Download Market Segmentation

Market Segmentation
Definition
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Market segmentation is the process of
grouping a market into smaller
subgroups.
These smaller sub groups is a clustering of
people with similar needs
Benefits
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Distinguish one group from the other
In-depth study of the characteristics of the
buyer
Can create a fine tuned product / service
offering
Can price the product appropriately
Select the best distribution &
communications channels
Makes marketing effort more efficient &
economical
Methods of Market Segmentation
Geographic Segmentation
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The brand can operate in 1 or more
geographical areas or in all
But it pays attention to local variation
Demographic Segmentation
Most popular for distinguishing customer groups
 As consumer wants, preferences & usage rates
are often associated with this variable
EG : Eddie Bauer clothing retailer tested a new
electronic
poster window display
A 50 inch plasma flat screen TV was used
EG. Morning display: older models
Evening display: younger models
9 weeks later sales at one location had risen by
59% from the previous 9 months
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Demographic Segmentation
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Age & life cycle are tricky variables
Age is a poor predictor of the timings of life
events, a person’s interest, status,needs,etc
Eg. Ford Motors designed its Mustang to
appeal to young people who wanted a
inexpensive sports car. But Ford found out
that Mustang was bought by older buyers.
It’s target market was not the chronologically
young but the psychologically young buyer
Demographic Segmentation
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Gender : Men & women have different
attitudinal & behavioral orientation
Women tend to take in more of the data in
their immediate environment & are more
emotional
Men focus on things that will help them
attain a goal, more rational
Demographic Segmentation
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Clothing, hairstyling, cosmetics & magazines apply
gender differentiation
EG. Virginia Slims cigarettes are addressed to
women. They have appropriate flavor, packaging &
advertising cues to reinforce female image
Automobile manufacturers are designing features
to appeal to women car owners but they stop short
of advertising it as a woman’s car
Demographic Segmentation
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Income : Automobiles, clothing, cosmetics &
travel
Income does not predict the best customer
Economical cars are not bought by the really
poor but by those who think of themselves
as poor relative to their status aspirations
Demographic Segmentation
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Generation: Each generation is influenced by
the times in which it grows up – music,
movies, politics, etc
Demographers call these groups cohorts
Members of a cohort share the same major
experiences, similar outlooks & values
7 groups distinguished by Meredith Schewe
& Karlovich -
Demographic Segmentation
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The Depression Cohort – Shaped by hard times & the
great depression, aged between 79-88 in 2000. This
cohort lacked jobs when they were coming of age,
financial security is one of their core values
The World War 2 Cohort – Aged between 73-78 in 2000
& shaped by the World War 2. This cohort focused on
defeating a common enemy, they are team oriented &
patriotic
The Post War Cohort – Shaped by optimism &
prosperity of the post war era, aged between 55-72 in
2000. Expects stability & prosperous times to continue
Leading – Edge Baby Boomer Cohort – Shaped by the
assassins of Kennedy, Martin Luther King & the
Vietnam war, aged between 46-54 in 2000. Champions
causes (civil rights, women’s right) yet is hedonistic &
self indulgent
Demographic Segmentation
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6.
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Trailing Edge Baby Boomer Cohort – Shaped by energy
crisis, aged between 35-45 years. Less optimistic than
the leading edge baby boomers
Generation X : Shaped by bad economic times, AIDS
awareness, aged between 24-34 in 2000. Puts quality
of personal life ahead of work life, not team players &
cynical about advertising
Generation Y : Shaped by economic prosperity & the
Internet, aged 23 & under in 2000. More idealistic &
less cynical than Gen Xers
Demographic Segmentation
Schewe & Karlovich developed a framework called The
Lifestage Analytic Matrix that combines life stages,
physiographic, emotional effects & socio economics to
analyze a segment/individual
2 individuals from the same cohort may differ in :
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Life stages (getting married, getting divorced)
Physiographics (coping with hair loss, menopause)
Emotional effects (nostalgia from the past, experiences instead
of things)
Socioeconomics – (losing a job, receiving an inheritance)
Use of this analysis leads to efficient targeting &
messages
Psychographic Segmentation
Buyers are divided into different groups based on
lifestyle / personality / values
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Buyers from the same demographic group can exhibit
different psychographic profiles
Lifestyle : People differ in attitudes, interests & activities &
these affect goods & services
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Shaped by whether consumers are time constrained or
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money constrained
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Time constrained consumers are prone to multi task –
doing 2 things at a time. Make calls while eating, pay
others to perform tasks because time is more important
than money
Companies aiming to serve this group need to create
convenient services eg. ICICI bank, Bank of Baroda -8
to 8 working
Psychographic Segmentation
Companies aiming to serve money constrained
individuals need to create lower cost products &
services eg. Maruti 800 & Alto entry level cars, Tata
Motors planning to make a car in Rs 1 Lakh
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Cosmetics, alcoholic beverages & furniture segment on
lifestyle
Personality : Marketers endow their products with a
brand personality that corresponds to a target
consumer personality
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Exciting – Nike
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Beauty – Lux
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Freshness – Liril
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Rugged, rebellious, youthful – Levi’s
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Product features, services & image reflect the product’s
personality
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Psychographic Segmentation
Companies aiming to serve money constrained
individuals need to create lower cost products &
services eg. Maruti 800 & Alto entry level cars, Tata
Motors planning to make a car in Rs 1 Lakh
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Cosmetics, alcoholic beverages & furniture segment
on lifestyle
Personality : Marketers endow their products with a
brand personality that corresponds to a target
consumer personality
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Exciting – Nike
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Beauty – Lux
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Freshness – Liril
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Rugged, rebellious, youthful – Levi’s
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Product features, services & image reflect the
product’s personality
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Psychographic Segmentation
Values : Segment by core values, the belief systems that
underlie consumer attitudes & behavior
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6 global value segments though they differ in degree
country wise
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Strivers : More likely to be men than women, place high
emphasis on material & professional goals . 1 in 3 people in
Asia is a Striver
Devout : More women than men, tradition & duty are very
important to them.
Altruists: Interested in social issues & welfare of the society.
More women than men with an average age of 44 years
Intimates :Value close personal relationships & family above
all.Both men & women
Fun seekers : Young group with a male female ratio of 54 to 46
Creative : Strong interest in education, knowledge &
technology
Techniques
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Popularly known as “The Value & Lifestyle Segmentation”
Used widely in India
It helps to :
Identify whom to target and find niche markets much more
easily.
Locate where concentrations of your target group lives.
Gain insight into why the target group acts the way it does.
Improve and introduce products that speak to customers' values.
Target marketing and advertising campaigns much more
effectively and much more accurately.
Position products much more accurately in the marketplace.
VALS – The Indian Context
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The Self-Driven Materialists : People who are ambitious and
practical.
Striving to achieve success in terms of materialistic
possessions as well as social recognition. Money is more
important to them than job satisfaction and success to them is
defined in terms of money
They think logically and rationalize every action in the light of
the manner that they are benefited from it.
They like to spend Sundays with their family and a movie with
the family is their idea of entertainment. They watch Hindi
movies and like to listen to Hindi pop.
These are the people who would be receptive to advertisements
aired during commercial breaks of Hindi movies, before and after
Hindi movie related programs and even commercials appearing
in Hindi movies. Newspapers do not influence their behavior.
They idolize people in higher social circles and are constantly
trying to emulate them, hence celebrity endorsements of
products appeal to them. As consumer they are reluctant to be
extravagant and do not indulge themselves..
VALS – The Indian Context
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The Independent Explorer : Fiercely independent people,
broadminded, loyalists, not excessively ambitious, and
unorthodox in their behavior.
Not materialistic in their approach to life they equate success with
job satisfaction.
Their general approach to life is slightly casual and relaxed..
Generally non-conformists they constantly try to form their own
opinions on issues.
This trait is manifested in their buying behavior. Family and friends
do not influence the choice of brands they purchase and celebrity
endorsements too do not make an impact on them. They prefer
newspapers to television as sources of information. They are more
likely to watch television channels like Star World and Star Movies.
They are receptive to new ideas and do not mind experimenting
or trying out a new thing. They believe that branded products offer
more benefits than unbranded products. They prefer stability but
also crave for some amount of excitement. They have courage of
conviction, are socially responsible, environmentally conscious
and have a forgiving nature. They are expressive. Progressive
people in tune with the times, these consumers are not averse to
embracing the western culture.
VALS – The Indian Context
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The Passive Traditionalists :Epitomize tradition and
conservatism Indian values as well as belief in the Indian
system is strongly embedded in these people.
They prefer job security to progress in career or job
satisfaction and are averse to risk. They are complacent
and do not make an effort to change the way things are at
present.
These people prefer to work in groups and do not like to
take responsibility. Not adaptive of new technology, people of
this group are suspicious of new products.
They are family oriented and most of their leisure activities
are centered on the home. These people do not generally form
any strong opinions themselves and prefer to go with the flow.
Newspapers influence their opinions and they believe more in
regional language newspapers and entertainment in
regional languages appeals to them. As a consumer they
prefer to buy brands that their families bought and are not
open to purchasing any foreign brands ( nationalists).
Not experimentative, they generally plan their purchases and
do not indulge in impulse buying.
VALS – The Indian Context
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The Enthusiastic Experimenters : Individuals belonging to this
group are enthusiastic in nature.
These people are ardent followers of fashion, trends and fad (in
vogue). They are the consumers who are ever ready to try out new
brands and products. (experimentative)
These are the kind of people who would shop in supermarkets or
make their purchases via teleshopping/E-commerce. They are more
likely to be seen at a McDonalds or a Pizza Hut rather than at a
roadside pav-bhaaji stall.
Impulsive people, they like to indulge themselves through
excessive buying-purchases usually comprising of designer brand
names. Being financially better off, their needs are mainly for social
recognition as well as social acceptance.
They try to satisfy these needs through membership of exclusive
clubs. Image therefore is important to them not as an expression of
power or in materialistic terms, but as an expression of taste and
sophistication.
They are focused on meeting their needs and it is these ends that
matter more than the means to arrive there.
VALS – The Indian Context
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The Opinionated Realists : These people are self-centered and
consider no one else but themselves.
They are loners, very uncomfortable in groups. (indifferent)
They are broadminded only when it concerns issues, which don’t
have an immediate effect on their lives as individuals.
They believe in fending for themselves and are stubborn regarding
certain issues.
They feel that newspapers are more credible than Television and go
through advertisements in newspapers consciously.
They watch television without any particular preference. For these
people, commercials during programs are a welcome break. (not
experimentative) They are not quick to accept new media/
product/ ideas. They do not experiment much but believe that
branded products do offer better quality than unbranded ones.
Education is of low priority.
They believe more in hard work to achieve their goals.
VALS – The Indian Context
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The Mature Sensibles : This group believes in traditional values
and systems like joint families and are religious though they do not
follow rites and rituals regularly.
They are polite well-mannered people who prefer a formal work
environment.
They have a high degree of respect for institutions of authority
and social decorum.
They stick to their morals and principles like equality and honesty.
They are not fast to accept new ideas and look for the finer things
in life like a 'world of beauty'.
As consumers they are not easily influenced and as a result are not
reciprocative to discounts and sales.
They are very cautious and logical in their approach. They are not
biased towards products that are branded, insist on value for
money, and yet are quality conscious.
They appreciate the value of education. Commercials generally do
not appeal to them. Radio is still of relevance to them
Behavioral Segmentation
Based on knowledge of, attitude towards, use of,
response to product
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Rated to be the best starting points for market
segmentation
Occasions :Buyers can be differentiated according to the
occasion when they need, use, purchase a product
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Occasions can be used to expand the market
Eg. Cadbury chocolates attempting to replace traditional
mithai on auspicious days
Benefits : Classified according to the benefit they seek
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People vary in seeking the benefits from the same
product
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Mobil found out that car drivers stopping for gas seek different
benefits
Behavioral Segmentation
Mobil identified 5 different benefit segments :
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Road Warriors – Premium products & quality service (16%)
Generation F – Fast fuel, fast service & fast food (27%)
True Blues – Branded products & reliable services (16%)
Home Bodies – Convenience (21%)
Price Shoppers –Low price (20%)
Though gasoline is a commodity product, price
shoppers were only 20%.
Mobil decided to roll out Friendly Serve : Cleaner
property, bathrooms, better lighting, well stocked stores
& friendly personnel's
Mobil charged 2 cents more per gallon than its
competitors but its sales increased by 20-25%
Behavioral Segmentation
User Status : segmented into non users, ex-users,
potential, first time users & regular users.
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Leading brands focus on attracting potential users
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Smaller brands focus on attracting current users away
from the leading brand
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Potential users are customers who will become users at
some life stage/life event
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Usage rate : Light, medium & heavy product users
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Heavy users are a small percentage of the market but
account for high percentage of total consumption
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Eg. Heavy beer drinkers account for 87% of the beer
consumed almost 7 times as much as a light beer
drinker
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Marketers would rather attract 1 heavy user than
several light users
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Heavy users are either loyal to one brand or keep
changing for low price
Behavioral Segmentation
Loyalty Status : Varying degrees of loyalty exist
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Hard core loyals : Consumers who buy one brand all
the time
Split loyals : Loyal to 2 or 3 brands
Shifting loyals : Shift easily from one brand to another
Switchers : No loyalty to any brands
Buyer Readiness : A market is made up of different
stages of readiness
Some are unaware, some are informed, some
interested, etc
Targeting Multiple Segments
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Motorola : In 1999, based on a 25 nation
research it created 4 sub brands for its mobile
phones
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Accompli – For customers seeking leading edge
wireless technology. Large touch screen, office
assistant & software enabled
Timeport – Java based phone with internet browsing
software & desktop organizer. Focused on the
business user
V – Targets status seeking phone users with the latest
styles as well as high end technology
Talkabout – Standard phones at good value
Targeting Segments
Levi’s : Measure-to-fit women’s jeans under
Personal Pair brand
 In-store customization concept called
Original Spin which offers more options &
features
DeBeers : Design “your own engagement
ring program”
 Choose from within 189 unique designs
Flexible Market Offering
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Flexible marketing offering rather than a
standard offering to the segment
2 parts :
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Naked Solution – All segment members appreciate
Discretionary Option – Only some segment members
value
Eg. Delta Airlines offers Economy passengers a
seat, food & soft drink. Alcoholic beverages &
ear phones are charged extra