Identifying Market Segments
By Agung Utama
A company cannot serve all
customers in a broad market
The customers are too numerous and
diverse in their buying requirements
A company need to identify the
market segments it can serve
effectively
Mass marketing
The starting point for discussing
segmentation is mass marketing
Mass production, mass distribution
and mass promotions of one
product for all buyers
Pro : creates the largest potential
market, which leads to lowest cost,
lower price or higher margins.
Contra : The proliferations of
advertising media and distribution
channel is making it difficult and
increasingly expensive to reach a
mass audience.
Micro marketing
1)
Segment marketing
Segment market : consists of a group of
customers who share a similar set of wants.
Segment differ from sector
The marketer’s task : Identify the segment
and decide which one (s) to target.
The benefits :
Can create a more fine tuned product or
service
Can price it appropriately fot the target
segment
Can more easily select the best
distribution and communication
channels
Have a clear picture of its competitors
2.
Niche marketing
A more narrowly defined group seeking a
distinctive mix of benefits.
Identified by dividing segments into sub
segments
Example : heavy smokers includes two niches :
trying to stop and who do not care.
Characterization of attractive niche
1) Have a distinctive of needs
2) Pay a premium
3) Has size, profit and growth potential
4) Gains certain economies through
specialization.
3.
Local Marketing
Target marketing is leading
to marketing programs
tailored to the needs and
wants of local customer
groups.
Citibank provide different
mixes of banking services
in its branches, depending
on neighborhood or
demographics.
Pro: see national
advertising as wasteful
because it fails to
local
needs
Contra : It drives up
manufacturing and
marketing cost by reducing
economics of scale.
4.
Individual customer marketing
Ultimately every individual has a unique set of
wants and needs.
I the past centuries, producers customized their
offering to each customer .
The tailor fitted a suit and a cobbler made
shoes for each individual.
Mass customization : ability of a company to
prepare a mass basis individually designed
products, services, program, and
communications to meet each customers
requirements.
1.
Homogenous preferences
•
•
2.
A market where all consumers
have roughly the same
preferences.
The market shows no natural
segments. The existing brands
would be similar and cluster
around the middle of the market
Diffused preferences
•
•
A market where consumer
preferences may be scattered
throughout the space, indicating
that customers vary greatly in
their preferences
The first brand to enter the
market is likely to position in the
centre to appeal to the most
people. A second competitor
could locate nect to the first
customer group tnd and fight for
market share or it could locate
in a corner to attract a
2.
Diffused preferences
•
•
A market where
consumer preferences
may be scattered
throughout the space,
indicating that
customers vary greatly
in their preferences
The first brand to enter
the market is likely to
position in the centre to
appeal to the most
people. A second
competitor could locate
next to the first brand
and fight for market
share or it could locate
in a corner to attract a
customer group that
was not satisfied with
the centre brand
3.
Clustered preference
The market might reveal
distinct preferences clusters,
called natural market segments.
The first firm in this market has
three options. It might position
in the centre, hoping to appeal
to all groups. It might position in
the largest market segment, or
it might develop several brands,
each positioned in a different
segment.
1.
2.
Needs Based Segmentation
group customers in to segments
based on similar needs and benefits
sought by customer.
Segment Identification
For each needs based segment,
determine which demographics,
lifestyles, and usage behaviors
make the segment distinct and
identifiable.
3.
4.
5.
6.
7.
Segment Attractiveness
Determine the overall attractiveness of
each segment using criteria such as:
market growth, competitive intensity and
market access.
Segment Profitability
Segment Potitioning
for each segment, create a value
proposition and product price positioning
strategy based on that segment’s unique
customer needs and characteristics.
Segment Acid Test
Create a test attractiveness of each
segment’s positioning strategy
Marketing Mix strategy
Measurable
The size, purchasing power and characterisric
of the segments can be measured.
Substantial
The segments are large and profitable enough.
Accesible
The segments can be effectively reached and
served.
Differentiable
conceptually distiguishable and respon
diffrently to different marketing mix elements
and programs.
Actionable
Effective programs can be formulated for
attracting and serving the segments
Basis for segmenting
consumer markets
geographic segmentation
Dividing the market into
different geographical unit
such as nations, state, regions,
counties, cities, or
neighborhood
Demographic segmentation
The market is divided into
groups on the basis of variable
such as : age, famili size, famili
life cycle, gender, income,
occupation, education, religion,
generation, nationality, social
class, etc.
Pcycographic Segmentation
Buyers divided into different groups on the
basis of lifestyle, or personality or values.
Behavioral Segmentation
Buyers are divided into groups on the basis of
their knowledge, attitude toward use of or
response to a product.
Other behahioral variables : ocasions, user
status, usage rate, loyalty status, buyer
readiness, and attitude.
Once the firm has identified its market segment
opportunities, it has to decide how many and
which ones to target.
Market targeting related to select one or more
market segments to enter.
Five patterns of target market selection:
1. Single-segment concentration /concentrated
marketing.
The firms make a single product that it sells to a
single segment. The company gains a strong
knowledge of the segment’s needs and strong
market pressence.
Example: Volks Wagen concentrates on the small
car market and Porsche on the sport car market.
Single segment concentration
M1
P
1
P
1
P
1
M2
M3
2.
Selective Specialization/Multi Segment
Strategy
The firm selects a number of
segments, each objectively attractive
and appropriate.
This strategy has the advantage of
diversifying the firm’s risk
There may be little or no synergy
among the segments, but each
promises to be a money maker
Selective Specialization
M1
P
1
P
1
P
1
M2
M3
3.
Product Specialization
The firms make a certain product that
it sells to several segments.
The advantages of the strategy is a
strong reputation in the specific
product area.
Product Specialization
M1
P
1
P
1
P
1
M2
M3
4.
Market Specialization
The firm concentrates on serving
many needs of particular customer
group.
The advantage of this strategy is
gaining a strong reputation in serving
this customer group and became a
channel for additional products the
customer groups can use.
Market Specialization
M1
P
1
P
1
P
1
M2
M3
5.
Full Market Coverage
The firms attempts to serve all customer
groups with all the products they might
need. Only very large firms such IBM, Coca
Cola, General Motors, Toyota can undertake
a full market coverage strategy.
Large firm can cover a whole market in two
broad ways: undifferentiated marketing and
differentiated marketing.
In undifferentiated marketing, the firms
ignores segment differences and goes after
the whole market with one offer.
In differentiated marketing, the firms
operates in several market segments and
design different products for each segment.
Full Market Coverage
M1
P
1
P
1
P
1
M2
M3
A company cannot serve all
customers in a broad market
The customers are too numerous and
diverse in their buying requirements
A company need to identify the
market segments it can serve
effectively
Mass marketing
The starting point for discussing
segmentation is mass marketing
Mass production, mass distribution
and mass promotions of one
product for all buyers
Pro : creates the largest potential
market, which leads to lowest cost,
lower price or higher margins.
Contra : The proliferations of
advertising media and distribution
channel is making it difficult and
increasingly expensive to reach a
mass audience.
Micro marketing
1)
Segment marketing
Segment market : consists of a group of
customers who share a similar set of wants.
Segment differ from sector
The marketer’s task : Identify the segment
and decide which one (s) to target.
The benefits :
Can create a more fine tuned product or
service
Can price it appropriately fot the target
segment
Can more easily select the best
distribution and communication
channels
Have a clear picture of its competitors
2.
Niche marketing
A more narrowly defined group seeking a
distinctive mix of benefits.
Identified by dividing segments into sub
segments
Example : heavy smokers includes two niches :
trying to stop and who do not care.
Characterization of attractive niche
1) Have a distinctive of needs
2) Pay a premium
3) Has size, profit and growth potential
4) Gains certain economies through
specialization.
3.
Local Marketing
Target marketing is leading
to marketing programs
tailored to the needs and
wants of local customer
groups.
Citibank provide different
mixes of banking services
in its branches, depending
on neighborhood or
demographics.
Pro: see national
advertising as wasteful
because it fails to
local
needs
Contra : It drives up
manufacturing and
marketing cost by reducing
economics of scale.
4.
Individual customer marketing
Ultimately every individual has a unique set of
wants and needs.
I the past centuries, producers customized their
offering to each customer .
The tailor fitted a suit and a cobbler made
shoes for each individual.
Mass customization : ability of a company to
prepare a mass basis individually designed
products, services, program, and
communications to meet each customers
requirements.
1.
Homogenous preferences
•
•
2.
A market where all consumers
have roughly the same
preferences.
The market shows no natural
segments. The existing brands
would be similar and cluster
around the middle of the market
Diffused preferences
•
•
A market where consumer
preferences may be scattered
throughout the space, indicating
that customers vary greatly in
their preferences
The first brand to enter the
market is likely to position in the
centre to appeal to the most
people. A second competitor
could locate nect to the first
customer group tnd and fight for
market share or it could locate
in a corner to attract a
2.
Diffused preferences
•
•
A market where
consumer preferences
may be scattered
throughout the space,
indicating that
customers vary greatly
in their preferences
The first brand to enter
the market is likely to
position in the centre to
appeal to the most
people. A second
competitor could locate
next to the first brand
and fight for market
share or it could locate
in a corner to attract a
customer group that
was not satisfied with
the centre brand
3.
Clustered preference
The market might reveal
distinct preferences clusters,
called natural market segments.
The first firm in this market has
three options. It might position
in the centre, hoping to appeal
to all groups. It might position in
the largest market segment, or
it might develop several brands,
each positioned in a different
segment.
1.
2.
Needs Based Segmentation
group customers in to segments
based on similar needs and benefits
sought by customer.
Segment Identification
For each needs based segment,
determine which demographics,
lifestyles, and usage behaviors
make the segment distinct and
identifiable.
3.
4.
5.
6.
7.
Segment Attractiveness
Determine the overall attractiveness of
each segment using criteria such as:
market growth, competitive intensity and
market access.
Segment Profitability
Segment Potitioning
for each segment, create a value
proposition and product price positioning
strategy based on that segment’s unique
customer needs and characteristics.
Segment Acid Test
Create a test attractiveness of each
segment’s positioning strategy
Marketing Mix strategy
Measurable
The size, purchasing power and characterisric
of the segments can be measured.
Substantial
The segments are large and profitable enough.
Accesible
The segments can be effectively reached and
served.
Differentiable
conceptually distiguishable and respon
diffrently to different marketing mix elements
and programs.
Actionable
Effective programs can be formulated for
attracting and serving the segments
Basis for segmenting
consumer markets
geographic segmentation
Dividing the market into
different geographical unit
such as nations, state, regions,
counties, cities, or
neighborhood
Demographic segmentation
The market is divided into
groups on the basis of variable
such as : age, famili size, famili
life cycle, gender, income,
occupation, education, religion,
generation, nationality, social
class, etc.
Pcycographic Segmentation
Buyers divided into different groups on the
basis of lifestyle, or personality or values.
Behavioral Segmentation
Buyers are divided into groups on the basis of
their knowledge, attitude toward use of or
response to a product.
Other behahioral variables : ocasions, user
status, usage rate, loyalty status, buyer
readiness, and attitude.
Once the firm has identified its market segment
opportunities, it has to decide how many and
which ones to target.
Market targeting related to select one or more
market segments to enter.
Five patterns of target market selection:
1. Single-segment concentration /concentrated
marketing.
The firms make a single product that it sells to a
single segment. The company gains a strong
knowledge of the segment’s needs and strong
market pressence.
Example: Volks Wagen concentrates on the small
car market and Porsche on the sport car market.
Single segment concentration
M1
P
1
P
1
P
1
M2
M3
2.
Selective Specialization/Multi Segment
Strategy
The firm selects a number of
segments, each objectively attractive
and appropriate.
This strategy has the advantage of
diversifying the firm’s risk
There may be little or no synergy
among the segments, but each
promises to be a money maker
Selective Specialization
M1
P
1
P
1
P
1
M2
M3
3.
Product Specialization
The firms make a certain product that
it sells to several segments.
The advantages of the strategy is a
strong reputation in the specific
product area.
Product Specialization
M1
P
1
P
1
P
1
M2
M3
4.
Market Specialization
The firm concentrates on serving
many needs of particular customer
group.
The advantage of this strategy is
gaining a strong reputation in serving
this customer group and became a
channel for additional products the
customer groups can use.
Market Specialization
M1
P
1
P
1
P
1
M2
M3
5.
Full Market Coverage
The firms attempts to serve all customer
groups with all the products they might
need. Only very large firms such IBM, Coca
Cola, General Motors, Toyota can undertake
a full market coverage strategy.
Large firm can cover a whole market in two
broad ways: undifferentiated marketing and
differentiated marketing.
In undifferentiated marketing, the firms
ignores segment differences and goes after
the whole market with one offer.
In differentiated marketing, the firms
operates in several market segments and
design different products for each segment.
Full Market Coverage
M1
P
1
P
1
P
1
M2
M3