What is segmentation
Process of dividing the market (consumers) into identifiable groups based on similarities and differences as they relate to our product/product class.
Why segmentation?
- Value drivers might (and will be) different across segments
- One product that provides value to all customers (that is better than segment-specific competitors) is difficult
Segments should be…
- Distinct
- Homogeneous within groups
- Different across groups - Actionable
- Useful for identifying customers and deciding marketing mix variables - Substantial
- Big enough to be profitable
Demographic
- Age
- Gender
- Family Size
- Income
- Occupation
- Education
- Religion
- Race
- Generation
- Nationality
Psychographics: VALS
The most widely-used approach: Measure:
1. Consumer’s values
2. Attitudes and lifestyle
3. Personality
Behavioural segmentations
- Occasions
- Benefits sought
- Usage rate
- Light, medium, and heavy users (McDonald’s example) - Loyal status
- Loyalty programs at banks
Primary Segmentation Variables
- Descriptors “who”
- Psychographics “why”
- Behaviors “what”
Profiling the segments
- Profile segments
- Use cluster analysis (quantitative)
- Identify clusters and profile them using descriptor (who) variables_
- Decide how many segments to have
- Average profile criterion
Targeting: Decide which segments to target
- Company “Fit”
- Market opportunities for profit
- Segment size
- Growth rate - Competitive Intensity
- Undeserved needs
- Competitor’s strength
Targeting: Market coverage strategy
Three broad strategies
1. Undifferentiated marketing
Treats the entire market as a single segment. The company uses one marketing mix (product, price, place, promotion) to target the whole market without distinguishing between different segments.
- Differentiated Marketing
In this approach, a company recognizes multiple segments within the market and designs separate marketing mixes for each of them. - Concentrated Marketing
Here, a company focuses its efforts on one specific segment or a few closely related segments. It tailors its marketing mix to meet the particular needs of that segment.
Cannibalization
Reduction in sales volume of one product as a result of the introduction of a new product by the same producer.
When do companies should not care about cannibalization
- When competitors will take share away from your brand –> Better off taking the sare from your older brand yourself
- When new brand has much higher profit margin
- When phasing out the older brand
How to convince consumers in the target segment to choose our offerings?
The offer should be:
1. Meet (or exceed) customer needs
2. Do it better than competitive offerings
What is brand positioning?
Framing the brand’s image in the target consumer’s minds, so it occupies a distinct and valued place in relation to competitors. (brand differentiation)
Key to positioning
- Determine the needs of consumers along the benefits dimensions
- Determine consumer’s perceptions of all existing products in the market along each dimension.
Positioning analysis tools
Perceptual Map
1. Focuses on 2 most important attributes or benefits that customers seek
2. Contains Brand Locations.
S-T-P Process
- Market Segmentation
1. Identify segmentation variables and segment the market
- Develop profiles of the resulting segment
- Market Targeting
3. Evaluate attractiveness of each segment
- Select target segments
- Product/Service Positioning
5. Identify possible positioning concepts for each target segment
- Select, Develop, and signal the chosen positioning concept.
Developing a positioning statement
- Elements:
- Target (Segment)
- Frame of Reference (Competition)
- Point of Difference (Uniqueness)
- Reason to Believe (Support) - Purpose:
- Internal
- Summarize strategy
- Guide tactical decisions (4Ps)
- External
- Establish identity in the mind of the consumer
- Differentiate your product
