Market Segementation

Market Segementation

1. The STP Process

   • Transaction before Relational now
   • Market Segmentation
     • Target Market
       • The purpose of evaluating the attractiveness of the differing market segments identified in this stage is to evaluate market potential in each segment
       • Brand positioning
         • Physical Attributes
           • Functional and capability a brand offers
             • intangible and intangible
         • Brand communication
           • How consumers perceive the brand
             • Your product must do it says
             • Functional
               • Product features, price quality and use
             • Expressive
               • user, benefit and heritage
         • Perceptual mapping
           • Geometric comparison of how competing products are perceived (Sinclair and Stalling 1990)
             • Further apart the positions the greater the opportunity for new brands to join
         • Repositioning
           • Changing the tangible attributes and communicate to same market
             • Regent Inns moved from foods to drinks
           • Change communication
             • Vodaphone Make the most of now to Power to you (Bussey, 2009)
           • Change target market but deliever same product
             • Lucozade again
           • Change product and target Market
         • Six Approaches to Positioning ( Aaker 1982)
           • Attributes
             • BMW Handling and engineering efficiency
               • Ultimate driving machine
           • Price /Quality
             • Sears efforts to create a more upbeat fashion image was thought to have hurt their "value" position and caused some share declines. 1 Sears' recent five-year plan details a firm return to a positioning as a family, middle-class store offering top value. Sears is just one company that has faced the very tricky positioning task of retaining the image of low price and upgrading their quality image. There is always the risk that the quality message will blunt the basic "low-price," "value" position.
           • Use of product
             • Campbell's Soup for many years was positioned for use at lunch time and advertised extensively over noontime radio.
           • Product user
             • Revlon's Charlie cosmetic line has been positioned by associating it with a specific lifestyle profile.
               • Johnson & Johnson saw market share move from 3 percent to 14 percent when they repositioned their shampoo from a product used for babies to one used by people who wash their hair frequently and therefore need a mild shampoo.
           • Product class
             • For example, Maxim freeze-dried coffee needed to position itself with respect to regular and instant coffee.
           • Respect to competition
             • Avis "We're number two, so we try harder" campaign. The strategy was to position Avis with Hertz as a major car rental agency and away from National, which at the time was a close third to Avis.
           • Positioning Strategy(Aaker)
             • Step 1 : Identify Customer
               • A Tab buyer could be asked what brand would have purchased had Tab been out of stock. The resulting analysis will identify the primary and secondary groups of competitive products.
               • Step 2:Determine How the Competitors are Perceived and Evaluated
                 • The task is to identify a list of product associations and select those that are most useful and relevant in describing brand images
                 • Step 3:Competitors positions
                   • Step 4 Analysing customers
                     • basic understanding of the customer and how the market is segmented will help in selecting a positioning strategy. How is the market segmented? What role does the product class play in the customer's lifestyle? What really motivates the customer?
                       • for Betty Crocker by the Needham, Harper & Steers advertising agency, s They conducted research involving more than 3,000 women, and found that Betty Crocker was viewed as a company that is: honest and dependable friendly and concerned about consumers a specialist in baked goods but out of date, old, and traditional a manufacturer of "old standby" products not particularly contemporary
                       • Benefit segmentation
                     • Step 5 Making positioning decisions
                   • are positioned with respect to the relevant product associations and with respect to each other.
       • According to Kotler (1984) all segments must be (DAMP)
         • Distinct
           • segment should be the largest possible homogeneous group of buyers that it pays to go after with a specially designed marketing program" (Beane and ennis 1987)
         • Accessible
           • If they are not, how can you communicate the relative benefits of your product to that segment? (Beane and ennis 1987)
         • Measurable
           • must be easy to measure in order to determine its size, location and content. It might prove quite difficult to measure accurately the size of the Hispanic, illegal alien market for example. (Beane and ennis 1987)
         • Profitable
       • Other approachs
         • Rating Approach (Size profitability competitive intensity of a segement)
         • Segment stability and how it fits the mission
       • Targeting Approaches
         • Undifferentiated approach
           • One mass market
             • Olympics
               • disadvantage Very expensive
         • Differentiated approach
           • Several markets segments to target
             • Hewlett Packard Targeted home office uses business and government departments
               • Disadvantage is a loss of economy of scale
         • Concentrated marketing strategy
           • Few Market segments
             • Organisations with limited resources use this
               • E.g Jordan cereal company
         • Customized targeting strategy
           • Strategy for each customer rather than market
             • e.g. Manufacturer of industrial electronics customize its product for Nissan Unileveler and Levi
     • Breakdown method
       • Market consist of customers that are the same so identify groups that share differences
     • Build up method
       • Approach that considers a market to to consist of customers that are different so you would want to find similarities
         • General analysis on similarities (Freytag and Clarke 2001)
     • Consumer Criteria
       • Behavioural
         • Product Usage
           • Heavy users of public transport might be targeted different to heavy users of private vehicles
         • Transaction and Purchase
           • EPOS
         • Media Usage
           • Heavy and light readership leads to different appeals Potter (1988)
       • Psychological
         • Benefits Sought
           • Passengers differentiated between first class business class and economy class
       • Profile
         • Demographic
           • YDC launched yoghurt to appeal for young people and parents
           • as more and more brands became national, the second major system of segmentation—demographic segmentation—became popular. Under this philosophy(Smith 1956) targets were defined as younger people, men, or families with children
         • Lifecycle
           • Supermarkets targeted singles with high disposable incomes
             • Benefit segmentation (1968)
               • Consuming a given product are the basic reasons for the existence of true market segments
                 • Experience with this approach has shown that benefits sought by consumers determine their behaviour much more accurately
                   • Toothphase
                     • decay prevention, one with brightness of teeth, one with the fiavor and appearance of the product, and one with price.
         • Geographic
           • British with turkey swedes with fish
           • Geodemographic
             • Socio-economic data
           • the first type to exist was geographic segmentation. Small manufacturers who wished to limit their investments, or whose distribution channels were not large enough to cover the entire country, segmented the U. S. market, in effect, by selling their products only in certain areas(Smith 1956)
       • Contact Data
     • Examples
       • ; the cigarette and automobile industries (Smith 1956)
       • . Recent introduction of a refrigerator with no storage compartment for frozen foods was in response to the distinguishable preferences of the segment of the refrigerator market made up of home freezer owners whose frozen food storage needs had already been met. (Smith 1956)
     • consists of viewing a heterogeneous market (one characterized by divergent demand) as a number of smaller homogeneous markets in response to differing product preferences among important market segments. (Smith 1956)
       • To look for new product opportunities or areas which may be receptive to current product repositioning
   • Benefiits
     • Enhancing a company's competitive position
       • Coke gender
     • Examining and identifying market growth opportunities
       • Lucozade changed from ill to soft drink
     • Effective and efficient matching of company resources
       • Asda uses data informed segmentation to target consumers and also offer rewards

2. Segmentation in Business Markets

   • Organizational Characteristics
     • Size
       • Helps identify design delivery usage rate or order size
     • Location
       • Potential customers in one geographical area are different in another area
     • Industry type
       • Used to identify and categorize all types of businesses
   • Customer Characteristics
     • Decision making Unit
       • Factors include policy factors purchasing strategies
     • Choice Criteria
       • Accountancy practice may segment its clients on the basis of that seek compliance type accounting products
         • Audits and tax work
         • companies that need accounting services
     • Purchase Situation
       • Structure of the buying organisations purchasing procedures
       • Type of purchasing situation present
         • First time purcahse
         • Repurchase or straight re boy
         • Early or late purchases

3. Limitations of Market Segmentation

   • Consumers needs not fully met
     • People seen as a group
       • Relationship marketing software exists allowing companies to develop approaches for indidvual customers
     • Not enough info that linked m.s to competitive advantage (Hunt and Arnett 2004)
       • Does not stress the need to segment on the basis of differentiating the offering from competition

4. History of why businesses use M.S

   • Happened due to Decrease in size of the minimum efficient producing or manufacturing unit required in some product areas (Smith 1956)
     • Ascendancy of product competition. An expanded array of goods and services is competing for the consumers dollar
       • Markets have been developed to the point where additional advertising and selling expenditures are yielding diminishing returns

5. Segmentation methods

   • Benefit segmentation
     • Approach is to measure consumer value systems in detail together with what consumers think about the brand(Haley 1968)
       • Toothphase example