Strategic Marketing

Course Credit:02

Course Coordinator: Dr. Ashish Gupta

Email: ashishgupta@iift.edu
 Session Plan- 5 & 6
Market Segmentation, Market Orientation
and Organizational Learning
- Segmentation and Market- Driven Strategy
- Selecting the Segmentation Strategy
- Market Orientation and Organizational Learning
- Marketing Research Information
- Marketing Intelligence and Knowledge management

2-1
 Market Segmentation
People or organizations with needs or wants and the
Market ability and willingness to buy.

Market A subgroup of people or organizations sharing one or

more characteristics that cause them to have similar
Segment product needs.

Market The process of dividing a market into meaningful,

Segmentation relatively similar, identifiable segments or groups.

For Ex- https://www.tatasteel.com/corporate/our-value-chain/key-market-

segments/
Criteria for Segmentation

Segment must be large enough to warrant a special

Substantiality
marketing mix.

Identifiability Segments must be identifiable and their size

and Measurability measurable.

Members of targeted segments must be reachable

Accessibility
with marketing mix.

Unless segment responds to a marketing mix

Responsiveness
differently, no separate treatment is needed.
Bases for Consumer Segmentation

Geography

Demographics

Psychographics

Behaviouaral

Usage Rate
Bases for Segmenting
Business Markets

 Demographic
 Operating variables
 Purchasing approaches
 Situational factors
 Personal characteristics
Levels of Market Segmentation
 Market-Driven Strategy and
Segmentation

Market segmentation, value

opportunities and new market space

Market targeting and strategic

positioning
 Segmentation in
the Market-Driven Strategy Process
2 - 10
Market Segmentation, Value Opportunities
and New Market Space

Market segmentation - Placing the buyers in a

product-market into subgroups
Examining specific market segments helps to
identify how to:
 Attain a closer match between buyers’ value
preferences and the organization’s capabilities
 Compare the organization’s strengths (and
weaknesses) to the key competitors in each
segment
 Market Targeting
Market targeting consists of:
 Evaluating and selecting one or
more segments whose value
requirements provide a good
match with the organization’s
capabilities
 Undifferentiated Strategy

Single
Marketing
Mix

Organization
Target Market
 Differentiated Strategy

Marketing Mix 1

Marketing Mix 2
Organization

Target Market
 Concentrated Strategy

Single
Marketing
Mix

Organization
Target Market
Activities and Decisions in
Market Segmentation
Defining the Market to be
Segmented

Important consideration in defining

market to be segmented is:
 Estimating variation in buyers’
needs and requirements at
different product-market levels
 Identifying the types of buyers
included in the market
 Market Segmentation
in the Health and Beauty Supplies Market
Identifying Market Segments

Segmentation variables
Characteristics of people and
organizations
Product use situation segmentation
Buyers’ needs and preferences
Purchase behavior
 Segmentation Variables

One or more variables may be used to

divide the product-market into
segments
 Demographic and psychographic
 Use situation
 Needs and preferences
 Purchase-behavior
 Characteristics of People and
Organizations

Consumer markets - Characteristics of

people fall into two major categories:
 Geographic and demographic
 Psychographic
Organizational segmentation is aided by
examining:
 The extent of market concentration
 The degree of product customization
Product Use Situation Segmentation

Markets can be segmented based on

how the product is used
Needs and preferences vary
according to different use situations
Mass customization offers a
promising means of responding to
different use situations at
competitive prices
 Buyers’ Needs and Preferences

Needs and preferences specific to

products and brands can be used
as segmentation bases and
segment descriptors
 For example:
Loyalty status
Benefits sought
Proneness to make a deal
Buyers’ Needs and Preferences

Consumer needs
 Physiological needs
 Need for safety
 Need for relationships with other
people
 Personal satisfaction needs
Buyers’ Needs and Preferences

Understanding the nature and

intensity of needs is important in:
 Determining how well a particular
brand may satisfy the need
 Indicating what change(s) in the
brand may be necessary to provide
a better solution to the buyer’s
needs
Buyers’ Needs and Preferences
Attitudes
 Enduring systems of favorable or
unfavorable evaluations about brands
 Reflect the buyer’s overall liking or
preference for a brand
 May develop from:
Personal experience
Interactions with other buyers
Marketing efforts
Buyers’ Needs and Preferences

Perceptions
 Process by which an individual
selects, organizes, and interprets
information inputs to create a
meaningful picture of the world
 People perceive things differently
 Purchase Behavior
Consumption variables useful in segmenting
consumer and business markets
Level of product use may not necessarily
identify the best value opportunities
Useful to classify buying decisions according
to:
 Their characteristics
 Products to which they apply
 Marketing strategy implications of each type
of purchase behavior
 Consumer Involvement in Purchase
Decisions

Source: Eric N. Berkowitz, Roger A. Kerin, Steven W. Hartley, and William Rudelius, Marketing, 5th ed. (Chicago: Richard D. Irwin, 1997), 156. Copyright © The
McGraw- Hill Companies. Used with permission.
 Illustrative
Segmentation Variables

Source: Eric N. Berkowitz, Steven W. Hartley, William Rudelius, and Roger A. Kerin, Marketing, 7th ed. (Burr Ridge, IL: McGraw-Hill/Irwin, 2003).
 Forming Market Segments
Requirements for segmentation
Approaches to segment identification
Customer group identification
Forming groups based on response
differences
Requirements for Segmentation

Useful criteria for evaluating a potential

segmentation strategy:
 Response differences
 Identifiable segments
 Actionable segments
 Cost/benefits of segmentation
 Stability over time
 Product differentiation and market
segmentation
Approaches to Segment
Identification
Customer Group Identification

Necessary to select one or more of

the characteristics of people or
organizations as the basis of
segmentation
Segments are formed by:
 Management judgment and
experience
 Supporting statistical analyses
 Management Insight and Available
Information

Management’s knowledge of customer

needs is a useful guide to segmentation
Business segment variables include:
 Type of industry
 Size of purchase
 Product application
 Data Mining for Segmentation
Useful in consumer market segmentation
 Databases are organized by geography
and buyers’ descriptive characteristics
 Can be used to identify:
Customer groups
Design effective marketing programs
Improve the effectiveness of existing
programs
 Forming Groups Based on
Response Differences
Alternative to selecting customer groups
based on descriptive characteristics:
 Identify groups of buyers by using
response differences to form the
segments
Segments vary in responsiveness based
on:
 Relative price
 Relative service
 Forming Groups Based on Response
Differences

Cluster analysis
 Groups people according to the
similarity of their answers to
questions
Perceptual maps
 Uses consumer research data to
construct perceptual maps of buyers’
perceptions of products and brands
 Strategic Positioning
Positioning strategy - Combination of actions
management takes to meet needs and wants
of each market target
 Consists of:
Product(s) and supporting services
Distribution
Pricing
Promotion components
Consumer Perception Mapping
Illustration
 Positioning Issues
Choosing “what to position”: The criteria to
promote could relate to products, services,
the 4Ps, company image and reputation, and
the people.

As a strategy, positioning can be based on:

i) perceived benefits, characteristics or
image.
ii) competition
iii)a combination of both (i) and (ii).
 Positioning Issues
“How many criteria” to use for positioning: The
marketer has the option to use one or few of the
criteria to position himself. When he uses just
one criterion, he makes use of what is called a
Unique Selling Proposition. He may also decide
to position on more than one criterion and may
position on a few features or attributes or
benefits.
 Positioning Issues
What “qualities” should the criteria for
positioning possess?:
The criteria for positioning should be:
- Important: “value” in the eyes of the
segment;
For Ex- Sony color TVs: known for
picture quality and sound effect.
 Product Positioning
The product positioning may be done on
specific bases / features / characteristics:
i) Product Attributes: Example: LG Golden Eye: Auto contrast and
Brightness control.
ii) Benefits, Problem Solutions and Basic Needs: Examples: Pepsodent
(decay prevention), Close-Up (Fresh breath).
iii) Quality: Example: Sony picture quality and sound
iv) Product User: Examples: Parker (Amitabh Bachchan), Reid and Taylor
(Executive/ Lifestyle), Johnson and Johnson (Babies)
v) Product Usage: Example: Krack cream
vi) Specific use: Example: Greeting cards for every occasion
vii) Services: Example: Maruti Service Station all over India
viii) Price: Example: Big Bazaar: Sabse Saste Paanch Din
ix) Distribution: Example: Urban clap (direct selling: Servce at Home)
x) Against other Products (Competitors): Example: Savlon vs Dettol;
Savlon Jalta nahin.
Finer Segmentation Strategies

Logic of finer segments

Finer segmentation strategies
 Logic of Finer Segments
Factors add up to the benefits of
considering very small segments
 The capabilities of companies to offer
cost effective, customized offerings
 The desires of buyers for highly
customized products
 The organizational advantages of close
customer relationships
 Finer Segmentation Strategies

• Seeks to identify narrowly defined segments using one or

more of the previously discussed segmentation variables

• Provides customized products at prices not much higher

than mass-produced items

• Intended to offer buyers opportunities to vary their

choices in contrast to making unique choices
 Finer Segmentation Strategies

Finer segmentation issues

 How much variety should be offered to
buyers?
 Will too much variety have negative effects
on buyers?
 Is it possible to increase buyers’ desire for
variety, creating a competitive advantage?
 What processes should be used to learn
about customer preferences?
Selecting the Segmentation
Strategy

Deciding how to segment

Strategic analysis of market segments
Deciding How to Segment

Choice of a segmentation
method depends on:
 The maturity of market
 The competitive structure
 The organization’s experience
in the market
Strategic Analysis of Market Segments

Each market segment of interest needs to be

studied to determine its potential
attractiveness as a market target
Major areas of analysis:
 Customers
 Competitors
 Positioning strategy
 Financial and market attractiveness
 Segment “Fit” and
Implementation

Important aspect of evaluating

segment attractiveness
 How well the segments match
company capabilities
 The ability to implement
marketing strategies around those
segments
Thank You