Market Segmentation

Market Segmentation - Dividing consumers into groups according to 1)response to marketing actions 2)identity, needs and characteristics

Why segment? 1)To understand consumers better 2) To respond faster and better to consumer's needs, using different strategies for different segments->More productive.

3 basic market preference patterns 1) Homogeneous preference-For mature products, use mass marketing 2) Diffused preference-Use customised marketing. 3)Clustered preference-Use differentiated marketing

Identification Variables (Consumers)
1)Geographic - Places of work and study and stay, can be micro or macro.
2)Demographic - Gender, age, income, education, race, religion, social class, family life cycle, household size, household structure, nationality(within a country)
3)Psychographics - Lifestyle, personality(introvert, extrovert), events(funeral, marriage)

Identification Variables (Business)
1)Industry(different industries need products for different uses)
2)Size
3)Ownership(Owners from different countries buy differently)
4)Technology - Ability to service machineries after buying or need services
5)Vertical scope - Areas which they demand from company, from transport to logistics
6)Organisation of purchasing department - Centralised or de-centralised

Response Variables
1)Usage - Non, occasional, light(effective marketing), heavy(Bulk discounts)
2)Readiness - Awareness, knowledge, interest, trial, adoption
3)Loyalty - None, switching, absolute (80/20 rule - 80% of sales from 20% of consumers)
4)Benefits sought/Product preference - Prestige or basic benefit / Different products for same needs.
5)Occasion for usage
6)Urgency for use
7)Price sensitivity
8)Openness to advertising messages
9)Method of usage
10)Place of purchase/usage

Search for distinct groups, use less variables, usually choose the best one as more variables will cause losing of groups.

Choosing Segment
1)Favourable response - choose one which I can provide what they want
2)Size and growth - A growing big size is desired to ensure profitability
3)Competitive intensity - A fast growing segment is attractive, may face lots of competition
4)Accessibility to segment/capability - Resources to reach the segment, hard to open a new distributing channel in a new market
5)Opportunities for differentiation - A firmer holding if able to differentiate favourably from competitors

Differentiaing - 1) Areas which are important to target segment 2) Areas I am strong in compared to competitors

Product Differentiation Examples
1)Reliability
2)Innovativeness
3)Style of products
4)Ease of use
5)Quality
6)Taste

Service Differentiation Examples
1)Responsiveness
2)Courtesy and human touch
3)Competency
4)Styling (hairdresser)
5)Trust(Banker)
6)Value(Airlines)

Positioning - 1)Provide a frame of reference for products in the consumer's mind 2)Represent a point of differentiation, focus on benefits to hightlight to consumers

Examples
1)Attributes
2)Benefits
3)User
4)Application/usage occasion
5)Product category - Position new products against other categories
6)Competitor - Position against competitors