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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