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chapter 5 segmenting markets learning objectives_1 • Explain how both B2B and consumer markets can be broken down into smaller, more manageable groups of similar customers • Understand the effects on the marketing mix of pursuing specific segments 5-2 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 learning objectives_2 • Understand the potential benefits and risks of segmentation • Appreciate the role of segmentation in strategic marketing thinking 5-3 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Segmentation Defined Segmentation is the art of discerning and defining meaningful differences between groups of customers to form the foundations of a more focused marketing effort. 5-4 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 eg business and consumer travel markets 5-5 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Stages of Segmentation for B2B Markets • Identify subgroups within the whole market that share common general characteristics (macro segments) • Select target segments from macro segments based on differences in specific buying characteristics (micro segments) 5-6 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 B2B Segmentation Bases Macro Micro • Size • Product • Location • Applications • Usage rate • Technology • Purchasing and decisionmaking processes • Buyer-seller relationships 5-7 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Consumer Segmentation • Similar to B2B segmentation, except – Consumer segments tend to be larger – More difficult to get close to buyer – More emphasis on lifestyle and context 5-8 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Consumer Segmentation Bases Geographic Multi-variable Geodemographic Behaviour Psychographic Demographic 5-9 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 eg Geographic Segmentation and Instant Hot Chocolate • Ideal for UK market (homes equipped with kettles, nice bedtime drink, or substitute for tea • Less so for French market (kettles uncommon, norm of making hot chocolate with milk rather than water) 5-10 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Demographic Segmentation • Age • Gender • Race • Income • Occupation • Social status • Family structure 5-11 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 eg Geodemographic Segmentation and Mosaic • The analysis of people by where they live • Micro-targeting system • Targets by neighourhood Source: Experian Ltd, http://www.experian.com. © 2005 Experian Ltd. All rights reserved. The word ‘Experian’ is a registered trademark in the EU and other countries and is owned by Experian Ltd and/or its associated companies 5-12 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Psychographic Segmentation • Lifestyle segmentation • Categories – Activities – Interests Quorn targets vegetarians with meat substitutes Source: © Quorn http://www.quorn.co.uk 5-13 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 – Opinions – Demographics eg Lifestyle Orientations in China • Fashion-orientated • Tradition-orientated • Achievement-orientated • Moderate-orientated 5-14 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Lifestyle Orientations in the USA 5-15 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Why Use Psychographic Segmentation? • To define a target market • To create a new view of the market • To position the product • To better communicate product attributes • To develop overall strategy • To market social and political issues 5-16 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Behaviour Segmentation • End use • Benefits sought eg usage segmentation in the soup market •Dinner party starter • Usage rate •Warming snack • Loyalty •Meal replacement • Attitude •Recipe ingredient • Buyer readiness •Easy office lunch 5-17 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Loyalty Segments • Current loyal user, continuing purchase • Current customer, switching possible • Occasional user, could become loyal • Occasional user, switching possible • Non-user, could become user • Non-user, unlikely to become user 5-18 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Figure 5.2 The AIDA Response Hierarchy Model Awareness Interest Desire Action 5-19 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Segmentation Targeting Strategies Undifferentiated Differentiated 5-20 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Concentrated Undifferentiated Strategy Marketing mix 5-21 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 The market Differentiated Strategy Marketing mix 1 Segment 1 Marketing mix 2 Segment 2 Marketing mix 3 Segment 3 5-22 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 eg Cadbury’s Market Segments • Immediate eat • Home stock • Kids • Seasonal • Gift 5-23 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Concentrated Strategy Marketing mix 2 5-24 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Segment 2 Criteria for Successful Segmentation Distinctiveness Tangibility Accessibility Defendability 5-25 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_1 • Which bases of segmentation groups consumers in terms of their usage rate, the purpose of use, or their willingness and readiness to buy? Behavioural segmentation • _____ occurs when a consumer consistently buys the same brand over a long period. Brand loyalty 5-26 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_2 • _____ stages categorise consumers in terms of how close they are to making a purchase or a decision. Buyer readiness • Which segmentation base considers the measurable aspects of population structure, such as birth rates, age profiles, family structures, education levels, occupation, income and expenditure patterns? Demographic segmentation 5-27 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_3 • _____ is a combination of geographic and demographic segmentation that can either give the demographic characteristics of particular regions, neighbourhoods and even streets, or show the geographic spread of any demographic characteristics. Geodemographics • Which segmentation base groups customers in terms of their geographic location? Differential advantage 5-28 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_4 • _____ means to group consumers on the basis of psychographic characteristics. Lifestyle segmentation • _____ segments in B2B markets are defined in terms of broad organisational characteristics such as size, location and usage rates, or in terms of product applications. Macro 5-29 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_5 • _____ segments in B2B markets are defined in terms of detailed organisational characteristics such as management philosophy, decisionmaking structures, purchasing policies. Micro • What term refers to using a number of different variables to develop a rich profile of a target group of customers? Multivariate segmentation 5-30 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_6 • Which bases of segmentation defines consumers in terms of their attitudes, interests and opinions? Psychographics • _____ are consumers who are not loyal to any one brand of a particular product and buy two or more brands within the category. Switchers 5-31 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006 Key Terms_7 • _____ is the process of deciding how many market segments to aim for and how to do it. Targeting 5-32 Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006