Targeting Attractive Market Segments

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Targeting Attractive Market Segments

• Marketing Management

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Overview

• Why segmenting markets?
• Segmentation bases
• Consumer markets
• Business markets
• Evaluating market segments
• Targeting
• Selecting segments
• Nokia Video Case

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What is segmentation?

• Divide a market into distinct customer groups
  with distinct needs, characteristics and
  behaviors who might require different marketing
  mixes.

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Market Segments vs. Niches

• Market segment
• Group of customers with similar set of wants
• Fairly large
• Attract several competitors

• Niche
• More narrowly defined group seeking distinct set
  of benefits
• Fairly small
• Attract only a few competitors

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Motivations for segmentation

• Identify new market opportunities
• Design marketing programs that are most effective
  in reaching specific customer groups
• Improve strategic allocation of marketing
  resources

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Segmentation Key questions

• Do customers in different segments behave
  differently toward product/service?
• Should we use different marketing mix strategies?

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Segmentation variables and breakdowns for U.S.
consumer markets
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Bases for Segmenting Consumer Markets Customer
Characteristics

• Geographic
• Demographics
• Age
• Family size life cycle
• Gender, etc.
• Social class
• Psychographic
• Personality (brand personality)
• Lifestyle (VALS) attitudes, interests,
  activities
• Values

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Bases for Segmenting Consumer Markets Behavior
(product)-related Approaches

• User type (e.g., Pepsi)
• Usage occasions (e.g., De Beers)
• Benefits sought
• Usage rate
• Light versus medium versus heavy versus non
• Attitude towards the product
• Brand loyalty status

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Patronage of fast-food restaurants by adults 18
and older Simons Market Research Bureau Spring
2001 Choices System National Consumer Survey
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Benefit Segmentation What Does Gen Y Want In A
Car?

• Gen Y 16-24 yo
• 850,000 cars per year 6 of U.S. vehicle sales
• Benefits sought?
• Value
• Price
• A youth car is just a cheap car
• Eric Noble, president of the Car Lab

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Honda Element

• Average age 44
• A big mistake car companies make is they assume
  because kids have three piercings that they want
  to drive something obnoxious.

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Segmenting Business Markets

• Demographics
• Industry, company size, location
• Operating variables
• Technology
• Situational variables
• Urgency, specific application, size order
• Personal characteristics
• Attitudes towards risk, loyalty

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Segmentation variables and breakdowns for U.S.
organizational markets
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Criteria for good segmentation

• Measurable?
• Size, profile, buying power, growth?
• Accessible?
• Differentiable
• Behavior f(segmentation variables)
• Substantial?
• Size?
• Profit margins?
• Growth potential?
• Potential competitive position?
• Actionable

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Targeting

• Evaluate market segments
• Market attractiveness
• Size
• Growth
• Profit margins
• Competitive position
• Level of competition
• Substitutes
• Company objectives resources

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How should we decide which segments to target?
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Implications of Alternative Positions Within the
Market-Attractiveness/Competitive-Position Matrix
Competitive Position
Weak
Strong
Medium

• Desirable Potential Target
• Protect position
• Invest to grow at max. digestible rate
• Concentrate on maintaining strength

• Desirable Potential Target
• Invest to build
• Challenge for leadership
• Build selectively on strengths
• Reinforce vulnerable areas

• Build selectively
• Spec. in limited strengths
• Seek to overcome weak.
• Withdraw if indications of sustainable growth are
  lacking

High

• Limited expansion or harvest
• Look for ways to expand w/out high risk
  otherwise min. invest. and focus operations

• Desirable Potential Target
• Build selectively
• Emphasize profitability by increasing
  productivity
• Build up ability to counter competition

• Manage for earnings
• Protect existing strengths
• Invest to improve position only in areas where
  risk is low

Med.
Market Attractiveness

• Protect and refocus
• Defend strengths
• Seek ways to increase current earnings without
  speeding markets decline

• Manage for earnings
• Protect position
• Minimize investment

• Divest
• Sell when possible to maximize cash value
• Meantime, cut fixed costs avoid further
  investment

Low
Sources Adapted from George S. Day, Analysis
for Strategic Market Decisions (St. Paul West,
1986), p. 204 D. F. Abell and J. S. Hammond,
Strategic Market Planning Problems and Analytical
Approaches (Englewood Cliffs, NJ Prentice Hall,
1979) and S. J. Robinson, R. E. Hitchens, and D.
P. Wade, The Directional Policy Matrix Tool for
Strategic Planning, Long Range Planning 11
(1978), pp. 8-15.
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Selecting segments

• Single segment
• Market specialization
• Product specialization
• Full market coverage
• Undifferentiated marketing commonalities,
  similarities
• Differentiated marketing differences in the
  extreme one individual (customized marketing)

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Market-product grid of alternative strategies for
a lawnmower manufacturer
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Target Marketing Strategies
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Closing thoughts

• Keep things simple beware of over-segmentation
• Develop segment-by-segment long-term invasion
  plans
• Be aware there are always two ways to fine-tune
  an existing segmentation schema
• Market segments evolve are dynamic
• Come up with creative segmentation schemes that
  may lead to a sustainable competitive advantage
  (SCA).