Marketing Management 3 assigment 750-900 words each assigment

Marketing_Management_CHs3-4_Week3.pdf

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Segmentation

3. 2

Marketing Framework

Discussion Question

• Name a product in which everyone wants the same thing.

Segmentation

• Psychologists: • Consumers have different motivations that

drive their purchases • Economists:

• Imperfect competition exists; consumers have heterogeneous needs

• Marketers: • The market is comprised of different

segments

Segmentation

• Segmentation • Breaking the market into more homogeneous

consumer groups • A single product, price, promotion is unlikely

to satisfy all consumers’ needs • e.g., Miley Cyrus appeals to tweens; Wilford

Brimley appeals to seniors

Segments Defined

• Market segment • A group of customers who share similar

inclinations toward a brand • e.g., One segment might purchase a car

primarily to get from A to B while another segment may purchase a car primarily to impress their friends

• Marketers’ Goal • Create marketing mixes that meet the

segment’s needs

Marketing Segmentation

Types of Segmentation

• Mass marketing • All customers are treated the same • Is usually more efficient but not effective in

meeting customer needs • e.g., Pepsi seems to be mass marketed but

is not – Pepsi, Diet Pepsi, Caffeine free Pepsi, 2-

liters, 12 pack cans, 6 pack bottles, etc.

Types of Segmentation

• One-to-one marketing • Each customer serves as his own segment • Product is tailored for each person’s desires • Is usually more effective in meeting

customers’ needs but hard to achieve efficiently and may involve quality issues

• e.g., Toyota allows customers to “build” their own Scion; however, options are limited

Segmentation

• Segmentation falls between one-to-one and mass marketing • As segment size increases, segments

become more heterogeneous • As segment size decreases, segments

become less profitable • Marketers need the “optimal” segment size

• Niche • Targeting small market that firm serves well

Segmentation: Demographics

• Demographics • Marketers may change marketing mix

• Gender, age, stage in life cycle, education, income, ethnicity

• Demographic variables are clear and easy to recognize • However, they may not determine interests

• e.g., Do all older people dislike new technology? Do only men like to hunt?

Segmentation: Geographic

• Geographic distinctions between customers can change preferences/needs

• Cultural differences can exist between countries or within a country

– e.g., Southern USA prefers spicier food • Urban living is different than small town

– e.g., NYC residents want smaller dishwashers • Hot climates require different products than

cold climates – e.g., Minnesotans need snow blowers

Segmentation: Geographic/Demographic

• Combining geographic and demographic information can be powerful

Segmentation: Psychological

• Psychological: get inside the heads and hearts of customers • Attitudes: e.g., Favorable attitude toward “green” products • Knowledge & awareness: e.g., Don’t know about the product • Wants and needs: e.g., Need for safety • Affiliations: e.g., Members of the AMA • Traits: e.g., Extroverts who want to socialize • Expertise & involvement: e.g., New, motorcycle enthusiasts • Brand attributes sought: e.g., Low price and red color • Risk orientation: e.g., Risk adverse-late technology adopters • Aspirations: e.g., Want to be a better cook

• Vary in terms of relevancy to the product 15

Segmentation: Psychological/Lifestyle

• Psychological & lifestyle • e.g., Gardeners, food connoisseurs, etc.

• Vals: psychographic segmentation tool • Marketers determine people’s attitudes and

what they value and use this knowledge to communicate effectively

• e.g., Strivers are trendy, like to impress, often impulsive

Segmentation: Behavioral

• Behavioral: behaviors people engage in • Attitudes can’t be observed; behaviors can • Intentions do not always equal behaviors • Behaviors help predict future behavior

• Current users; Non users • Non users may use competitors or don’t buy

• 80:20: 80% of sales come from 20% of customers

– It costs 6 times more to acquire new customer compared to retaining loyal

Segmentation: Behavioral

• Patterns of co-purchasing • Purchase a new house, usually purchase

new appliances, curtains, etc. • Create opportunities for cross selling

B2B compared to B2C Segmentation

• Primary distinction between B2B & B2C

is the sources of data are different

Concept in Action

• Automobile insurance industry example • Industry is large and competitive • Segment market using cluster analysis

• Survey customers; identify questions where there is variability in responses

• If no variability in responses, do not segment on that variable

– Useful segmentation has variation across groups

How to Segment the Market

• Iterate between two approaches • Managerial: top-down ideation • Customer-based: bottom-up customer

needs assessment

• Doing both approaches is important • Managers may hold beliefs that are not

consistent with systematically gathered data

How to Segment the Market

• Begin with understanding the marketplace and then gather information on the customer’s perspective • A segment may look desirable in terms of

size and growth but be saturated with competitors and not consistent with firm goals

How to Evaluate Segmentation Schemes

• Does the segmentation scheme have 1. Data to identify segments?

• Census data: available but may not be useful • Vals & Prizm: expensive • Specific survey may not be available

2. Databases to access segments? • Databases that give access to the specific

people within your chosen segments

How to Evaluate Segmentation Schemes

• Does the segmentation scheme have 3. Profitability?

• Size matters but so does frequency & depth ($) of purchase, price sensitivity, segment stability, growth potential, competitive intensity, etc. – Use information to estimate segment value

• Be careful not to segment too narrowly – Determine what matters to your product

How to Evaluate Segmentation Schemes

• Does the segmentation scheme 4. Fit with corporate goals?

• Consider your firm’s goals and image • e.g., Subzero (high-end refrigeration) does

not “fit” with the low-end refrigerator market 5. Actionable?

• Marketer can design something for segment • It is common to link usage, attitudinal, etc.

variables to demographic variables to make the segment more actionable

Segmentation Strategies

• Multiple segments in a marketplace

Segmentation Strategies

• Breadth strategy • Serve more than one segment

Segmentation Strategies

• Depth strategy • Serve one segment well

Segmentation Strategies

• Tailored strategy • Different products for different segments

Managerial Recap

• Customers vary in preferences • It is usually impossible to please all

customers with one product

• Segments can be formed on nearly any kind of differentiating information

• e.g., demographics, geographics, psychological, behaviorial, etc.

Managerial Recap

• Segmentation schemes should be • Based on data, • Sustained by a database to help access the

customers, • Profitable enough to serve, • Sensible with respect to the larger corporate

goals and planning, and • Actionable

Targeting

4. 32

Marketing Framework

Discussion Questions

1. Which segment does Mountain Dew target?

2. Why do you think they are pursuing this target?

Targeting

• Once the market is segmented, marketers select (target) one or more of those markets to pursue • Why? It is hard to be all things to all people

• Firms select target markets which are a good fit with the firm and have good profit potential

How to Choose a Target

• Top down: strategic fit • Does this market fit with who we are?

• Understand firm’s resources, strengths weaknesses, brand personalities, etc.

• Bottom up: profitability • How profitable will this segment be?

• Function of the current market size, its anticipated growth, current and anticipated levels of competition, customer behavior and expectations

How to Choose a Target

• “Go for it” and “avoid” are easy decisions

SWOT

• Strengths and weaknesses are relative to competitors • Should include customers’ perspectives

• Requires market research • Strategies:

• Leverage firm’s strengths • Improve or design around firm’s weaknesses

SWOT

• Opportunities and threats are usually driven by changes in one of the 5Cs

For example: • The rise in Internet access • Growing Hispanic population in U.S. • New competitors • New offerings from existing competitors • Lack of competitors within a market • Aging Baby Boomers

Competitive Comparisons

• Companies typically assess their strengths relative to their competitors

Competitive Comparisons

• Perceptual maps show customers’ perceptions of firm’s strengths/weaknesses relative to competitors • In many product categories, price and

quality are key • Quality is defined by the industry

Competitive Comparisons Questions

• Which competitors do we dominate on price? Quality?

• If we pursue a price sensitive target, which competitor would be of most concern? 43

Sizing Markets Considerations

• Some estimates are less firm than others • Give intervals and “what if” scenarios

• Each estimate should be as precise as possible

• The more precisely defined the segment,

the easier the numbers are to estimate

Concept in Action: Additional Factors

• Additional Factors-Estimate growth • Use census to determine size of next cohort • Obtain sales data for previous years and

extrapolate using a moving average • e.g., 3-year moving average would average

years 1, 2, 3; then average years 2, 3, 4; then average years 3, 4, 5; Then fit a curve to the data (regression)

Concept in Action: Additional Factors

• Additional Factors-Profitability • Need to determine pricing

• Selling RVs is a good; Renting is a service • Estimate fixed and variable costs

• Additional Factors-Competition • How fierce is the competition? Is there one

firm or 30 firms? Does the one firm dominate the market?

• Search yellowpages.com for RVs

Concept in Action: B2B Market Sizing

• Census.gov cross-classifies businesses by sector (e.g., NAICS codes) and size (e.g., by sales or number of employees) • RVs might be sold to mobile dentists, blood

collectors, salons, etc.

Market Sizing

• Use the purchase decision making process: Awareness, trial, repeat, etc. • Population x %aware x %trial x %repeat

• Multiply by how much & how often buy • (Population x %aware x %trial x %repeat) x

per annum purchase

• Multiplied by average retail price paid

Managerial Recap

• Targeting is important but not difficult • Choose target by iterating between

• Corporate fit • Utilize SWOT to help clarify corporate fit

• Segment sizing • Use secondary data (e.g., demographics) • Use customer survey data on attitudes &

preferences and behavior to smooth out the size estimation

Slide Number 1
Segmentation
Marketing Framework
Discussion Question
Segmentation
Segmentation
Segments Defined
Marketing Segmentation
Types of Segmentation
Types of Segmentation
Segmentation
Segmentation: Demographics
Segmentation: Geographic
Segmentation: Geographic/Demographic
Segmentation: Psychological
Segmentation: Psychological/Lifestyle
Segmentation: Behavioral
Segmentation: Behavioral
B2B compared to B2C Segmentation
Concept in Action
How to Segment the Market
How to Segment the Market
How to Evaluate Segmentation Schemes
How to Evaluate Segmentation Schemes
How to Evaluate Segmentation Schemes
Segmentation Strategies
Segmentation Strategies
Segmentation Strategies
Segmentation Strategies
Managerial Recap
Managerial Recap
Targeting
Marketing Framework
Discussion Questions
Targeting
How to Choose a Target
How to Choose a Target
SWOT
SWOT
SWOT
Competitive Comparisons
Competitive Comparisons
Competitive Comparisons Questions
Sizing Markets Considerations
Concept in Action: Additional Factors
Concept in Action: Additional Factors
Concept in Action: B2B Market Sizing
Market Sizing
Managerial Recap