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Dr. S. Borna
MBA671
MARKET SEGMENTATION
Market Segmentation
Objectives:
1. To understand what it means
to “segment” a market.
2. To know the basic steps in
segmenting a market.
3. To understand the bases used to
segment consumer and industrial
markets.
Objectives Continued
4. To know how to evaluate and
select segments for targeting of
marketing programs.
5. To know how to determine and
structure a product position to
gain a competitive advantage.
6. To understand the concepts of
positioning and differentiation.
7. To be able to identify competitive
advantages of specific firms in
the marketplace.
8. Be able to discern differentiation
attributes
9. To be able to review how different
firms are trying to communicate
their positioning strategies.
Benefits of the Segmentation
Concept
1. Market “Reality”
2. Provides a Market
Opportunity
3. Precise Definition of the
Market in Terms of
Consumer Needs
Benefits cont.
4. Efficient Allocation of
Marketing Resources
5. Segmentation Leads to a
More Precise Setting of
Market Objectives
The Concept of Segmentation
is Based on Three Propositions:
1. Consumers are different.
2. Differences in consumers are
related to differences in
market demand
3. Segments of consumers can
be isolated within overall
market
Three Simple Consumer
Models
(Management View of Consumers)
1. Similarity
2. Unique
3. Difference/ Similarity
These views lead to:
Three Alternative Marketing
Strategies
1. Market Aggregation
(mass production)
2. Extreme Market Segmentation
(mass customization)
3. Partial Market Segmentation
Mass Marketer’s View of Its
Market
P
D
O
Q
Segmenter’s View of the Market
P
Q
P
Q
P
Q
Levels of Market
Segmentation
Mass Marketing
no
segmentation
Segment Marketing
Niche Marketing
Local Marketing
Individual Marketing
Basic Market-Preference
Patterns
Sweetness
(c) Clustered
preferences
Creaminess
(b) Diffused
preferences
Creaminess
Creaminess
(a) Homogeneous
preferences
Sweetness
Sweetness
Criteria for Segmentation
1. Size (Substantiality)
2. Reachability
3. Measurability(size, purchasing
power, profiles of segments can be measured)
Criteria cont.
4. Variations in Market
Response
5. Segments are Sufficiently
Stable
6. To minimize within group
difference and maximize
among group difference.
Two Approaches To Market
Segmentation
A. Socioeconomic
1. Analysis of
B.
Psychological
Consumer
C. Geographic
Characteristics
(forward segmentation)
2. Analysis of
Consumer
Responses
Subjective
Measures of
consumer Responses
(Perceptual Factors)
Objective
Measure
(Behavioral
of
Consumer
Differences)
Responses
(Usage
Factors)
(backward
segmentation)
A) Social Class
Ethnic
Demographic
Age
Income
Sex, etc.
B) Personality Type (Compulsive,
Ambitious)
Buyer Motives
Economy
Patronage, etc.
Bases for Segmentation
1. Socioeconomic and
Demographic
2. Geographical
3. Psychological
4. Perceptual Factors
5. Usage Factors
Five Patterns of Target Market
Selection
Single-segment
concentration
Product
specialization
Selective
specialization
M1 M2 M3
M1 M2 M3
M1 M2 M3
P1
P1
P1
P2
P2
P2
P3
P3
P3
Market
P= Product M= Market
specialization
M1 M2 M3
Selling lab equipment
to universities only
P1
P1
Microscope to labs
P2
P2
Radio Broadcast to …
P3
P3
Full market
coverage
M1 M2 M3
Undifferentiated Market Strategy
MKG
MIX
MARKET
Differentiated Strategy
MKG MIX 1
SEGMENT 1
MKG MIX 2
MKG MIX 3
SEGMENT 2
SEGMENT 3
Concentrated marketing
MKG MIX
SEGMENT 2
SEGMENT 3
Selecting a marketing
strategy
1. Company Resources
2. Product Homogeneity
3. Product Stage in P.L.C.
cont.
Selection of strategy
cont.
4. Market Homogeneity
5. Competitive Marketing
Strategy
Evaluating The Market
Segments
1. Segment Size and Growth
2. Segment Structural
Attractiveness
Segment Rivalry
Threat of New Entrant
Threat of Substitute P.
Bargaining Power of Buyers
and Suppliers
Evaluation cont.
3. Company Objectives
and Resources