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Revision Notes MARKET SEGMENTATION Assembled by Arsene Kodjo MARKET SEGMENTATION DEFINITION It consists of dividing a whole market (heterogenious) into smaller and similar groups of needs or characteristics so that the best and profitable one can be selected and subsequent marketing programs applied to it. Market segmentation Stages (STP) 1. Segmenting- dividing the market into groups of similar needs using unique characteristics ( ex. grouping Toyota car users by age) 2. Tageting – selecting the appropriate market segment from various groupings ( ex. women professional between the age 28-35 and working in Accra) 3. Positioning- deciding how to register the company’s services or product into the mind of the selected target group Market segmentation variables for segmenting consumer market 1-Demographics Variables– general characteristics of a population including age, gender, income, ocupation, education, religion and family life cyle. A familiy life cycle describes the stages in which a person goes through from birth to adult. Variables used in familly life cycle segmentation include youth and single status, maried and single,married with kids, maried but single....etc Ex. An insurance company wishing to provide insurance package to female car users for example will try to know the number of female who purchased brand new cars over the past 3 to 5 years by dividing the entire market using gender variable. Market segmentation variables for segmenting consumer market 2- Geographic Variables- grouping a market or customers based on where they live such as: • Countries • States • Regions • Cities • Towns • Regional economic or monetary blocs(ECOWAS, EU, NAFTA) Market Segmentation variables for segmenting consumer market 3- Geo-demographics variables- trying to group consumers or markets based on their behaviours and their geographical locations ACCORN(A Classification Of Residential Neighborhood) is a system used in UK for geo-demographic segmentation whereas LSM (Living Standards Measurement ) is used in Ghana Ex. identify the number of female car users between the ages of 27-35 years old(demographic) and who live in Accra (geographic) Market segmentation variables for segmenting consumer market 4- Psychographic segmentation- focusing on social class of consumers. • It involves grouping consumers on the basis of how they live their life • It uses AIO (Activities , Interest and Opinion) of consumers to group them Activities- hobby or work Interest-family, job or food Opinion- politics, education , development • “VALS” is also used to segment consumers based on what influences their purchasing behaviors. Market segmentation variables for segmenting consumer market • Behaviour segmentation- Grouping consumers on how they behave or act towards particular products . variable under this methodology are: • Purchase behaviour (ex. Straight re-buy) • Benefits sought • User status and usage rate. Others are • CRF (Currency, Frequency , Recency ) • Prospect , Customers , Clients , Advocates and Partners Market segmentation variables for segmenting industrial market • Industrial markets means Business to business markets. i.e. dividing organizational buyers into similar groups of interests or characteristics. Variables used in B2B markets segmentation include: • Demographics – company size , history , industry type, legal status(public or private) • Geographical coverage (international or regional) • Purchasing approaches (Centralised vs. Decentralised • Situational factors • Type of culture Market segmentation criteria for successful market segmentation • Measurability – ability to measure the variables selected • Accessibility – ability to define and reach the selected segment with specific marketing programs • Sustainability –ability to use the selected segment to achieve the company’s objectives Targeting • It involves decisions about the segments on-which the organisation will focus its resources. There are 3 strategies to approach segments: 1. Undifferentiated marketing –approaching the segments without taking considerations of the varying needs 2. Differentiated marketing –approaching different segments with different marketing mix 3. Concentrated marketing –select one or two segments and focus all marketing efforts on them Targeting how to select a market after segmentation • Remember the reasons for undertaking the project • Define criteria for attractive market (ex. market size) • Define your company’s strengths and capabilities (ex. strong brand name) • Match segments characteristics with defined criteria and company’ capabilities • Select In selecting a target market, the GE matrix is a helpful tool to use because it helps managers identify both the attractiveness of a selected market as well as the strengths of the business or the company trying to take advantage of such market. Positioning It is all about how you want your market to perceive your offering. Variables used in Positioning are: • Internal variables (the company),ex. Product quality , service quality , personnel readiness to serve, resource capability , experience…etc • External variables(the market), ex. social class , competition , market position, relationship with suppliers, ethical behaviours….etc International marketing difference between domestic and international market Factors Comments Culture Often diverse an multi-cultural markets Markets Widespread and sometimes fragmented Data Difficult to obtain and often expensive Politics Regimes vary in stability Governments Sometimes strong influence on regulating importers and foreign business ventures Economics Varying level of development