MARKET SEGMENTATION Chapter 7

MARKET MARKET SEGMENTATIONSEGMENTATION

Chapter 7Chapter 7MBAADM5

roger

bancilo

Chapter Overview:Chapter Overview:

1. What is Market Segmentation

2. Levels of Market Segmentation

3. Bases for Segmenting Markets

3 Steps in Target Marketing(S T P)

0Segmentation Marketing0 Identify bases for segmenting the market0 Develop segment profiles

0Target Marketing0 Develop measure of segment attractiveness0 Select target segments

0Market Positioning0 Develop positioning for target segments0 Develop a marketing mix for each segment

Market SegmentationMarket Segmentation0CONCEPT AND DEFINITIONCONCEPT AND DEFINITION

The concept of market segment is based on the fact that the market of commodities are not homogeneous but they are heterogeneous.

Market represent a group of customer having common characteristics but two customer are never common in their nature, habits, hobbies, income and purchasing techniques.

Defining Market SegmentationDefining Market Segmentation0According to Philip Kotler ,

“Market segmentation Market segmentation is sub-dividing a market into distinct and homogeneous subgroups of customers, where any group can conceivably be selected as a target market to be met with distinct marketing mix.”

Market SegmentationMarket Segmentation

0Market Segmentation Market Segmentation is a method of “dividing a market (Large) into smaller groupings of consumers or organizations in which each segment has a common characteristic such as needs or behavior.”

LEVELS OF MARKET LEVELS OF MARKET SEGMENTATIONSEGMENTATION

Evolving Marketing StrategiesEvolving Marketing Strategies0Mass Marketing: 0The term mass market refers to a large,

undifferentiated market of consumers with widely varied backgrounds.

0Products and services needed by almost every member of society are suited for the mass market. Such items as electric and gas, utilities, soap, paper towels and gasoline, for example, can be advertised and sold to almost anyone, making them mass market goods.

1. Mass Marketing1. Mass Marketing0An attempt to appeal to an entire market with one

basic marketing strategy utilizing mass productionmass production, mass distributionmass distribution and mass promotionmass promotion of one product for all buyers. Also called undifferentiated marketing.

0The appeal of mass marketing is in the potential for higher total profits. Companies that employ the system expect the larger profit to result from:

0(1) expanded volumeexpanded volume through lower prices, and0(2) reduced costsreduced costs through economies of scale made

possible by the increased volume.

0 Henry Ford Henry Ford applied the concept in the automobile industry. His Model-T was conceived and marketed as a "universal" car — one that would meet the needs of all buyers.

Ford Model-T was the first to mass market automobiles. Ford mass produced by assembly line, mass distributed through dealers, and mass promoted one product for all buyers.

Mass MarketingMass MarketingHenry Ford epitomized this strategy when he offered the Model- T Ford in one color , black.

2.2. SEGMENT MARKETINGSEGMENT MARKETINGA market segment consists of a large identifiable group of customers within a market who share a similar set of needs and wants, purchasing power, geographical location, buying attitudes, or buying habits.

Identifiable Group with in a Market with Similar• Similar Needs & Wants• Purchasing Power• Geographical Location• Buying Attitudes

Example:Automakers may identify four broad segments in the car market.Buyers who are primarily seeking:

11. Low-cost Basic TransportationLow-cost Basic TransportationToyota Wigo, Mitsubishi Mirage, Honda Brio, Kia Picanto, Hyundai

Eon & i10, Tata Indigo

2.Driving Thrills & High Performance2.Driving Thrills & High PerformanceToyota 86, Subaru BRZ, Subaru WRX STI,

Ford Mustang, Chevrolet Camaro, Nissan GTR

3. Luxurious Driving Experience3. Luxurious Driving ExperienceLexus LFA, Mercedes, BMW, Audi, Bently, Meserati

4. Supercar / Hypercar4. Supercar / HypercarMcLaren, Ferrari, Bugatti, Lamborghini, Pagani, Renault

5. Car Safety Features5. Car Safety FeaturesVolvo Top Safety Features

Volvo 360 Degrees Surround Camera; Blind Spot Information System, Lane Keeping Warning, Volvo Adaptive Cruising, Park Assist Pilot,

Active High beam Headlights

Safety FeaturesSafety FeaturesSubaru Forester

Strong Utilitarian Body Structure, Eye Sight CameraOff-road Safety with X Mode , Best crash-test ratings in its class

Safety FeaturesSafety FeaturesFord Focus & Ford Explorer

Ford Focus: Active City Stop, Blind Spot Warning, Self-parkingFord Explorer: Inflatable seatbelt

Safety?Safety?

FLEXIBLEFLEXIBLE MARKETMARKET OFFERINGOFFERING

0 Consists of the product and service elements that all segment members value, plus options (additional charge) that some segment members value.

0 Even in segments, 100 % of their needs are not the same.

FLEXIBLEFLEXIBLE MARKETMARKET OFFERINGOFFERING0 Consists of two parts.1.Naked Solution : - products and

services that all members of the segment values.

2.Discretionary options : - that some segment members value. Each option might carry an additional charge.

FLEXIBLEFLEXIBLE MARKETMARKET OFFERINGOFFERING0 Need: Low Cost Basic Transportation1. Naked Solution: Mitsubishi Mirage

2. Discretionary options: 2 Trims in 4 variants to choose from

Mirage GLX (MT) – P503,000

Mirage GLX (CVT) – P553,000 ^P50K (CVT)

Mirage GLS (MT) – P598,000 ^P95K (Trim)

Mirage GLS (CVT) – P648,000

(MT) – Manual Transmission

(CVT) – Continuous Variable Transmission (Automatic)

FLEXIBLEFLEXIBLE MARKETMARKET OFFERINGOFFERING

Manual or CVT?Manual or CVT?

FLEXIBLEFLEXIBLE MARKETMARKET OFFERINGOFFERINGMirage GLX (MT) - P503K

0 Ignition key starter0 Key entry0 Option: SAT-NAV system0 Option: Touch screen multimedia

entertainment0 2 Speakers 0 Non leather wrapped steering wheel0 Manual control air con0 Driver side airbag only0 14” steel rim w/ hubcaps0 No fog lamps0 No rear spoiler0 2 front doors power windows0 Option: ABS w/EBD

Mirage GLS (MT) – P598K

0 Start/stop push button starter system0 Keyless entry system0 SAT-NAV equipped touch screen

multimedia entertainment

0 6 Speakers0 Leather wrapped steering wheel0 Automatic climate control air con0 Twin airbags0 15” alloy wheel0 Fog Lamps0 Rear spoiler0 Central locking 4 door power windows0 ABS w/ electronic brace-force distribution

Delta Airlines offers all economy passengers a seat and soft drinks. It charges economy passengers extra for alcoholic beverages.

FLEXIBLEFLEXIBLE MARKETMARKET OFFERINGOFFERING

2. NICHE MARKETINGGroup of customers seeking a distinctive mix of

benefits who are ready to pay extra premium.A niche is a more narrowly defined customer

group typically a small market whose needs are not being well served. Marketers usually identify niches by dividing a segment into sub segments or by defining a group seeking a distinctive mix of benefits.

Niche = segment sub – segments

NICHE MARKETINGEx. Car buyers who are primarily seeking

for thrills and high performance.[MT] Manual Transmission[CVT] Continuous Variable Transmission with Paddle shifter

NICHE MARKETING

3. LOCAL MARKETING0 Marketing programs tailored to the

needs & wants of local customer groups in trading areas, neighborhoods , etc.

0 This trend is called grass roots marketing.

LOCAL MARKETING

4. INDIVIDUAL MARKETING0 Ultimate segmentation – segments of 1 or

customized marketing or one-to-one marketing.

0 Customerization – empower the consumers to design the product or service offering of their choice.

Bases for Segmenting Consumer Markets

GEOGRAPHIC SEGMENTATIONDivides the market into different

geographical units such as nations, regions, states, counties, or cities.

Mcdonalds globally, sell burgers aimed at local markets, for example, burgers are made from lamb in India rather then beef because of religious issues.

In Mexico more chilli sauce is added and so on. Tereyaki burger in Japan.

Toyota Motor Corporation

DEMOGRAPHIC SEGMENTATION

Demographic segmentation is the most popular segmentation method because consumer needs, wants, and usage often vary closely with demographic variables and are easier to measure than other types of variables.

Dr. Rosenbloom

FamilyFamilyFamilyFamily

Income LevelIncome LevelIncome LevelIncome Level

EthnicityEthnicityEthnicityEthnicityEducationEducationEducationEducation

AgeAge

Demographic 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.

As people age their needs and wants change, some organizations develop specific products aimed at particular age groups for example  nappies for babies, toys for children, clothes for teenagers and so on.   

Gender segmentation is commonly used within the cosmetics, clothing and magazine industry.

Income segmentation is another strategy used by many organizations.

Products and services are also aimed at different lifecycle segments. Holidays are developed for families, the 18-30's singles,  and for those in their 50's.     

Gender

Geographic Segmentation

Psychographic SegmentationPsychographic segmentation divides buyers

into different groups based on social class, lifestyle, or personality traits.

8- 42

Swatch targets those with an active lifestyle

Behavioral SegmentationBehavioral segmentation divides buyers

into groups based on their knowledge, attitudes, uses, or responses to a product

• Occasion• Benefits sought• User status• Usage rate• Loyalty status

Occasion segmentation divides buyers into groups according to occasions when they get the idea to buy, actually make purchases, or respond to a product.

Benefit segmentation requires 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.

Behavioral Segmentation

User status divides buyers into ex-users, potential users, first-time users, and regular users of a product.

Usage rate divides buyers into light, medium, and heavy product users.

Loyalty status divides buyers into groups according to their degree of loyalty

Behavioral Segmentation

Segmentation Criteria[MASDA]

To be useful, a market segment must be:

• Measurable• Accessible• Substantial• Differentiable• Actionable

Requirements for Effective Segmentation

Measurable examples include the size, purchasing power, and profiles of the segments.

Accessible refers to the fact that the market can be effectively reached and served.

Substantial refers to the fact that the markets are large and profitable enough to serve.

Differentiable refers to the fact that the markets are conceptually distinguishable and respond differently to marketing mix elements and programs.

Actionable refers to the fact that effective programs can be designed for attracting and serving the segments.

Segmentation Criteria