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Download ANALYSING THE BUSINESS ENVIRONMENT
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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 – – – – – – 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 • • • • • • • • 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: – – – – Measurable Substantial Accessible Actionable