A1261931409onFHy

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NEEDS ANALYSIS THROUGH MARKET
SEGMENTATION CHAPTER 6
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WHY SEGMENT THE MARKET?

• To subdivide the reference market in more
  homogeneous sub-markets.
• To adapt the firms offering to the needs and
  expectations of each segment.
• To avoid dispersion of the firms marketing
  efforts based on a undifferentiated vision of the
  reference market.
• To identify one or several priority target
  segments on which concentrate marketing efforts
  in order to obtain a sustainable competitive
  position.

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DIVERSITY OF NEEDS IN THE REFERENCE MARKET
Value for the customer
Customers
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UNDIFFERENTIATED MARKETING
Value for the customer
Single Product
Customers
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DIFFERENTIATED MARKETING
Value for the customer
Product C
Product B
Product A
Customers
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LEVELS OF MARKET SEGMENTATION

• MACRO-SEGMENTATION
• To subdivide the reference market in "strategic
  business units" (SBU) using three criteria
• solution(s), groups of customers, technologies
• MICRO-SEGMENTATION
• Within each SBU, to identify groups of customers
  having the same set of expectations, using four
  sets of criteria,
• Socio-demographic
• benefits sought
• purchase behaviour
• life-styles

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MACRO-SEGMENTATION
Solutions

What are the solutions sought?



Groups of customers




Who are the buyers to satisfy?

Technologies

How buyers needs are satisfied?
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MARKET BOUNDARY DEFINITIONS

• PRODUCT-MARKET (or macro-segment)
• A specific group of customers seeking a
  specific solution based on a single technology.
• SOLUTION-MARKET
• A given solution for a specific group of
  customers, but including all the substitute
  technologies to perform this solution (a
  category).
• INDUSTRY
• A single technology, but covering several
  solutions and several groups of customers.

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EXAMPLE OF MACRO
-
SEGMENTATION
The fruit transformation market
Needs / Functions
"
Filling
"
Garnir
repas
Fruit transformation
Customer groups
Households
-
Food Industries
-
Pastries
bakeries
Organizations
Technologies
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METHODS OF MICRO-SEGMENTATION

• DESCRIPTIVE SEGMENTATION
• Based on socio-demographic profile of the
  customer.
• BENEFIT SEGMENTATION
• Based on the customer's value system vis-à-vis a
  given product.
• BEHAVIORAL SEGMENTATION
• Based on the actual purchasing behaviour of
  customers.
• LIFE STYLE SEGMENTATION
• Based on socio-cultural profile of the customer.

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SOCIO-DEMOGRAPHIC (or descriptive)
SEGMENTATIONRationale in B2C

• The assumption is that people having different
  socio-demographic profile (sex, age, income, .)
  have different needs.
• The merits of descriptive segmentation are its
  low cost and ease of application.
• In affluent societies, this method has a
  declining predictive value, as different people
  can adopt the same purchase behaviour.

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Socio-demographic Segmentation
The Case of a New Food Product
Occupation Rate
Percent of households buying
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1. National
2. Region 1
3. Region 2
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4
4. Region 3
5. Region 4
6. Region 5
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13
7. Major cities
8. 15000 inh
7
10
9. 5-15000 inh
10. -5000 inh
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5
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11. Under 35 years old
8
12
9
12. 35-49 years old
6
1
13. 50-64 years old
15
19
14. 65 and over
3
20
6
15. 1-2 pers.
10
16. 3-4 pers.
11
8
17. 5 pers. and more
4
18. A B
2
17
14
19. C1
20. C2 D
600
700
800
900
1000
1100
1200
1300
1400
1500
Penetration rate
Volume purchased per household (over 100
households per segment)
City
Age
Household
Socio-professional
Regions
size
groups
size
classes
Source Industry.
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EXAMPLES OF NEW SOCIO-DEMOGAPHIC SEGMENTS

• The senior citizen (over 65) segments for banking
  services, recreational activities, Medicare, an
  so on.
• The segment of single-adult households, that is
  the unmarried, divorced, widowed or single parent
  families.
• The dual-income households, having high
  discretionary income (the DINKS).
• The segment of working women for all time-saving
  goods.

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Example of descriptive segmentation The
Corporate Banking sector.
Funds
more than 1 000 000

available

10 001 to 1 000 000

101 to 10 000

100 and less

Decision Centre
One person


Finance Committee

Board of directors



Social

Services
-
Industrial
Charity

Types of organisation

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BENEFIT SEGMENTATION Rationale

• Customers having the same demographic profile,
  can have very different value systems.
• For a customer, a product is a bundle of benefits
  and some benefits can be more important than
  others.
• Benefit segmentation tries to identify the
  sub-groups of customers having the same values
  and expectations.

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BENEFIT SEGMENTATION Required information

• The list of attributes or benefits associated
  with a product category.
• An evaluation of the relative importance attached
  to each benefit.
• A regrouping procedure of customers with similar
  rating patterns.
• An evaluation of the size and profile of each
  identified segment.

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THE TOOTHPASTE MARKETThe package of benefits
sought

• WHITENESS
• FRESHNESS
• GOOD TASTING
• PRODUCT APPEARANCE
• DECAY PREVENTION
• GUMS PROTECTION
• TEETH SENSITIVITY
• ECONOMY

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BENEFIT SEGMENTATION OF THE TOOTHPASTE MARKET

Benefits Segments

Benefits

sought

Cosmetic

Therapeutic

Sensory

Economy

White Freshness

Colgate, White Glo,



Whitening

Signal,
Nighttime breath

ArmHammer P.M.

Cavity, tartar and

Crest,
Parogencyl,



gum protection

Parodontax,

Sens
itive teeth

Sensodyne,...

Taste, Flavor,



Colgate Barbie,


Colour, Fun

Crest Kids,


Core function




Private labels

Low price

All
-
in
-
one



Reprentative brands only. Toothpaste companies
have a multisegment strategy
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Example of a Perceptual Map The watch market
Exclusive design
Rolex, Omega, .
Swatch
Seiko, Citizen traditional Swiss watches
High prices
Moderate prices
Timex
Conventional design
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Example of a Perceptual Map
Exclusive design
Rolex, Omega, .
Swatch
Seiko, Citizen traditional Swiss watches
High prices
Moderate prices
Timex
Conventional design
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BEHAVIOURAL SEGMENTATION

• PRODUCT-USER SEGMENTATION
• users, non-users, first users, ex-users,
  occasional versus regular users, consumption
  situations, ...
• VOLUME SEGMENTATION
• heavy or light users.
• LOYALTY SEGMENTATION
• hard-core loyals, soft-core loyals,
  switchers, mercenaries,
• SENSITIVITY TO ONE MARKETING VARIABLE
• price, promotion, innovation, ...

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BEHAVIOURAL SEGMENTATIONBeer drinking in three
different consumption situations

• During a meal, beer drinking complements the food
  and a light beer is preferred.
• Between meals, in a pub or at home, the brand can
  be a full bodied beer.
• In a social environment, with friends, a
  prestigious brand will be welcome.
• In general, there is no brand transfer from one
  situation to the other

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SOCIO-CULTURAL (or life style) SEGMENTATIONRation
ale

• Individuals from the same socio-demo group can
  have very different life styles (and vice-versa).
• The objective is to obtain a more complete human
  profile and to supplement demographics.
• It attempts to draw a human portrait of consumers
  by adding such elements as activities, interest
  and opinions.

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LIFE STYLE SEGMENTATION Levels of analysis

• INDIVIDUAL VALUES
• (long lasting beliefs and convictions )
• ACTIVITIES, INTERESTS AND OPINIONS (AIO)
• (revealing the value system)
• THE TYPES OF PRODUCTS OR SERVICES PURCHASED
• (reflecting the two preceding levels)

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Life Style Dimensions
Activities
Interests
Opinions
Demographics
Work
Family
Themselves
Age
Hobbies
Home
Social issue
Education
Social events
Job
Politics
Income
Vacation
Community
Business
Occupation
Entertainment
Recreation
Economics
Family size
Club membership
Fashion
Education
Dwelling
Community
Food
Products
Geography
Shopping
Media
Future
City size
Sports
Achievements
Culture
Life cycle
Source Plummer, (1974)
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Examples of General Life Style Statements


I find myself checking the prices in the grocery
stores even for small items (price conscious).


An important part of my life and activities is
dressing smartly (fashion conscious).


I would rather spend a quiet evening at home than
go out to a party (homebody).


I like to work on community projects (community
minded).


I try to arrange my home for my children's
convenience (child oriented).
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MARKET TARGETINGAlternative Strategies

• UNDIFFERENTIATED MARKETING
• To go after the whole market with one product.
• DIFFERENTIATED MARKETING
• To operate in several segments with products
  designed for each segment.
• FOCUSED MARKETING
• To concentrate on one segment adopting a
  specialist strategy.

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MARKET COVERAGE STRATEGIES
Mass Market Strategy
Large Segment Strategy
Adjacent Segment Strategy
Multi Segment Strategy
Single Segment Strategy
Niche Segment Strategy
Mass Customization Strategy
Segt A1
Segt A2
Segment A
Segment A
Segment A
Segt A3
Segt A4
Segt A5
Segt B1
Segment B
Segment B
Segt B2
Segt C1
Segment C
Segment C
Segt C2
Segt C3
Segt C3
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REQUIREMENTS FOR EFFECTIVE SEGMENTATION

• DIFFERENTIAL RESPONSE
• The segments must be different in terms of
  sensitivity to marketing variables.

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REQUIREMENTS FOR EFFECTIVE SEGMENTATION

• DIFFERENTIAL RESPONSE
• The segments must be different in terms of
  sensitivity to marketing variables.
• ADEQUATE SIZE
• The market potential must be large enough to
  justify a tailor-made programme.

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REQUIREMENTS FOR EFFECTIVE SEGMENTATION

• DIFFERENTIAL RESPONSE
• The segments must be different in terms of
  sensitivity to marketing variables.
• ADEQUATE SIZE
• The market potential must be large enough to
  justify a tailor-made programme.
• MEASURABILITY
• The size and the behavioural characteristics of
  each segment should be easily observable.

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REQUIREMENTS FOR EFFECTIVE SEGMENTATION

• DIFFERENTIAL RESPONSE
• The segments must be different in terms of
  sensitivity to marketing variables.
• ADEQUATE SIZE
• The market potential must be large enough to
  justify a tailor-made programme.
• MEASURABILITY
• The size and the behavioural characteristics of
  each segment should be easily observable.
• ACCESSIBILITY
• The degree to which segments can be easily
  reached and served.

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REQUIREMENTS FOR EFFECTIVE SEGMENTATION

• DIFFERENTIAL RESPONSE
• The segments must be different in terms of
  sensitivity to marketing variables.
• ADEQUATE SIZE
• The market potential must be large enough to
  justify a tailor-made programme.
• MEASURABILITY
• The size and the behavioural characteristics of
  each segment should be easily observable.
• ACCESSIBILITY
• The degree to which segments can be easily
  reached and served.
• ACTIONABILITY

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THE RISK OF CANNIBALISM Four possible scenarios
Scenario 1
Scenario 3
My brand
Brand X
My brand
Brand X
New
brand
New
brand
Scenario 2
Scenario 4
My brand
My brand

Brand X
Brand X
New
brand
New brand
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