In New York it links promotions with the New York Giants football team and in S. Nevada mountains skiers are given hot soup samples. Developing multiple strategies is costly and needs to be justified by an enhanced aggregate impact.
• 23.
  Market segmentation • Companiesrecognize they cannot appeal to all buyers in the marketplace, at least not to all buyers in the same way. Buyers are too numerous, too widely scattered and too varied in their needs and buying practices. • Also, companies themselves vary greatly in their ability to serve different segments. Thus a company must identify the parts of the market it can serve best and most profitably. It must design customer- driven marketing strategies that build the right relationships with the right customers.
• 24.
  Shotgun vs Rifle •Hence , most companies have moved away from mass marketing and towards target marketing.- identifying market segments, selecting one or more of them and developing products and marketing programmes tailored to each. • Instead of scattering their marketing efforts ( the shotgun approach) , firms are focusing on the buyers who have greater interest in the values they create best (the rifle approach)
• 25.
  Customer-Driven Marketing Strategy: CreatingValue for Target Customers • Market Segmentation • Market Targeting • Differentiation and Positioning
• 26.
  The Process andConcepts defined • Market segmentation involves dividing the market into smaller groups of buyers with distinct needs, characteristics, or behaviours that might require separate marketing strategies or mixes. • The company identifies different ways to segment the market and develops profiles of the resulting market segments.
• 27.
  Market Targeting Consists ofevaluating each ,market segment’s attractiveness and selecting one or more market segments to enter.
• 28.
  • Next, thecompany decides on a Value Proposition – on how it will create value for target customers • Differentiation involves actually differentiating the firm’s market offering to create superior value • Positioning consists of arranging for a market offering to occupy a clear distinctive, desirable place relative to competing products in the minds of target consumers.
• 29.
  Market Segmentation
• 30.
  Market Segmentation Segmenting ConsumerMarkets
• 31.
  Market Segmentation • Geographicsegmentation divides the market into different geographical units such as nations, regions, states, counties, or cities. • Many companies today are localising their products.eg Citibank offers different mixes of branch banking services depending on neighbourhood demographics. Baskin Robbins does “3 mile marketing” emphasizing local events and promotions close to its local store locations. Segmenting Consumer Markets
• 32.
  • Many largecompanies are seeking to cultivate as yet untapped geographic territory. Many large companies are fleeing the competition of major cities and suburbs to set up shop in rural and semi - urban India eg smaller size retail formats which offer a more intimate neighbourhood store setting. Walmart has complemented its supercenters by opening small super market style Market-side grocery stores in markets where full size stores are impractical.
• 33.
  Market Segmentation Demographic segmentationdivides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality Demographic segmentation
• 34.
  • Demographic factorsare the most popular bases for segmenting customer groups. • The reasons for this : • Consumer needs, wants and usage rates often vary closely with demographic variables. • Demographic variables are easier to measure than other variables. • Even when other segmentation bases are used marketers need to know characteristics in order to assess the size of the target market and to reach it efficiently
• 35.
  Demographic segmentation :Age and Life Cycle segmentation Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups.eg Leo Toys offers different toys for kids in different age groups. HP targets adult buyers with The Computer Is Personal Again campaign with ads featuring Price and Value. But for teens it uses mostly online and viral media in its Society for Parental Mind Control campaign “ fun ways to get a sweet computer out of your parents.” HP believes kids are the arbiters of “cool”.
• 36.
  HDFC Standard LifeInsurance has launched pension plans for retired people so that they do not have to depend on anyone for their financial needs. Companies marketing to mature customers usually employ positive images and appeals. Carnival Cruise Lines targets people of all age groups through it sad for its Fun Ships featuring an older person and child riding waterslides stating, “ Fun has no age limit”.
• 37.
  Demographic segmentation : Gendersegmentation • Gender segmentation divides the market based on sex (male or female). • This has been used in clothing, cosmetics, toiletries and magazines. Eg retail stores in India offers clothing only for girls. • More recently most women’s cosmetic makers have started marketing men’s lines. Nivea markets Nivea for men “an advanced line of enriching skincare and soothing aftershave products designed for the active men’s lifestyle” and offers a 4 step guide to perfect men’s care.
• 38.
  • L’Oreal marketsHydra Energetic – moisturizer for men to soften the signs of fatigue and stress. • Neglected gender segments can offer new opportunities in markets ranging from motorcycles to guitars. 10 years ago 2 wheelers were mainly targeted at men and looked as a means of transportation.
• 39.
  • Today marketerslike Bajaj and Hero Honda are targeting brands like Kristal DTS-I and Pleasure at young women. These two wheelers are not bulky and powerful but light and fun to ride for young and fashionable women.
• 40.
  Pleasure Why Should BoysHave All The Fun ? Brand : Pleasure Company: Hero Honda Agency: FCB Ulka November 2005 saw the launch of the scooter from Hero Honda branded " Pleasure". The launch was a bold one because of two reasons : 1. The scooter was going to compete with its technology partner Honda. 2. Hero Honda was perceived as a bike manufacturer
• 41.
  Pleasure • Pleasure isa 102 cc scooter targeting the young ladies. The launch makes sense because the scooter segment is now growing and is expected to touch 1 million units. In the scooter segment , the ungeared scooter segment is growing very fast. • Hero Honda wants to have a pie of this segment. It is a paradox in that in the 1990's Hero Honda disrupted Scooters with its 4 stroke bikes and now it is introducing a scooter.
• 42.
  • Pleasure ispositioned as a Pleasure scooter. The company is targeting Ladies and Ladies only ( that is clearly and obviously cried out in the baseline and in the ads). • A sound strategy. If you are targeting ladies, why should you expect men to ride that scooter. So Hero Honda has decided that the brand will be for ladies.
• 43.
  • Pleasure isgoing to be sold through "Just4her" showrooms where the salesperson will be ladies ( Men are going to be pissed off by that) • The product comes with 8 flashy colours and lot of features for the fairer sex like broader seats, electric start etc. So as far as the product concept goes, Hero Honda have a winner at hand.
• 44.
  • The communicationexecuted by FCB Ulka which is splashed all over the channels have an international look and aimed at the ladies of age group 18 - 35. The segmentation is based on the current techno boom and the emerging empowered ladies segment. • Will it work in the real world?
• 45.
  Market situation • Thereare some danger points in Pleasure's paths. The product is pitted against Honda Activa and Dio. • Activa is a formidable player and its reputation itself is an entry barrier for Pleasure. Since the pricing of Pleasure is comparable with that of Dio, Pleasure should have to make sure that it creates a meaningful differentiation.
• 47.
  Demographic segmentation : Incomesegmentation Income segmentation divides the market into affluent or low-income consumers. Used for long by marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel Many companies target affluent consumers with luxury goods and convenience services. Not all companies use income segmentation targeting the affluent. Retailers such as Big Bazar successfully target low and middle income groups. “ Isse sasta kaun?”
• 48.
  Psychographic Segmentation • Psychographicsegmentation divides buyers into different groups based on social class, lifestyle, or personality traits. There are two frameworks used for the purpose of lifestyle analysis, viz, the AIO and the VALS frameworks.
• 49.
  The AIO modelframes long sets of questions using the measures in the next slide to find out major dimensions of lifestyles of consumers AIO framework
• 50.
  AIO framework
• 51.
  THE VALS MODEL
• 52.
  Behavioral segmentation Behavioral segmentationdivides buyers into groups based on their knowledge, attitudes, uses, or responses to a product • Occasions • Benefits sought • User status • Usage rate • Loyalty status Segmenting Consumer Markets
• 53.
  Occasions • Buyers canbe grouped according to when they get the idea to buy, actually make their purchase, or use the purchased item. • Eg Most consumers usually drink Orange Juice in the morning, but orange growers have promoted orange juice as a cool, healthful refresher , any time in the day drink. • Internationally, Coca Cola presents Diet Coke as n early morning pick me up in its “ Good morning” campaigns. In the Indian sub – continent ,,Coca Cola promotes its brands as a family drink on occasions such as Diwali, Christmas of family outings.
• 54.
  • Greeting cardmanufacturers create greeting cards with appropriate messages for all occasions such as Valentine’s Day, Christmas day, Diwali, New Years and birthdays. • In India you have a greeting card for every occasion. Mother’s day, Father’s day,, Wonderful son, great daughter, best niece, blah,blah….
• 55.
  • Benefit segmentationrequires finding the major benefits people look for in the product class, the kinds of people, who look for each benefit , and the major brands that deliver each benefit. Benefits sought
• 56.
  Eg a companymanufacturing athletic wear segments its market according to benefits that different consumers seek from their active wear “Fit and Polish” customers seek a balance between function and style. “Serious Sports Competitors” seek performance and function. “ Value seeking moms” have low sports interest and low Active wear involvement , they buy for the family and seek durability.
• 57.
  User status Markets canbe segmented into non –users, ex- users, potential users, first – time users, and regular users of a product. Marketers want to reinforce and retain regular users, attract targeted non – users, and reinvigorate relationships with ex- users.
• 58.
  Usage rate • Marketscan be segmented into light, medium and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption. • eg Burger King has Super Fans (Ages 18 -34) who make up 18 percent of the chain’s customers but account for almost 50 % of all consumer’s visits. Burger King’s ads are, therefore, slanted towards these consumers
• 59.
  Loyalty status • Amarket can be segmented by consumer loyalty eg by : • Brands ( Colgate) • Stores ( Big Bazar/ Shoppers’s Stop) • Companies (Toyota)
• 60.
  Buyers can bedivided into groups according to their degree of loyalty. • eg Apple , Harley Davidson have an almost fanatic following of loyal users. They buy only these brands all the time. • Other consumers are only somewhat loyal – they are loyal to two or three brands. • Still others show no loyalty while buying.
• 61.
  Implications • By studyingits loyalists a company can pinpoint its target market and develop sharply focused marketing appeals • By studying its less loyal buyers the company can detect which brands are competitive with its own • By studying consumers who are shifting away from its brands a company can learn about its marketing weaknesses.
• 62.
  Market Segmentation Multiple segmentationis used to identify smaller, better-defined target groups Geodemographic segmentation is an example of multivariable segmentation that divides groups into consumer lifestyle patterns Using Multiple Segmentation Bases
• 63.
  Market Segmentation PRIZM NEclassifies every American household into 66 unique segments organized into 14 different social groups, based on demographic, behavioural and lifestyle factors • These groups segment people and locations into marketable groups of like-minded consumers that exhibit unique characteristics and buying behavior based on a host of demographic factors Using Multiple Segmentation Bases
• 64.
  • Consumer andBusiness Markets use many of the same variables to segment their markets. • In addition, some other variables are also used to segment Business Markets such as : • Operating characteristics • Purchasing approaches • Situational factors • Personal characteristics Market Segmentation : Segmenting Business Markets
• 65.
  9.65 Business Markets Segmentation •Demographic: – Industry – Company size – Location • Operating variables: – Technology – User/non-user status – Customer capabilities • Situational factors: – Urgency – Specific application – Size of order • Purchasing approaches: – Purchasing organization – Power structure – Existing relationships – General policies – Purchasing criteria • Personal characteristics: – Buyer-seller similarity – Attitude towards risk – Loyalty
• 66.
  • By goingafter segments instead of the whole market, companies can capture just the right value proposition to each segment served and capture more value in return. • Almost all companies serve at least some business markets. Eg ICICI Bank targets merchants, corporations, and SMEs with specific tailor -made services for all.
• 67.
  • Many marketersbelieve that Buying behaviour and benefits provide the best basis for segmenting business markets.
• 68.
  Market Segmentation Segmenting Internationalmarkets
• 69.
  • Geographic locationseg .Regions such as North America, Western Europe, The Pacific Rim, the Middle East, Asia or Africa. • Economic factors eg. Population income levels or overall level of economic development. • Political and legal factors eg. Type and stability of government, receptivity to foreign firms, monetary regulations, amount of bureaucracy etc. • Cultural factors eg. Common languages, religions, values and attitudes, customs and behavioural patterns.
• 70.
  Market Segmentation Segmenting onthe basis of geographical, economic, political, cultural and other factors assumes segments should consist of clusters of countries. But with new communication technologies connecting consumers around the world, marketers can define and reach segments irrespective of location.
• 71.
  Divides consumers intogroups with similar needs and buying behaviors even though they are located in different countries. eg. Lexus targets the world’s well – to – do. the global elite segment irrespective of country Swedish furniture giant IKEA targets the aspiring global middle class. It sells good quality furniture that ordinary people worldwide can afford. Coca Cola creates special programmes to target teens who are its core consumers of soft drinks the world over. Intermarket segmentation or Cross- market segmentation
• 72.
  Market Segmentation • Tobe useful, market segments must be: Requirements for Effective Segmentation
• 73.
  Market Targeting • Targetmarket consists of a set of buyers who share common needs or characteristics that the company decides to serve Selecting Target Market Segments
• 74.
  Principles of Marketing,Sixth Canadian Edition 9.74 Target Marketing Strategies • Three factors used to evaluate segments: – Segment size and growth – Structural attractiveness • Competition, substitute products, power of buyers/suppliers – Company objectives and resources Figure 9.2
• 75.
  Market Targeting Undifferentiated marketingtargets the whole market with one offer – Mass marketing – Focuses on common needs rather than what’s different Target Marketing Strategies
• 76.
  Market Targeting Differentiated marketingtargets several different market segments and designs separate offers for each • Goal is to achieve higher sales and stronger position • More expensive than undifferentiated marketing Target Marketing Strategies
• 77.
  Market Targeting • Concentratedmarketing targets a small share of a large market • Limited company resources • Knowledge of the market • More effective and efficient • Eg Nirma started as a nicher, selling only low priced detergents to rural and semi rural customers. Concentrated ( Niche Marketing )
• 78.
  Market Targeting Micromarketing isthe practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations • Local marketing • Individual marketing Target Market Strategies
• 79.
  Market Targeting Local marketinginvolves tailoring brands and promotion to the needs and wants of local customer groups • Cities • Neighborhoods • Stores Target Market Strategies
• 80.
  Market Targeting Individual marketinginvolves tailoring products and marketing programs to the needs and preferences of individual customers • Also known as: – One-to-one marketing – Mass customization – Markets-of-one marketing Target Market Strategies
• 81.
  Market Targeting Depends on: •Company resources • Product variability • Product life-cycle stage • Market variability • Competitor’s marketing strategies Choosing a Target Market
• 82.
  Market Targeting • Benefitscustomers with specific needs • Concern for vulnerable segments • Children – Alcohol – Cigarettes – Internet abuses Socially Responsible Target Marketing
• 83.
  Differentiation and Positioning Productposition is the way the product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products – Perceptions – Impressions – Feelings
• 84.
  Differentiation and Positioning Positioningmaps show consumer perceptions of their brands versus competing products on important buying dimensions. Location of circle= Where Consumers position a brand Size of circle = Brand’s relative market share . Thus Land Cruiser is a niche brand perceived as relatively affordable and more performance oriented.
• 85.
  Differentiation and Positioning •Identifying a set of possible competitive advantages to build a position • Choosing the right competitive advantages • Selecting an overall positioning strategy • Developing a positioning statement Choosing a Differentiation and Positioning Strategy
• 86.
  Differentiation and Positioning Competitiveadvantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices Identifying Possible Value Differences and Competitive Advantages
• 87.
  Differentiation and Positioning Value propositionis the full mix of benefits upon which a brand is positioned Selecting an Overall Positioning Strategy
• 88.
  Differentiation and Positioning Identifyinga set of possible competitive advantages to build a position by providing superior value from: Choosing a Differentiation and Positioning Strategy
• 89.
  Differentiation and Positioning Differenceto promote should be: Choosing the Right Competitive Advantage
• 90.
  Communication and Deliveringthe Chosen Position Choosing the positioning is often easier than implementing the position.