Building the Right
Relationships with
the Right
Customers
Market Segmentation
People
People or
or organizations
organizations with
with
Market
Market needs
needs or
or wants
wants and
and the
the ability
ability and
and
willingness
willingness to
to buy
buy
AA subgroup
subgroup of of people
people or
or
Market
Market organizations
organizations sharing
sharing one
one or
or more
more
Segment
Segment characteristics
characteristics that
that cause
cause them
them to
to
have
have similar
similar product
product needs.
needs.
The
The process
process ofof dividing
dividing aa market
market
Market
Market into
into meaningful,
meaningful, relatively
relatively similar,
similar,
Segmentation
Segmentation identifiable
identifiable segments
segments or or groups.
groups.
Market Segments
Specific groups of customers with
similar needs, purchasing
behaviors, and identifying
characteristics.
Understanding customer needs is
the first step in successful market
segmentation.
Levels of Market
Segmentation
Dividing Markets into Smaller Segments that
Can be Reached More Efficiently And Effectively
With Products and Services That Match Their
Unique Needs.
Mass Marketing
Same product to all consumers
(no segmentation)
Segment Marketing
Different products to one or more segments
(some segmentation)
Levels of Market
Segmentation
Niche Marketing
Different products to subgroups within segments
Micromarketing
Products to suit the tastes of individuals and locations
Local Marketing
Individual Marketing
Tailoring
brands/promotions to local Tailoring products and
customer groups programs to the needs of
individual customers
Mass Customization
Mass customization is the ability
to prepare on a mass basis
individually designed products
and communications to meet
each customer’s requirements.
Choice Board
Stywotsky and Morrison have
introduced interactive online
system that allows individual
customers to design their own
products and services by
choosing from a menu of
attributes, components, prices,
and delivery options.
Customerization
Wind and Rangaswamy
introduced customerization that
combines operationally driven
mass customization with
customized marketing in a way
that empowers consumers design
the product and service offering
of their choice.
Basic Market-Preference
Patterns
(a) Homogeneous (b) Diffused (c) Clustered
preferences preferences preferences
Creaminess
Creaminess
Creaminess
Sweetness Sweetness Sweetness
Steps in Segmentation Process
Need-Based Segmentation Group consumers into segments
Need-Based Segmentation based on similar needs and benefits
Segment For each need-based segment,
Segment Identification
Identification determine identifiers to make distinct
Use predetermined attractiveness criteria
Segment
Segment Attractiveness
Attractiveness to determine attractiveness of each seg.
Segment Determine segment profitability
Segment Profitability
Profitability
For each segment, create “value
Segment
SegmentPositioning
Positioning proposition” and price positioning
Segment Test attractiveness of each segment’s
Segment “Acid
“AcidTest”
Test” positioning strategy
Marketing Roll out to tactical
MarketingMix
MixStrategy
Strategy
The Classic Segmentation Variables for
Consumer Markets
FIGURE 7.3
Step 1. Market
Segmentation
Demographic
Segmentation
Dividing the market into groups based on
variables such as:
– Age
– Gender
– Family size or life cycle
– Income
– Occupation
– Education
– Religion
– Race
– Generation
– Nationality
Demographic Targeting by
Age
Crest targets adults with the ad and product on the left, and
children with the ad and product on right.
Generation
Each generation is profoundly
influenced by the times in which
it grows up – the music, movies,
politics and defining events of
that period. Demographers call
these groups as Cohorts.
Geographic Segmentation
World Region or Country
City or Metro Size
Density or Climate
Geographic Variables
Geographic segmentation divides a
market into different geographic units.
Variables and breakdowns include:
– World Region or Country: North America,
Western Europe, Pacific Rim, Mexico, etc.
– Country Region: Pacific, Mountain, etc.
– City or Metro Size: defined numerically
– Density: rural, suburban, urban
– Climate: northern, southern
Psychographic
segmentation
Buyers are divided into different
groups on the basis of
psychological / personality traits,
lifestyle, or values.
Lifestyle
Personality
values
VALS Segmentation System
Behavioral
Segmentation
Decision Roles Behavioral
Initiator Variables
Occasions
Influencer
Benefits
Decider
User Status
Buyer
Usage Rate
User
Buyer-Readiness
Loyalty Status
Attitude
Segmenting for Business
Markets (Bonoma &
Shapiro)
Demographic
Demographic
Operating
Operating Variable
Variable
Purchasing
Purchasing Approaches
Approaches
Situational
Situational Factors
Factors
Personal
Personal
Characteristics
Characteristics
Segmenting Business
Markets
Demographic segmentation
– Industry, company size, location
Operating variables
– Technology, usage status, customer capabilities
Purchasing approaches
– Purchasing function, power structure, nature of
existing relationships, general purchase policies,
purchasing criteria.
Situational factors
– Urgency, specific application, size of order
Personal characteristics
– Buyer-seller similarity, attitudes toward risk, loyalty
Sequential Segmentation
Based on the stage of purchase
decision process:
First-time prospects
Novices
Sophisticates
Sequential
Segmentation
Based on the type of selling:
Price oriented customers
(Transactional selling)
Solution oriented customers
(consultative selling)
Strategic-value customers
(enterprise selling)
Segmenting
International Markets
Geographic segmentation
– Location or region
Economic factors
– Population income or level of economic development
Political and legal factors
– Type / stability of government, monetary
regulations, amount of bureaucracy, etc.
Cultural factors
– Language, religion, values, attitudes, customs,
behavioral patterns
RRequirements
equirements for
for effective
effective
segmentation
segmentation
• Size, purchasing power, profiles
Measurable
Measurable of segments can be measured.
• Segments can be effectively
Accessible
Accessible reached and served.
• Segments are large or profitable
Substantial enough to serve.
Substantial
• Effective programs can be
designed to attract and serve
Actionable
Actionable the segments.