LECTURE 6:
MARKET
SEGMENTATION
DR. DILIP S. MUTUM
Consumers and Markets
BUSI1063
OBJECTIVES
Market segmentation is ubiquitous and a crucial part of understanding
customers and consumers. It is a form of demand side market
modelling. The session will demonstrate and explain how this is done
using real world examples.
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SPECIFIC OBJECTIVES
At the end of this lecture you should be able to:
1. Define ‘market segmentation’, ‘market targeting’ and ‘market
positioning’.
2. Explain the bases on which markets may be segmented.
3. Describe the alternatives an organisation has in positioning itself
against its competitors.
4. To understand the role of segmenting in marketing strategy
development
5. Outline how companies select target markets and implement
segmentation strategies
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YEO VALLEY ADVERT
• Yeo Valley Somerset organic yoghurt producer
• £5m advert during 2010 X Factor show
• #1 music download in the UK
• "most viewed" status on Facebook and YouTube
• Million of Tweets
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• Sales increased by almost 15%
STP
Identify homogeneous groups in the market
Consider variables for segmenting market
Segmentation
Look at profile of emerging segments
Validate emerging segments
Select those segments that you want to target
Decide on targeting strategy
Targeting
Decide which and how many segments should be
targeted
Develop your product to reach the targeted customers
Understand consumer perceptions
Positioning
Position products in the mind of the consumer by
communicating the desired positioning
Design appropriate marketing mix
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WHY SEGMENT?
(SOURCE: YANKELOVICH AND MEER, HBR 2006)
Grouping customers along similarities
Homogeneity in segments
Heterogeneity between segments
Knowledge about possible segments should inform:
Which segments to target
How to target them
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MARKET SEGMENTATION
Demographic segmentation: Geographic segmentation:
age, sex, family life circle, geographical region units,
income, occupation, education, such as countries, states,
religion, race, generation gap regions, counties, towns or
and nationality. streets.
Psychographic segmentation: Behavioural segmentation:
life style or personality or knowledge of, attitude
values. toward, usage of, or response
to a product.
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PSYCHOGRAPHIC SEGMENTATION
Psychographic Segmentation
Basedon:
Attitudes Values Lifestyle
Activities Interests Opinions
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CRITICISM OF LIFESTYLE SEGMENTATION
(SOURCE: YANKELOVICH AND MEER, HBR
2006)
PROs
Psychographics capture some truth of people’s lifestyles, attitudes,
self-image and aspirations.
Useful to create advertising
CONs
Very weak at predicting what people are likely to purchase
Thus, poor in terms of corporate decision making.
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BEHAVIORAL SEGMENTATION
BREAKDOWN
Kotler and Keller, 2009, p.265
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VARIABLES FOR BEHAVIORAL
SEGMENTATION
Behavioral Variables
User Status
Usage Rate
Buyer-Readiness
Loyalty Status
Attitude
Occasions
Value Proposition
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SEGMENTING BY BEHAVIOUR: BIG DATA
Database marketing tracks specific consumers’
buying habits very closely
The collection and analysis of extremely large
datasets is called Big Data.
In a single day, consumers create 2.5 quintillion
bytes of data.
Example: monitoring of Google searches for fever
and flu can help epidemiologists to identify
specific areas of the US that have been hit by flu
outbreaks even before patients begin visiting
doctors and hospitals.
Big Data will be discussed in more detail in the
next lecture
1-13
SEGMENTATION CRITERIA:
REQUIREMENTS
1. Measurable
2. Substantial
3. Accessible
4. Differentiable
5. Actionable
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EXAMPLE: DELL AND THE PC MARKET
Can be divided into home users, corporate and educational users.
Dell originally targeted corporate customers.
In 2003, Dell dropped the word computer from it’s corporate name
Went into new categories of consumer electronics:
PDA’s, Flat tvs and digital cameras. (based on product benefit)
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BMW’s segmentation
Brand Extension
The BMW Growth Model
Leverages Existing Brand to Reach New Markets More Brands mean more Growth
Compact
1.4 Sales in
millions of units
1 Series (new)
Subcompact
1.2
MINI
SUV
1.0
X (Z4)
Roadster Series
X Series Sports Utility Vehicle
0.8
New Brands 0.6 Passenger cars
Reaches New Markets Beyond Core Brand 3,5,6,7
Performance Sedans
0.4 Series
0.2
2000 2002 2004 2006 2008
1 Series Mini Sport Subcompacts
Brand Development Strengthens Core Brand & Reaches New Segments 16
BENEFIT SEGMENTATION: EXAMPLE
In the 1960s, Russell Haley, an American academic, explained the
concept of “benefit segmentation” using the toothpaste market as an
example. The following table has been adapted from his work
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SELECTING TARGET MARKETS
Market segment attractiveness and internal compatibility
consider not just how attractive segment is as a target, but also how
well it fits with company capabilities
a significant implementation question
Segment attractiveness
Market factors, Economic/technological barriers, Competitive
factors, Business environment factors
Business strength
Current position, Economic and technological position, Capability
profile
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TARGET MARKET SELECTION
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POSITIONING: DIBB ET AL. 2006,
P. 247
A product’s positioning is the place occupied in a
particular market, as perceived by the customer
segment at which that product is targeted.
Positioning is not what is done to the
product/service, it is what is created in the minds
of the target customers.
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POSITIONING (DIBB ET AL. 2006, P.
247)
Target customers must perceive the
product/service to have a clear image and
positioning compared to its competitors.
Product differentiation is widely viewed as the
key to successful marketing; the product/service
MUST stand out and have a clearly defined
positioning
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POSITIONING WILL BE
DISCUSSED IN MORE DETAIL IN
LECTURE 10: BRANDING: THE
SOUL OF THINGS
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SUMMARY: STEPS IN SEGMENTATION, TARGETING
& POSITIONING
6. Develop Marketing
Mix for Each Segment Market
5. Develop Positioning Positioning
for Each Segment
4. Select Target
Segment(s)
Market
3. Develop Measures
of Attractiveness Targeting
2. Develop Profiles
of Segments Market Segmentation
1. Identify Bases(criteria)
for Segmentation
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ANY QUESTIONS?
Thanks
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