Market Segmentation

Market Segmentation

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Chapter Outline

Delineate firm’s current situation

Determine consumer needs and wants

Divide markets on relevant dimensions

Develop product positioning

Decide segmentation strategy

Design marketing mix strategy

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Market Segmentation

Process of dividing a market into groups of similar consumers and selecting the most appropriate group or groups for the firm to serve

Target market: Group or segment a company selects to serve

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Figure 5.1: A Model of the Market Segmentation Process

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Delineate the Firm’s Current Situation

Firms must do a complete situational analysis when embarking on a new or modified marketing program

Aids in determining objectives, opportunities, and constraints to be considered when selecting target markets and developing marketing mixes

Intended to be a reminder of tasks to be performed prior to marketing planning

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Determine Consumer Needs and Wants

Successful marketing strategies depend on discovering and satisfying consumer needs and wants

Consumer needs and wants are translated into operational concepts at a strategic level

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Divide Markets on Relevant Dimensions: A Priori versus Post Hoc Segmentation

Marketing manager decides on the appropriate basis for segmentation in advance of doing any research on a market

A priori segmentation

People are grouped into segments on the basis of research findings

Post hoc segmentation

Jump to Divide Markets on Relevant Dimensions: Priori versus Post Hoc Segmentation, Appendix

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Divide Markets on Relevant Dimensions: Relevance of Segmentation Dimensions

Managerial expertise and experience are required for selecting the appropriate dimensions or bases on which to segment particular markets

Initial dimensions can be determined from:

Previous research

Purchase trends

Managerial judgment

Consideration and research of sought benefits are a strongly recommended approach in the marketing literature

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Divide Markets on Relevant Dimensions: Approaches for Segmenting Markets, 1

Benefit segmentation: Focuses on satisfying needs and wants by grouping consumers on the basis of the benefits they are seeking in a product

Psychographic segmentation: Focuses on consumer lifestyles as the basis for segmentation

V A L S: Best-known psychographic segmentation

Explains and predicts consumer behavior

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Divide Markets on Relevant Dimensions: Approaches for Segmenting Markets, 2

Geodemographic segmentation: Identifies specific households in a market by focusing on local neighborhood geography

Creates classifications of actual, addressable, mappable neighborhoods where consumers live and shop

Example: Nielsen PRIZM

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The United States V A L ST M Framework

Has eight psychographic groups based on two dimensions

Vertical dimension segments people based on the degree to which they are innovative and have resources

Horizontal dimension represents primary motivations for buying

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Figure 5.4: V A L S T M Framework and Segments

Source: Strategic Business Insights; www.strateglcbuslnesslnslghts.comNALS.

Jump to Figure 5.4: V A L S T M Framework and Segments, Appendix

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Develop Product Positioning, 1

Positioning strategies used

Focusing on the superiority to competitive products

Positioning based on use or application

Targeting particular types of product users

Positioning relative to a product class

Pitching directly against particular competitors

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Develop Product Positioning, 2

Positioning map: Visual depiction of consumer perceptions of competitive products, brands, or models

Used to investigate how to position a product

Constructed by:

Surveying customers about various product attributes

Developing dimensions and a graph indicating the relative position of competitors

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Figure 5.5: Positioning Map for Automobiles

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Decide Segmentation Strategy: Alternatives

Deciding not to enter the market

Deciding to be a mass marketer

Deciding to market to one segment

Deciding to market to more than one segment and design a separate marketing mix for each

Jump to Decide Segmentation Strategy: Alternatives, Appendix

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Criteria for Segmentation

Viable segments must be:

Measurable: Firms must be capable of measuring their size and characteristics

Meaningful: Segment should have sufficient sales and growth potential to offer long-run profits

Marketable: Segment can be reached and served by the firm in an efficient manner

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Design Marketing Mix Strategy

Selection of target market and designing the marketing mix should go hand in hand

Marketing mix decisions are made in conjunction with target market selection

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APPENDIces

Figure 5.1: A Model of the Market Segmentation Process, Appendix

The figure contains 6 rectangular boxes placed one below the other. To denote a process, downward pointing arrows are placed at the bottom of each of the boxes, except for the last one. The content in the first box reads delineate firm’s current situation. The content in the second box reads determine consumer needs and wants. The content in the third box reads divide markets on relevant dimensions. The content in the fourth box reads develop product positioning. The content in the fifth box reads decide segmentation strategy. The content in the sixth box reads design marketing mix strategy.

Jump back to Figure 5.1: A Model of the Market Segmentation Process

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Divide Markets on Relevant Dimensions: A Priori versus Post Hoc Segmentation, Appendix

There are two small rectangular boxes partially overlapping two large rectangular boxes. Each pair of small and large boxes is placed one below the other. The content in the large box explains the term provided in the small box. In the first pair of boxes, the small box is labeled a priori segmentation. The content in the large box reads marketing manager decides on the appropriate basis for segmentation in advance of doing any research on a market. In the second pair of boxes, the small box is labeled post hoc segmentation. The content in the large box reads people are grouped into segments on the basis of research findings.

Jump back to Divide Markets on Relevant Dimensions: Priori Versus Post Hoc Segmentation

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Figure 5.4: V A L ST M Framework and Segments, Appendix

The figure presents a rectangular box. Two diamond-shaped boxes are superimposed at the center of the top and bottom of the rectangular box. The diamond-shaped box at the top is labeled innovators, and the diamond-shaped box at the bottom is labeled survivors. There are two labels at the top-right corner of the box. The first label reads high resources, and the second label reads high innovation. There are two labels at the bottom-right corner of the box. The first label reads low resources, and the second label reads low innovation. Three vertically elongated rectangles are placed at the center of the rectangular box. Each of the rectangles have two diamond-shaped boxes placed one below the other. The label above the boxes reads primary motivation. Starting from the left, the first rectangle is labeled ideals. The two diamond-shaped boxes in this rectangle are labeled thinkers and believers. The second rectangle is labeled achievement. The two diamond-shaped boxes in this rectangle are labeled achievers and strivers. The third rectangle is labeled self-expression. The two diamond-shaped boxes in this rectangle are labeled experiencers and makers.

Jump back to Figure 5.4: V A L S T M Framework and Segments

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Figure 5.5: Positioning Map for Automobiles, Appendix

There are two boxes in the image, one small and one large. The small box overlaps the large box. A vertical line and a horizontal line intersect to form a cross within the small box. The lines divide the box into four quadrants. The top of the vertical line is labeled luxurious. The bottom of the vertical line is labeled functional. The left side of the horizontal line is labeled traditional, and the right side of the horizontal line is labeled sporty. There are five points in the top-left quadrant. Starting from the top, the points are labeled Mercedes, Cadillac, Lincoln, Chrysler, and Buick. There are five points in the top-right quadrant. Starting from the top, the points are labeled Lexus, Porsche, B M W, Acura, and Infiniti. There are six points in the bottom-right quadrant. Starting from the top, the points are labeled Chevrolet, Nissan, Toyota, Saturn, V W, and Kia. There are three points in the bottom-left quadrant. The first two points are placed beside each other. They are labeled Mercury and Ford. The third point placed below the point labeled Ford is labeled Dodge.

Jump back to Figure 5.5: Positioning Map for Automobiles

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Decide Segmentation Strategy: Alternatives, Appendix

There is a curved line on the left side of the slide. Four circles are placed one below the other over this line. The circles do not contain any text. Each circle is attached to a rectangular box. Starting from the top, the content in the first box reads deciding not to enter the market. The content in the second box reads deciding to be a mass marketer. The content in the third box reads deciding to market to one segment. The content in the fourth box reads deciding to market to more than one segment and design a separate marketing mix for each.

Jump back to Decide Segmentation Strategy: Alternatives

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