Strategic marketing lecture 4

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Module: Strategic MarketingInstructor: Bilal Ahmad

LECTURE: Strategic market segmentation

Introduction

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• Identification of Market segments

• Buyer’s needs, preferences and purchase

behavior

• Formation of market segments

• Customer group identification

• Forming group base on Response differences

• Finer segmentation strategies

Learning Outcomes



• Selecting the segmentation strategy

• Strategic analysis of market segments



• Identifying market segments– Segmentation variables

– Characteristics of people and organizations• Consumer markets

• Organizational markets

• Product use situation segmentation

• Buyers’ needs and preferences

– Consumer needs

– Attitudes

– Perceptions

• Purchase behaviour



• Segmentation variables

– Segmentation and targeting of customers allows the

marketer to deliver a product within the target audience

needs and wants (Pickton and Broderick, 2005: 373)

Identification of Market segments

Buyers’ Needs/PreferencesUseSituationCharacteristics of People/

Organizations

PurchaseBehavior



Illustrative Segmentation Variables

Characteristicsof people/organizations

ConsumerMarkets

Organizational Markets

Age, gender, income,family size, lifecycle stage, geographiclocation,lifestyle

Type of industry, size, geographic location, corporate culture, stage ofdevelopment, producer/intermediary

Use situation Occasion, importance ofpurchase, prior experience with product, user status

Application, purchasingProcedure (new task, modified rebuy, straightrebuy

Buyers’ needs/preferences

Brand loyalty status, brandpreference, benefits sought,quality, proneness to make a deal

Performance requirements, brand preferences, desiredfeatures, servicerequirements

Purchasebehavior

Size of purchase,frequency of purchase

Volume, frequencyof purchase



• Definition– Market segmentation based on use of product

– Needs and Preferences vary according to

different use situations

• Mass customization

Product use situation segmentation



• Example:

• Astra/Merck segmentation based on.– Health care as business

• Care administrator

– Traditional• Physicians with standard patient needs

– Cost sensitive• Physicians for whom cost is paramount

– Medical though leaders• People on leading edge

Product use situation segmentation



– Needs and preferences• Specific to product

• Specific to brand

• Used as segmentation bases

• Used as segmentation descriptors

– Customer needs

– Attitude

– Perceptions

Buyer's needs and Prefrences



• Customer needs

– Basic physiological needs

– Nature and intensity of needs

– Better solution (Filling the gap)

• Attitudes– Attitude influence behavior

– Marketing strategy development




• Perception– Process by which an individual selects,

organize, and interprets information inputs to

create a meaningful picture of the world.

(Bernard and Gary, “Human behavior”. 1964)

– Evaluation of Positioning strategy

– Strategic management of Positioning strategy




• Purchase behavior– Consumption variables

– Volume of purchase

– CRM system

– Loyalty Program




• Purchase behavior




• Levels of involvement

Forming Market segments

Low involvement

Habitual Decisions

E.g.. tea, toothbrush

Moderate involvement

Simple decisions

E.g. Face wash, snacks

High Involvement

Lengthy decisions

E.g. Car, University



– Requirements for segmentation• Response differences

• Identifiable segments

• Actionable segments

• Cost/benefits

• Stability

– Approaches to segment identification

– Customer group identification

– Forming groups based on response differences

Forming market segments



• Example

• Miller genuine draft –

– “mainstream sophisticates”

• Milwaukee’s Best Light –

– “hardworking men”

• Pilsner Urquell –

– “beer afficionados”

• Miller Icehouse –

– for “drinking buddies”

Forming market segments



Beer market demographics



• Response differences

• Identifiable segments

• Actionable segments

• Cost/benefits of segmentation

• Stability over time

• Product Differentiation and market

segmentation

Requirements for segmentations



Segment identification

B-Start with customer

response profile

A-Start with identifiers of

customer group

Approaches to segment identification



• Management insight and available

information

• Cross classification analysis

• Data Mining for segmentation

• Segmentation illustrations

Customer group identifiaction



• Customer relationship management (CRM)– Cluster analysis

– Perceptual maps• Product market area

• Competitor analysis

• Buyer’s perception analysis

• Map preparation

Forming group based on response differences



– Logic• Customized offerings

• Diverse customer base

• Close customer relationships

– Finer segmentation strategies• Micro-segmentation

• Mass customization

• Variety-seeking strategy

Finer segmentation strategies



– Deciding how to segment

– Strategic analysis of market segments• Customer analysis

• Competitor analysis

• Positioning analysis

• Estimating segment attractiveness

• Segmentation “fit” and implementation

Selecting the segmentation strategy



• Anticipating the future

– Boundaries and composition of Product market

– End-user customer base

– Market and industry transformation

– Potential threats

– Value chain composition and structure

– Product life cycle phase?

Strategic vision about future


Strategic marketing lecture 4

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