11/18/2013

Market Segmentation & Target Market

Session Outline
Target market strategies
Mass marketing Differentiated marketing Niche marketing Micro marketing

STP process Segmentation basis Target market Target market selection

11/18/2013

Target Market Strategies

Broad

Narrow

Mass Marketing
Companies aim at the total (whole) market for a particular product. Customers in the market have similar needs and wants that can be reasonably satisfied with a single marketing program.
Duracell, for example, offers a collection of different battery sizes (D, C, A, AA, AAA, 9-volt), but they are all disposable batteries marketed to consumers for use in toys and small electronic devices.

Mass marketing works best when the needs of an entire market are relatively homogeneous. Good examples include commodities like oil and agricultural products.
4

11/18/2013

Differentiated Marketing
Most firms use some form of market segmentation by
Dividing the total market into groups of customers having relatively common or homogeneous needs, and Attempting to develop a marketing program that appeals to one or more of these groups

Within the differentiated approach there are two options:

The multi-segment approach The market concentration approach Multi-segment approach seek to attract buyers in more than one market segment by offering a variety of products that appeal to different needs. Responding to the heterogeneous needs of different segments. Market concentration approach focus on a single market segment. The main advantage of market concentration is specialization also known as category specialization.

Niche Marketing
Some companies narrow the market concentration approach even more and focus their marketing efforts on one small, well-defined market segment or niche that has a unique, specific set of needs. Customers in niche markets will typically pay higher prices for products that match their specialized needs. One example of successful niche marketing is found in the gym industry.
Health club for women, Gyms for children, Gyms over-55 age group

Environmentally friendly cars Sports Cars Ford produces the Austin Martin, and Fiat the Ferrari Hewlett-Packard - all-in-one machines

11/18/2013

Micromarketing Individual Marketing

Due to advances in communication and Internet technology, individualized segmentation approaches have emerged. These approaches are possible because organizations now have the ability to track customers with a high degree of specificity. Three types of individualized segmentation approaches: One to one marketing, Mass customization, and Permission marketing

Mainly used in business to business market

STP Process
Market Segmentation
1. Identify bases for segmenting the market 2. Develop segment profiles

Target Marketing
3. Develop measures of segment attractiveness 4. Select target segments

Positioning
5. Develop positioning for target segments 6. Develop a marketing mix for each segment
8

11/18/2013

Segmentation
Dividing a market into distinct groups with distinct needs, characteristics, or behaviours
A segment is a bunch of people or organizations who buy the same way and want the same things
For example, marketers of soft drinks do not necessarily concern themselves with the age or gender of their customers, but rather with how age and gender relate to customers needs, attitudes, preferences, and lifestyles.
9

Segmentation Bases
Demographic Geographic

Psychographic

Behavioral

11

11/18/2013

12

Behavioral Segmentation
Behavioral segmentation is the most powerful approach because it uses actual consumer behavior or product usage to make distinctions among market segments. Typically, these distinctions are tied to the reasons that customers buy and use products. A common use of behavioral segmentation is to group consumers based on their extent of product usageheavy, medium, and light users. One of the best uses of behavioral segmentation is to create market segments based on specific consumer benefits.

13

11/18/2013

Berri Ltd Segmentation Revolution

Total Juice Chilled Long Life

Juice

Drink

Plastic

Canned

Combi

Drinks

Original Trade segmentation based on manufacturing process. No consumer behavior recognised, limited NPD.

Developed consumer needs states / usage occasions to unlock innovation and align to consumer behavior.

14

Benefit segmentation applied Snack Food Market

15

11/18/2013

Industrial Segmentation Variables

Demographic
i.e. Industry, Company Size, Location

Operating Variables
i.e. Technology, User Status, Customer Capabilities

Purchasing Approaches
i.e. Purchasing Function, Existing Relationships, Purchasing Criteria

Situational Factors
i.e. Degree of Urgency, Specific Applications

Personal Characteristics
i.e. Similarity, Risk Position, Loyalty

16

Target Market

17

11/18/2013

Effective Segmentation
Measurable
Size, purchasing power, profiles of segments can be measured Segments can be effectively reached and served Segments are large or profitable enough to serve Segments must respond differently to different market mix elements Effective programs can be designed to attract and serve the segments

Accessible Substantial

Differential

Actionable

18

Target Market
A set of buyers sharing common needs or characteristics that a company decides to serve.
Market segmentation is about the market. The consumers separate themselves into clusters and it is your job to record and identify these groups. But targeting is about your product or brand. Now you get to work out which of these segments you want to go after.
19

11/18/2013

Who should we sell to?

20
20

Target Market Selection

21

10

11/18/2013

Target Market Selection

Single-segment concentration Selective specialization Product specialization

M1 M2 M3 P1 P2 P3 P1 P2 P3

M1 M2 M3 P1 P2 P3
Full market coverage

M1 M2 M3

Market specialization

M1 M2 M3 P1 P2 P3 P1 P2 P3

M1 M2 M3
P = Product M = Market
23

24
24

11

11/18/2013

Unilever sells 8 Brands of Soap 25 in India

25

A Classification of Residential Neighbourhoods (ACORN)

Thriving e.g. Wealthy achievers, suburban areas e.g. Affluent greys, rural communities e.g. Affluent executives, family areas e.g. Well-off workers, family areas e.g. Affluent urbanites, town and city areas e.g. Better-off executives, inner-city areas e.g. Comfortable middle agers, mature home-owning areas e.g. New homeowners, mature communities e.g. Council estate residents, better-off homes e.g. Council estate residents, high unemployment e.g. Multi-ethnic low-income areas

Expanding Rising

Settling

Aspiring

Striving

26

12

11/18/2013

Market Segmentation & Targeting Why?

Develop sharper buyer profile Design products to meet specific needs More relevant brand personality Better targeting of communications More responsive promotions Effective & efficient channel strategy Optimal pricing Improved relationship management

27

Session Take Away

Linking Market Need to a Marketing Program

28

13

11/18/2013

Next to next Session

Readings Harvard Business Review & others
Segmentation Targeting

Next week case study on Ontela PicDeck

29

14