Download ANALYSING THE BUSINESS ENVIRONMENT

MARKET SEGMENTATION
The process by which a market is divided
into distinct customer subsets of people
with similar needs and characteristics
leading them to respond in similar ways to
a product/service offering
Growing Importance of Segmentation
– As markets mature, competition becomes more intense
– Customers have more varied needs and desires
– Technology -- micro-segmentation and relationship
marketing
– Identifies opportunities for new product development
– Helps design of effective marketing programs
– Improves strategic allocation of marketing resources
SEGMENTATION PROCESS
• 4 Major segmentation descriptors for consumer
and business markets: physical, behavioral,
product-related and benefits sought
• Objective is to divide the market into relatively
homogeneous groups
– Selection of Meaningful Descriptors
– Determine if there are differences in the dependent
variables
– Evaluation of the results
Segmenting the Market: Physical Descriptors
• Physical Descriptors
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Age
Sex
Life Cycle
Income
Geography
Education
General Behavioral Descriptors
• Life cycle
• Social class
• Interests (psychographics)
• Firm purchasing structure
• Buying situation
Product-Related Behavior Descriptors
• Product usage (place and frequency/scope)
• Loyalty
• Purchase predisposition
• Purchase influence
• Innovativeness
Customer Needs
• Benefits sought
– Different emphasis on various benefits of the product or
service
– What is the “bundle of benefits”
• Choice criteria
– Evaluated on the existence of desired characteristics
and the value of each characteristic
Service Segmentation
• Customers must be compatible with the service
since they are part of the service process
• Services lend themselves to customization far
better than products
• Some services may be able to use technology to
reduce variability and costs
Selected Macro-level Bases of Business
Segmentation
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Size
Geographic Location
Usage Rate
Structure of Procurement
Product/Service Application
SIC code
Characteristics of Purchase Situation
Value in Use
Selected Micro-level Bases of Segmentation
• Key criteria
– Quality, Delivery, Supplier Reputation
• Decision-specific conflict
– High or Low
• Purchasing strategy
– Optimizer, Satisficer, etc.
• Structure of decision-making unit
– Who are the major participants in the decision?
Selected Micro-level Bases of Segmentation
• Importance of purchase
– High……….Low
• Attitude toward vendors
– Favorable…………Unfavorable
• Organisational innovativeness
– Innovator…………..Follower
• Personal characteristics
– Demographics, Risk Averse?, Confidence, Job
Responsibility; Decision Style; etc.
Effective Segmentation Requires
• To be effective, identified segments must
be:
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Measurable
Substantial
Accessible
Actionable