L3 segmentation bho1171

Consumer Segmentation and Targeting

Lecture 3Chapter 6 (Sharp, 2013)

BHO1171 – Lecture 3 Slide 2

Segmentation-based targeting

Marketers often assume buyers differ from one another in their buying behaviour Marketer’s can choose to cater for these differences.

Market segmentation is the process of dividing up the market into distinct sub-groups These target segments should react differently to

different marketing. Targeting is the practice of creating differences in the

marketing mix to cater for these different segments or choosing not to serve some segments.


Segmentation-based targeting Segmentation of the market needs to meet a number of criteria

in order to be useful to the marketer. Marketers need to be able to answer the following questions in relation to the segment: Who are the buyers? How can we reach them? How are the segment customers different

from others? Where are they located? Where do they purchase? What are their interests and behaviours? What do they buy and/or

like?

The segments worthy or being targeted must be of a certain size and targetable.


Segmentation-based targeting

.


The logic and appeal of narrow targeting

How targeted should a brand try to be? Is it wrong to try to sell to all category brands?


3 phases in marketing strategy

Identify segmentation

bases

1. Market Segmentation

2. Market Targeting

3. Market Positioning

Develop profiles of segments

Develop positioning for

segments

Develop marketing mix for segments

Measure segment

attractiveness

Select target segments


Why Segment the Market? (1)

Mass Marketing Offering the same product and marketing mix to

all consumers Mass Marketing Issues

• Appropriate if all consumers respond to a similar marketing mix

• Benefits are that it is a low cost marketing strategy– one advertising and promotional strategy targeted to a single

market for a generic product.


Why Segment the Market? (2)

Market Segmentation Issues Allows producers to avoid head on confrontation

• By differentiating by price, styling, packaging, promotional appeal, usage, and distribution.

Increased costs of segmentation • i.e. Shorter production runs, different promotional

campaigns, consumer research


+ e.g. of product tailored to different segments

Melb to London$8,400Melb to

London$1400


Segmentation Variables

Psychographic Segmentation

Geographic Segmentation

Behaviour/Usage Segmentation

Demographic Segmentation


+

Family

Income Level

EthnicityEducation


Age



Other ideas: Age and life-cycle stage

• Wants and needs vary with stage

Gender• Buying patterns frequently follow

gender

Income

Race and culture

‘Generation’

Risk of stereotyped assumptions

For example the profile of mX readers:

“a bright, energetic must read for the busy

city worker targeting the young and affluent – a

generation driven by aspiration” (p.1, MX,

2012).


Geographic Segmentation

Divide market into separate geographic units

Nations, regions provinces, cities etc.

Develop regional marketing programmes

Quite likely in Global marketing programmes


Psychographic Segmentation

Grouping customers together based on social class, lifestyles and psychological characteristics Attitudes, interests and opinions

Adds richness of behavioural and social sciences to demographics

Socio-economic, status, values, attitudes and lifestyle groupings, personality


Upper class 10% of population

Middle class 60%

Lower class 30%

*Source: ABS

Social class in Australia*


Social standing and behaviour


Magazine covers for different social class segments?

http://images.google.co.uk/imgres?imgurl=http://s11.bdbphotos.com/images/orig/h/6/h6by8xnm0o2hx8m6.jpg&imgrefurl=http://www.whosdatedwho.com/topic/7928/georgina-chapman-tatler-magazine-july-2009.htm&usg=__2R-fm18XRYC4P74xSuiYUnJF2yY=&h=669&w=510&sz=82&hl=en&start=23&um=1&tbnid=uY1Z7NCOk_6iEM:&tbnh=121&tbnw=92&prev=/images?q=tatler+magazine+cover&ndsp=12&hl=en&sa=N&start=12&um=1


+Vals survey example

http://www.sric-bi.com/VALS/

http://www.apple.com/getamac/


Behavioural Segmentation

Decision Roles Initiator Influencer Decider Buyer User

Behavioural Variables Occasions Benefits User Status Usage Rate Buyer-Readiness Loyalty Status Attitude


Apparent benefits of segmentation Products/services fit

more closely what customers want

Customers can feel more responsive and loyal to organisations that speak directly to them and tailor their products accordingly

Enables organisations to target its marketing mix


Dangers of segmentation

Risk of poor definition and implementation of segmentation.

Knowing where to stop.Assumption that customers only fit into one

segmentAssumption that it is profitable to tailor

products to each segment


Criteria For Effective Targeting of Market Segments

Identification Relevant characteristics (eg:

demographics, lifestyle, benefits sought)Sufficiency

Sufficient number of peopleStability

Stable and likely to growAccessibility

Economical to reach



2. Market Targeting Measure

segment attractiveness




segments



bases




Marketing Mix Whole Market

Segment 2

Segment 1

Segment 3

Marketing Mix 1

Marketing Mix 2

Marketing Mix 3

Mass Marketing/ Undifferentiated Marketing

Target marketing

Concentrated/Focused Marketing

Targeting strategies

Segment 2

Segment 1

Segment 3

Marketing Mix


Targeting high value customers

Many businesses use profitability segmentation to target profitable consumers Airlines

• E.g. Business travellers get priority check in & baggage Banks

• High value customers get their own 1800 number or are recognised by input of client number


Two High-End Watches for Different Lifestyle Segments?




bases





segments


2. Market Targeting Measure

segment attractiveness



Brand positioning

First appeared in the Advertising Age Reis and Trout (1972)

Now in every marketing textbook Seen as a fundamental aim of marketing Yet not empirically tested

Position brand in consumers’ minds Make it the preferred brand for your brand’s

target market


Positioning

The final objective is to position a product in the mind of the consumer Differentiated from competition ‘own’ an image

“Positioning is…how you differentiate yourself in the mind of the prospect” ”• (Reis & Trout, 2001)


Developing and maintaining

1. Consider which positions are held by competitors

2. Which position is currently held by your brand?3. What is the desired position for your brand?4. Can you sustain that position?5. Implement a programme to establish the

desired position6. Monitor the perception held by consumers


Positioning Strategy – Differentiation Through:

Price/quality emphasize value in terms of quality, price, or both E.g. Stella Artois “Reassuringly Expensive”

Product attributes Characteristics as a positioning base e.g., Volvo brand is positioned on ‘Safety’While the BMW brand is positioned

on ‘Driving’. Product usage

Positioning based on a products typical use E.g. Nutri-Grain Bars replacing cereal

Against a competitor, e.g. Avis tries harder because it’s in 2nd place

http://www.youtube.com/watch?v=pTrmSX3hL6A

http://www.youtube.com/watch?v=EZd9k_5nOYY&NR=1

http://www.youtube.com/watch?v=oEHJ9p7qDZ4&feature=related

http://www.youtube.com/watch?v=aFZVuAmBLbE



http://www.youtube.com/watch?v=3JCkF8MYf28&feature=autoplay&list=PL880FAD7CABFD29D9&index=2&playnext=2


Perceptual Mapping

PERCEPTUAL MAPPING CAN BE USED TO: Show how (potential) customers view a firm's current or

potential offering. Show how customers view competitors' offerings. See what kind of offering different segments see as ideal. See what offerings are likely to appeal to which

segments. Help with combining and segmenting - by revealing

which segments view the market in similar (or dissimilar) ways.


+ Identifying a Positional Direction


Product Differentiation

In a competitive, price driven market, firms try to differentiate their products from competitive offerings. Adding new features Promotional campaign

This is a product oriented view of the world and usually occurs before segmentation of the market.

Some companies instigate product differentiation after segmentation e.g. Coke, Qantas – Premium Economy

The problem with segmentation, targeting and

positioning…


Brand user profiles seldom differ

Emprical evidence shows competing brands do not really have different sorts of customer bases.

The results demonstrate that brand-specific segments generally do not exist Interchangeable brands usually compete in what for

them is a single, unsegmented mass market. There is no support for the idea that competing

brands each appeal to a unique sub-set of users that look different from the customer bases of competitors.


Segmentation does not necessarily maximise returns

Segmentation and targeting does not guarantee maximum return from marketing expenditure.

It is not suggested that the segmentation targeting approach is not always inferior to mass marketing—simply segmentation is not always superior to mass marketing.

There are and will always be conditions under which segmentation is not the best, most profitable course of action.


Talking to everyone is possible

There are some reasons why marketers may want to limit who they talk to. Reasons include: The expense involved in talking to everyone Difficulty to appealing to all types of buyers in a market Different companies vary in their abilities to serve

different segments of the market.

There is some counter-evidence to these ideas:• Mass marketing can be more cost-effective than targeted

approaches• Brands should be as inclusive as possible


Yorkie Bar – great positioning?


Yorkie Bar – great positioning?

Yorkie Bar ad

Gender Total Brand Yorkie – egg

Yorkie – Honeycomb

Yorkie – Milk

Yorkie – Raisin & Buscuit

Yorkie Roast Almond

Yorkie- The Nutter

Male 56 26 73 57 46 0 40

Female 44 74 27 43 54 100 60

• Observations?

Source: TNS – pg 64 Sharp (2010)

http://www.youtube.com/watch?v=LH2pLzdeCP0


Smart targeting in practice Smart marketers take a number of steps to ensure they do

not over-target. They: Make sure they understand and document who buys the category Always check real numbers instead of relying only on indices Quantify any skews in brands and media Realise that adding a brand, SKU or focusing on a specific occasion

is typically about selling more to the same people. Know that heavy buyers are not the key to growth Use overall profit contribution rather than campaign ROI to assess

marketing performance Look to maximise overall sales and margins, not just response

from the target market.

L3 segmentation bho1171

Business

bho1171 lecture

consumer segmentation

market segmentation

implementation of segmentation

segmentation bases

market targeting

different marketing

target segments