MARKET SEGMENTATION

Agenda
Barco Presentation and discussion BIO-BREAK What is market segmentation? Segmentation Strategy Alternatives BIO-BREAK Basis for segmentation Market Segment evaluation

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Market segmentation What is it?
Divide a market into separate groups
Tailor a marketing strategy for each group Demand Differential

Why segment?
Identifies opportunities and needs. Allows firm to focus on specific needs. Improves marketing mix for each segment. Allows small firm to exist.

Segmentation Developmental Stages

Mass Markets Product Differentiation Target Marketing

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Buyer Preference Patterns

descriptive, not normative

homogeneous preference diffused preference clustered preference

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creaminess

Homogeneous Preference
-no natural segments -all buyers have same preference

sweetness

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creaminess

Diffused Preference
-no pattern (or poor research) -take center position

sweetness

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Clustered Preference
creaminess

-natural segments -increases as number of competitors increases

sweetness

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Market Coverage Strategies Undifferentiated (unsegmented) marketing strategy

market aggregation one strategy for entire market opposite of segmentation

Examples of firms who could benefit from this strategy?

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Market Coverage Strategies
Differentiated (segmented) marketing
different marketing strategies for multiple segments increased penetration into each segment higher sales and higher costs

Examples of firms who could benefit from this strategy?

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Market Coverage Strategies
Concentrated (niche)marketing strategy
target a small market go after a large share small firm survival strategy

Examples of firms who could benefit from this strategy?

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Surrogate (or segmentation) Variables
Why surrogate variables?

Customer Characteristics
State of Being
Demographic variables Geographic

State of mind
Psychographics Perceptions, Preferences

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Using Preference to Segment the Market

Preference Mapping Brands

Can multiple maps be present?

Do they meet the criteria for segmentation?

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Surrogate (or segmentation) Variables
Customer Response
Product Usage
Volume Loyalty Market Factors

Benefit Received

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1. 2. 3. 4. 5. 6.

7.

Determine Demand Patterns Establish Possible Bases of Segmentation Identify Potential Market Segments Choose a Target Market Approach Select the Target Market(s) Position the Firms Offering in Relation to the Competition Develop the Appropriate Marketing Mix(es)

Analyze Consumer Demand Target the Market Develop the Marketing Strategy

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Evaluation of Segmenting Variable
Measureable Stable over time Produce behavioral differences among the groups

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Evaluation of Market Segments

Sizeable
How Many? How Much Money? Propensity to Buy?

Reachable
by your marketing strategy

Demonstrate Behavior Differences

among the groups

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1 to 1 (Customized) Marketing
Logical end of segmentation Focus Relationship with buyer rather than on product development Customer Satisfaction Customization See Amazon for example

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Wrap-up
We have discussed market segmentation Key Takeaways

Focus on behavior Be able to judge if you have a good segmentation variable Be able to choose a market segment

Next Time
The Kodak Case Market Segmentation Behavioral Inputs into Marketing Management Please Read Chapters 4 and 5