chapter 08 market segmentation
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CHAPTER 08
Levels of Market Segmentation:
Mass marketing: In Mass marketing, seller engages in mass production of oneproduct for all customers.Mass Marketing = seller uses mass production, massdistribution, and mass promotion of one product for all buyers. Ford & Model T(Model A came in colors)
a. creates the largest potential market,
b. lowest production costs
c. lower prices or higher margins.
d. Problem = increased splintering of market - consumers have more ways to shop -malls, shops. Superstores, catalogs, home shopping networks, Internet: No More one
size Marketing fits all
Market segment: A market segment consists of a group of customers who sharea similar set of needs and wants.
A flexible market offering has 2 parts: a naked solution whole segment value, discretionary options some value
Market segments defined in many ways One way - identify preference segments
Basic Market-Preference Patterns ice cream attributes -sweetness & creaminess Homogeneous preferences
Figure (a) - all consumers roughly samepreferences - no segments
Diffused preferences Figure (b) - consumers vary greatly in their
preferences scattered throughout the mapped space -
great variation in preferences. Several brands
would locate in different areas of the mappedspace and attract different markets
Clustered preferences(Figure (c))
distinct clusters = natural market segments. First co. has
choice of going to center to try to appeal to all segments orgoing after one or more segments, each with a specific
formulation-Increases as number of competition increases
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Niche MarketingA niche market is a focused, targetable portion of a market.Niche marketing is marketing a product or service in a small portion of a market that is notbeing readily served by the main stream product or service markets.Niche Market Examples:
Sector product Niche
Agriculture Organic vegetables Consumers wanting foods grown without pesticides
Agriculture Pasturized goat milk Consumers allergic to cow milk
A niche is a more narrowly defined customer group seeking a distinctive mix ofbenefits. Marketers usually identify niches by dividing a segment into subsegments. An attractive niche:
distinct set of needs
will pay a premium for it niche do not attract competitors niche gains economies through specialization niche has size, profit & growth potential
Niche marketers understand customers needs that they willingly pay a premiumfor products.
Local Marketing:Local marketing involves marketing programs tailored (Adjust to a specific
need or market) to the needs and wants of local customer groups - cities,neighborhoods and even specific stores.It is the customization ofmarketing mix variables based on consumer, competitor, and storecharacteristics. Local marketing important in countries with strong regional differences Reflects trend- grassroots marketing - get as close & personally relevant
to individual customers as possible
Customerization:"Designing a product according to the individual's requirement is called asCustomerization." Customerization is the customization of products or servicesthrough personal interaction between a company and the customer. A company
is customerized when it is able to dialogue with individual customers and respondby customizing its products, services, and messages on a one-to-one basis.Example: Dell Computers which have started selling online has brought thisconcept into the picture. It has given customers to design their own PC with theirchoice. They can take the Memory, Hard disk, Screen, etc. on their choice. Dellwill design compatibility and makes the customer aware of this product. Then itdepends on the customer whether to go for it or not. But 99.9% feel to go. In thisway it has made the customers to feel happy about their product and service.Company has gained a boost in their sales by this strategy & also helpscustomer satisfaction.
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Segmenting Consumer MarketsThe major segmentation variablesgeographic, demographic, psychographic,and behavioral segmentation are summarized in Table 8.1
Geographic SegmentationDividing the market into different geographical units such as nations, states, regions,countries, cities, or neighborhoods. The company can operate in one or a few areas, oroperate in all but pay attention to local variations. For example, Hilton Hotels customizesrooms and lobbies according to location.
Geographic segmentation can be a useful strategy to segment markets because it:
provides a quick overview of differences and similarities between consumersaccording to geographical unit;
can identify cultural differences between geographical units; takes into consideration climatic differences between geographical units;
recognizes language differences between geographical units.
Geographic segmentation and profiling are very vital processes of marketing strategy, asthey are formulated after conducting detailed studies of the customers who belong todifferent regional units. This type of market segmentation can be beneficial to identify thepreferences and needs of customers in a particular region, as per the weatherconditions, lifestyle, culture, etc. geographic segmentation can make a huge differencein the success of a global company.
For example, a global business organization which specializes in clothing may divide themarket on the basis of the climate. This geographic segmentation of the market resultsin the sale of winter clothes in a country with cold weather, but at the same time may
promote other types of clothing in some other country. Hence, geographic segmentationvariables include regional climate, population density, economic status, etc.
Demographic Segmentation
The market is divided into groups on the basis of variables such as age, family size,family life cycle, gender, generation, education, occupation, income, religion, race,nationality, and social class.Demographic variables are easy to measure and are directly associated with consumerneeds and wants.The main demographic segmentation variables are summarized below:
Age and Life cycle Stage
The consumer needs and wants change with age. According to the age and life-cycle segmentation, consumers' age categories are divided into four segments:child, young adult, adult, and older adult. Some companies offer similar productsin different versions according to the age and life-cycle segmentation. Forexample, a vitamin manufacturer may offer a children's formula for ages 4-12, avitamin specially formulated for young teenagers, an adult version for adult menand women, and a high-energy formula for people over age 50. Some marketers
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will offer a product designed particularly for one specific segment of the agecycle, such as a shampoo developed for women over 40 to help with age-relatedHair changes.
Gender
Men & women tend to have different attitudinal & behavioral orientations. Womenhave traditionally been the main users of such products as hair coloring and cosmetics,and men the main users of tools and electronics. The best examples include clothing,hairdressing, magazines and toiletries and cosmetics.
Income, Education and Occupation: Income has long been an importantvariable for distinguishing market segments. Marketers usually are interested inaffluent consumers. The major problem of segmenting the market on the basis ofincome alone is that income simply indicates the ability to pay for a product, whilethe actual choice may be based on personal lifestyle, taste, and values-variablewhich are largely determined by education and occupation. Education,
occupation and income tend to be closely correlated in almost a cause-and -effect relationship. High-level occupation usually require advanced educationaltraining.Generation: Each generation is profoundly influenced by the times in which itgrows upthe music, movies, politics, and defining events of that period.
Social class
Many Marketers believe that a consumers "perceived" social class influences theirpreferences for cars, clothes, home furnishings, leisure activities and other products &services. There is a clear link here with income-based segmentation.
Demographic Segmentation Variables
TABLE 8.1
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Major Segmentation Variables for Consumer Markets
Geographicregion
Pacific, Mountain, West North Central, West SouthCentral, East North Central, East South Central, SouthAtlantic, Middle Atlantic, New England
City or metro
size
Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-
100,000;Density Urban, suburban, rural
Climate Northern, southernDemographicage
Under 6, 6-11,12-19, 20-34, 35-49, 50-64, 65+
Family size 1-2,3-4,5+Family life cycle Young, single; young, married, no children; young,
married, youngest child under young, married, youngestchild 6 or over; older, married, with children; older, under18; older, single; other
Gender Male, female
Income Under $10,000; $10,000-$15,000; $15,000-$20,000;$20,000-$30,000; $30,000-$50,000; $50,000-3100,000;
$100,000 and overOccupation Professional and technical; managers, officials, and
proprietors; clerical sales; craftspeople; forepersons;operatives; farmers; retired; students; homemakers;unemployed
Education Grade school or less; some high school; high schoolgraduate; some college; college graduate
Religion Catholic, Protestant, Jewish, Muslim, Hindu, otherRace White, Black, Asian, HispanicGeneration Baby boomers, Generation Xers
Nationality North American, South American, British, French,German, Italian, Japanese
Social class Lower lowers, upper lowers, working class, middle class,
upper middles, lower uppers, upper uppersPsychographiclifestyle
Culture-oriented, sports-oriented, outdoor-oriented
Personality Compulsive, gregarious, authoritarian, ambitiousBehavioraloccasions
Regular occasion, special occasion
Benefits Quality, service, economy, speedUser status Nonuser, ex-user, potential user, first-time user, regular
userUsage rate Light user, medium user, heavy user
Loyalty status None, medium, strong, absoluteReadinessstage
Unaware, aware, informed, interested, desirous, intendingto buy
Attitude towardproduct
Enthusiastic, positive, indifferent, negative, hostile
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