Marketing Fundamentals Part 2 Target Market & Segmentation

Marketing Fundamentals- Session 2 -

What we will cover…

Researching & Selecting Target Markets• A Model of Consumer Behavior• Market Segmentation– Identifying Segmentation Variables & segmenting the market– Profiling the Segments

• Market Targeting– Evaluate attractiveness of each segment– Select the target segment for the business

• Product Positioning (Session 3)

A Model of Consumer Behavior

Categories of Buying Decisions - Exercise

• Categorise the following into 3 groups– Those requiring very little time and effort– Those requiring moderate time and effort– Those requiring considerable time and effort

• Bread Magazines• Tissue Chewing Gum• Home• Coffee• Detergent• Lipstick• Shampoo• Car• Laptop• Shaving Foam• Butter• Soda• Luxury Handbag

Types of Buying Decisions

Types of Buying

Decisions

Impulse Buying

Extended Problem Solving

Habitual Buying

Now, consider the products on the earlier

slide – where would you place each of them – and what do we learn

from this?

Model of Consumer Behavior

Outside Stimuli

Marketing- 4 Ps

Environment- Economic,

Technological, Political, Cultural

Buyer’s Black Box

Buyer Profile- Cultural, Social,

Personal, Psychological

Decision Process- Need Recognition, Information Search, Evaluation, Decision,

Post-purchase

Outcomes

Choices on Product, Brand, Channel, Timing,

Amount

Model of Consumer Behavior

Outside Stimuli

Marketing- 4 Ps

Environment- Economic,

Technological, Political, Cultural

Buyer’s Black Box

Buyer Profile- Cultural, Social,

Personal, Psychological

Decision Process- Need Recognition, Information Search, Evaluation, Decision,

Post-purchase

Outcomes

Choices on Product, Brand, Channel, Timing,

Amount

The Buyer Profile … in Detail

Cultural & Social Factors

• Culture/Subculture (Nationality Groups, religious groups..)

• Social Class (based on variables like wealth, income, occupation, education etc)

• Reference Groups incl. family, friends, colleagues, etc.

Personal Factors

• Age• Lifecycle Stage• Occupation/Economic

status• Lifestyle• Personality/Self-

concept

Psychological Factors

• Motivaton (Maslow’s theory/Herzberg’s Theory)

• Beliefs, Attitudes, Perceptions

Buyer Profile – Exercise 1

• Visit any 1 of the sites below• Choose 1 ad from the work portfolio• Prepare a profile of the target buyer that the ad seems to be aimed at and reasons

• http://www.jwt.com/worldwide/work JWT

• http://www.bbdo.com/#!/the-work BBDO

• http://www.ogilvy.com/#/{filter:The-Work} Ogilvy

The Buyer Decision Process…. In Detail

Need Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Post-purchase behavior

Stacey Brown is looking to upgrade her computer skills – but she does not have a computer at home to practice

She begins to notice ads for computers (heightened attention) or starts looking for recommendations/material/visiting outlets etc. for information (active search)

Stacey prepares an initial ‘awareness set’ but then starts zoning onto a smaller set of brands that she is actively considering (consideration set)

Based on the benefits, she is looking for, and the product attributes, she develops a set of brand beliefs/image evaluations

With these evaluations in mind, Stacey forms a Purchase Intention for a brand – which is then executed/otherwise based on situational factors (offers/availability/personal changes)

Finally, the product experience kicks in and the satisfaction/otherwise from this refines the brand image perceptions and consequent Word of Mouth recommendations etc.

Note: You may not always go through all the steps all the time – examples ??

Buyer Behavior - Exercise

• Now consider 2 products that you have bought in the recent past– 1 should be of low value– The other of high value

• Trace the Decision Process you went through for each product using the framework just introduced

Market Segmentation

13

What is segmentation?

• Segmentation is a key principle of marketing ; it involves dividing up of the market into a series of sub groups on the basis of selected criteria

Why Segment?

• Many markets can not be treated in an aggregate way

• Segmentations provide companies with a way to tailor their marketing spend to particular consumers to maximise return on investment

• Segments must be actionable and identifiable

• Before conducting a segmentation exercise it is essential to determine– What are the objectives of the segmentation

– What variables will segmentation be based on

Features of Good Segmentation

Homogeneous within :

Respondents within a

segment will be as similar as

possible

Substantial : Segments need

to be large enough so that any targeting of segments is cost

effective

Heterogeneous Between :

Respondents in different

segments will be as different as

possible

Operational : Segments must be identifiable using variable

such as demographics

and/or attitudes

Segmentation Variables

Geographic

•Region/State•Climate

Demographic

•Age•Gender•Family Size/Stage•Income•Occupation•Religion/race

Psychographic

•Social Class•Lifestyle•Personality

Behavioral

•Usage status•Usage Rate•BenefitsVALS

(Values/Attitudes/Lifestyles)AIO Framework

(Activities/Interests/Opinions)

Segmentation Examples

Category Segmentation Base Identified Segments

Toothpaste Benefit Whitening, Sensitive Teeth, Fresh Breath, Cavity Protection

Credit Card Demographic Young & single, DINK, Young families, Middle-aged with families, Empty Nesters, Retired

Cars Demographic + Psychographic

Young Speed-Cravers, Young, Affluent Socially Mobile, Middle-Aged Practicals, Middle-Aged Status Conscious..

Hotels Behavioral/Occasions Business Meetings, Family Vacations, Honeymoon/Special Occasions

Local Health Club Behavioral Heavy Users, Regular users, Occasional Users,Program Attenders…

Segmentation – Exercise 1

• Suggest suitable segmentation variables for:

– Breakfast Cereal Maker– Coca Cola– Washing Detergent– Apple Iphone– Coffee– Toyota Lexus

Profiling the Segments

• Once the segments have been defined, need to focus on creating a more granular fingerprint of the segment – Profiling the segment in detail so that decisions regarding attractiveness and suitability of the

segment for the marketer can be taken– Need to access various sources of information for this– Surveys are key for segmentation

• Niche Segments:– These are segments (usually small), characterized by highly defined characteristics– Example – high-end sports cars, a very specific type of coffee, stem cell storage facilities etc.– Since niche segments are very narrowly focused, marketers need to aim to be the only one/of a few

serving the small segment – for profitability

Segment Profiles*

Decaffeinated Non-decaffeinated Ground

Size 35% 33% 32%

Distinguishing features

DecaffeinatedNot make me nervousPrepared quicklyNot wake upConcentrated form

Not decaffeinatedWake upConvenient packageWell-known brandEasy to prepare

Not prepared quicklyNot easy to prepareSpecial EquipmentNot concentrated form

Frequency of Use Light Medium Heavy

Type Usage Instant Both Ground

Demographics OlderWidowedLower incomeMore minorities

Average AgeDivorcedAverage IncomeMore minorities

YoungerMarriedHigher IncomeFewer minorities

* Source: Market Segmentation, Robert Smythe – an NFO pamphletExercise: What brands do you think each of the

segments is likely to be using?

Market Targeting

Tools for Segment Evaluation

Segment Size and growth

Segment Structural Attractiveness

Company Objectives & Resources

e.g. structural shift to online travel

Segment Structural Attractiveness

• Porter’s 5 Forces Model

Industry Competitors (Segment Rivalry)

Threat of New Entrants

Threat of Substitutes

Buyer PowerSupplier Power

Selecting Market Segments

• Based on evaluation, company now must select 1 or more segments to target

• 5 patterns of target market selection (Source: Derek F.Abell: Defining the Business: The Starting Point of Strategic Planning)

M1 M2 M3

P1

P2

P3

Note: M: Market; P : Product

Single Segment Concentration

M1 M2 M3

P1

P2

P3

1 2

Selective Specialization

Examples? Class Discussion

Selecting Market Segments

M1 M2 M3

P1

P2

P3

Note: M: Market; P : Product

Market Specialization

M1 M2 M3

P1

P2

P3

3 4

Product Specialization

M1 M2 M3

P1

P2

P3

5

Full Coverage

Examples? Class Discussion

25

Segmentation for Netflix – An Exercise

• Given the data in the next slide, identify the different types of segments emerging.

– Assign descriptive names to these segments based on their profiles

• Which segment/s should Netflix target? Develop initial thoughts on possible marketing strategies for these segments

Segmentation for Netflix

Total # of customers – 200 Cluster 1 Cluster 2 Cluster 3 Cluster 4

Size 68 32 45 55

Age of Customer (Mean) 32 26 44 58

Gender (in %)Male Female

58%42%

47%53%

36%67%

64%36%

# of children in Household (mean) 1.03 0.54 2.4 1.1

# of movies rented in last 3 months 10 12 3 8

Genre of movies rented in last 3 months (mean %)ActionComedyChildRomanceDramaWar

30%22%20%4%

15%9%

26%31%2%

27%12%2%

18%27%32%3%

15%5%

32%20%1%2%

17%28%

Thank You!