session 11 mg 220 mba - 27 sep 10

MG 220 Marketing ManagementMBA 10

Fall 2010

Muhammad Talha Salam, Asst. [email protected]

Access it online: www.slideshare.net/talhasalam

Part 3: Connecting with Customers

> Levels of Market Segmentation> Segmenting Consumer Markets> Bases for Segmenting Business Markets

Class Presentation | Session 11 | 27 Sep 2010

MG 220 Marketing Management 2Access it online: www.slideshare.net/talhasalam

Levels of Market Segmentation

• Mass Marketing is:Mass Production, Mass Distribution and Mass Promotion of one product for all buyers

COKE’s 300 Ml bottle for everyone

BUT…. Mass marketing is becoming difficult as it is not profitable to reach mass audience always

• Micro-Marketing is done at one of four levels:– Segments - Segment Marketing– Niches – Niche Marketing– Local Areas – Local Marketing– Individuals - Customerization


Levels of Market SegmentationSegment Marketing• Market Segment consists of a group of customers who share a similar set

of needs and wants.

• Clarification of segment & sector• In a sector, consumers may have different preferences

• Who creates Segments? Marketers or ….they just exist• They exist and keep evolving

• Marketer’s task is to identify segments and decide which ones to target

• In today’s research, segment is considered to be partly fiction as not everyone would want exactly same thing….even in a segment

• Thus, Concept of Flexible Market Offering:– Naked Solution – product/service elements that all segment members value– Discretionary options – elements that some segment members value


Levels of Market SegmentationSegment Marketing (…contd.)• Market Segment can be defined in several ways like

‘preference segments’

• Homogenous Preferences– No difference

• Diffused Preferences– No clear pattern

• Clustered Preferences– Clusters of preferences

Example is for preferences in ice cream’s creaminess and sweetnessCOLORED CIRCLE IS TO SHOW WHERE COMPANY SHOULD OPERATE

(A generalization only)


Levels of Market SegmentationNiche Marketing• Niche is a narrowly defined customer group seeking a distinctive

mix of benefits.

• Niches can be identified by dividing segments into sub-segments

• Segments are fairly large and attract several competitors. Niches are small and attract only one or two

• Characteristics of an attractive niche:– Customers have a distinct set of needs– They will pay premium to firm best satisfying their needs– Niche doesn’t attract other competitors– Niche firm/product gains economies through specialization– Niche has size, profit and growth potential

• Internet businesses have helped niches grow a lot


Levels of Market SegmentationLocal Marketing• Marketing programs tailored to needs and wants of local

customer groups

• A growing trend also called ‘grassroots marketing’

• Marketing activities concentrated on getting as close and personally relevant to individual customers as possible

• Those favoring Local Marketing consider national advertising to be wasteful

• Those against Local Marketing consider it to increase manufacturing costs by reducing economies of scale and increased logistical problems


Levels of Market SegmentationCustomerization• Ultimate level of segmentation: Segments of one

• Customerization combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the products and service offering of their choice.

• Choice to be made between going for Segments (Segment marketing) or Individuals (Customerization)

• Those favoring segmentation: More efficient | Less customer information | More standardization

• Those favoring Customerization: Segments are fiction | Those in a segment differ greatly


Segmenting Consumer MarketsKey Points• Two broad set of variables used in segmentation:

– Descriptive Characteristics• Geographic• Demographic• Psychographic

– Behavioral Characteristics

• Consumers are divided and it needs to be seen whether they have different preferences towards product or not


Segmenting Consumer MarketsDemographic Segmentation• Age and Life-Cycle Stage

– Wants and abilities change with age– Age segmentation can be refined further– Important to do it carefully by understanding consumers’ preferences as they

change– New Swift advertisement

• Life Stage– What events and stages a person goes through in his/her life– They affect buying behavior– Users in age group of 50-60 are about to retire from work life and are

segmented/targeted for pension plans etc.

• Gender– Importance of understanding how they differ in purchasing behavior– How they approach purchase decision is to be observed

• Income– Long-standing and established practice– Again understanding of exact behaviors is important– People from middle class in income may be targeted with premium products


Segmenting Consumer MarketsDemographic Segmentation (…contd.)• Generation

– A generation is impacted by lifestyle of times it grows in– Cohorts are formed whose members share same political, cultural and

economic experiences– Profiling of American generation is done famously as:

• Baby boomers (born: 1946-64)• Generation X (born: 1965-77)• Generation Y (born: 1978-94)• Millennials (born: 1995-2002)

– Behaviors are highly coherent

• Social Class– Has strong impact on lifestyle, product preferences etc.


Segmenting Consumer MarketsPsychographic Segmentation• Psychographic Segmentation is dividing buyers into

groups/segments based on:– Psychological / personality traits– Lifestyle– Values

• Culture may also play role in Psychographics

• A good example is VALS™ model used in USA


Segmenting Consumer MarketsBehavioral Segmentation• In Behavioral segmentation, buyers are divided into

groups based on:– Their knowledge of product– Attitude towards product– Use of product– Response to a product

• Decision Roles– Who buys what? What influence they have– Consumers may have following roles in buying process:

• Initiator• Influencer• Decider• Buyer• User

– Consider different household products purchased in daily life: Class discussion


Segmenting Consumer MarketsBehavioral Segmentation (…contd.)• Behavioral Variables

– Occasions: • Activities in different occasions help define needs and purchasing behavior• When consumers consumer a product? Traveling in holidays, Grocery at start of month etc.

– Benefits: Based on benefits sought by consumers– User Status: Non-users | Ex-users | Potential Users | First-time users |

Regular Users– Usage Rate:

• Light, medium and heavy users• Heavy users are less in number but contribute major part of sales• How to target these segments is to part of strategy because they have different attitudes

towards product

– Buyer-Readiness Stage:• Unaware | Aware | Informed | Interested | Desire the product | Intend to buy• Building awareness and informing is a key part of marketing effort

– Loyalty Status• Hard core loyals | Split loyals | Shifting loyals | Switchers• Study product’s strengths (hardcore loyals) | Identify competitors (split loyals) etc.

– Attitude: enthusiastic | Positive | Indifferent | Negative | Hostile


Segmenting Consumer MarketsBehavioral Segmentation (…contd.)• Behavioral Variables (breakdown)


Segmenting Consumer MarketsConversion Model• Groups in Users (based on strength of commitment) and

Nonusers (based on balance of disposition with current brand)

Convertible Shallow Average Entrenched

Stronglyunavailable Ambivalent AvailableWeakly

unavailable

Users Nonusers


Bases for Segmenting Business MarketsSequential Segmentation• Based on their stage in purchase decision

– First-time prospects– Novices– Sophisticates

• Based on type of selling– Price-oriented customers – Solution-oriented customers– Strategic-value customers

MG 220 Marketing ManagementMBA 10

Fall 2010

Muhammad Talha Salam, Asst. [email protected]

Access it online: www.slideshare.net/talhasalam

Part 3: Connecting with Customers

> Market TargetingPart 4:Creating Brand Equity> What is Brand Equity?> Building Brand Equity> Measuring Brand Equity

> Discussion on Term Project

Class Presentation | Session 12 | 30 Sep 2010

session 11 mg 220 mba - 27 sep 10

Business

segments segment marketing

customized marketing

marketing management4

marketing management6

marketing management2

marketing management3

marketing management9

marketing management5