Strategic Market Analysis

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CDU Business School

Lesson 6: Strategic thinking and decision making – segmentation challenges

Any further queries?

Regarding the models you are using.

Any questions regarding each section?

Assignment 2

NB. Don’t forget the additional unit resources • Chapters 1 to 5 of the unit text • Use the CDU library to identify journal articles reviewing the

models and strategic planning tools you plan to use • You can also review the marking rubric for further insights.

Schedule

• Recapping

– corporate reputation

– brand and price differentiation (segmentation)

• Revisiting the segmentation process

• Challenges associated with using traditional segmentation

variables

Read again Segmentation, targeting and positioning strategies (Chapter 5)

Targeting strategies

Undifferentiated Try to appeal to broad spectrum

Benefit from economies of scale

Differentiated Develops products for each segment

Where different needs exist

Concentrated Focus on a single segment

Often useful for smaller companies

Customised Meet the needs of individuals

Common in B2B and service firms

Steps in effective segmentation

1. Strategic orientation – decide / confirm organisational strategy / direction

3. Targeting – enhance understanding of the targeted segments by investigating in

detail their specific habits, attitudes and characteristics

4. Implementation – identify / develop a service / product mix most appealing to the

chosen segments that will facilitate the chosen strategic direction

2. Segment evaluation – develop potential segment profiles THEN evaluate in terms

of DISTINCTIVENESS / SIZE / ACCESSIBILITY / STABILITY / MATCH WITH

ORIENTATION

Segment evaluation - criteria for successful

segmentation

To be viable a segment must be:

• Distinctive / have different enough characteristics

• Sizeable / genuine & big enough to sustain business

• Measurable & accessible / identifiable & reachable with a

tailored marketing mix

• Stable / defendable in the long term

Key segmentation challenge?

When segmenting your customer base

how do you know which segmentation

dimensions will be the most appropriate?

• You don’t!

Given this companies often collect a diverse range of information when undertaking segmentation research

Consumer segmentation variables

Consumer segmentation

Behavioural

•Purchase occasion

•Usage

•Customer type

•Benefits/motives

Psychographic

•Lifestyle

•Personality

•Values

Profile

•Income & age

•Socio economic

•Product ownership

•GEOGRAPHIC

•Demographic What are the pitfalls

with trying to establish these?

Profile: Socio economic classification SEC All derived from Donald Monk’s original 1973 socio economic grading system

For Australia and New Zealand see http://www.abs.gov.au/ausstats/[email protected]/PrimaryMainFeatures/1220.0?OpenDocument

Consumer segmentation

Behavioural

•Purchase occasion

•Usage

•Customer type

•Benefits/motives

Psychographic

•Lifestyle

•Personality

•Values

Profile

•Income

•Socio economic

•Product ownership

•GEOGRAPHIC

•Demographic

http://www.caci.co.uk/case-studies/

https://www.youtube.com/watch?v=sbboWo-w0ZM

Profile: Geodemographics

Profile: Geodemographics

ABS has developed similar for Australian consumers: http://www.abs.gov.au/websitedbs/d3310114.nsf/4a256353001af3 ed4b2562bb00121564/72b3e57792a2e264ca2572f3002123a9!Ope nDocument Cameo Australia - Divides the population into 10 main groups and 51 distinct neighbourhood types.

Nielsen Prizm – identifies over 60 distinct consumer segments – see social groups / urbanisation and life stage versions of Prizm: https://segmentationsolutions.nielsen.com/mybestsegments/Defau lt.jsp?ID=70 https://segmentationsolutions.nielsen.com/mybestsegments/

Insights into how industry is segmenting

customers

Consumer segmentation variables

Consumer segmentation

Behavioural

•Purchase occasion

•Usage

•Customer type

•Benefits/motives

Psychographic

•Lifestyle

•Personality

•Values

Profile

•GEOGRAPHIC

•Demographic

•Socio economic

•Product ownership

Behavioural: Customer type Customer classification matrix

% Loyal % Potential

% Lapsed % Unaware/ untouched

Reward

Recover

Stimulate trial

Inform

Clear marketing goals for each customer group

Behavioural: Motivation

NEXT: core mail order shopping motives:

1. Hassle free shopping

2. Prestige of the Next brand & Next goods

3. Getting the right item

4. Incentive/added value

5. Wide range

6. Best buy

7. Recreational experience

8. Transaction efficiency

9. Decision reassurance

10. Quality of Directory

Greenland and McGoldrick article in

Marketing Channels

Key for full time

mothers

Key for working

women

http://www.nextdirect.com/sg/en/home

10% 20% 30% 40% 50% 60% 70% 80%

Motives: How drivers of choice (B2B motivation)

might vary by an organisation’s sphere of operations

Domestic International

Trustworthy & reliable bank

Effectiveness of operations / transactions

Technologically advanced company

Effective account management

Effective account communication

Value of services / products

Ability to structure tailor- made solutions

Personable, professional staff

Performance to international standards

Provide account / relation manager

L e v e l o

f im p

o rta

n c e

Common consumer segmentation variables

Consumer segmentation

Behavioural

•Purchase occasion

•Usage

•Customer type

•Benefits/motives

Psychographic

•Lifestyle

•Values

•Personality

Profile

•GEOGRAPHIC

•Demographic

•Socio economic

•Product ownership

classification according to

attitudes, aspirations &

other psychological criteria Needs closely inter

related with values

All consumers can be categorised into 7

values types

Self-Expression

Control

Status

Individuality

Survival

Security

Escape

Psychographic: Values, e.g.,

Y&R VALS system

http://www.not-perfect.com/files/content/4Cs_booklet.pdf

Which values type are you?

Masclow’s theory?

VALS

Model

Tobacco segment specific research

• Greenland (2011)

Segmentation

Variable

Examples of Variable in

Research

Demographic Gender Michael Amoroso Inc. 1985; Philip

Morris USA 1985; P. Lorillard &

Co. (undated)

Age: especially

young adults

Brown and Williamson Tobacco

Corporation 1992; Philip Morris

USA 1985

Race / ethnicity Brown & Williamson Tobacco

Corporation 1985; P. Lorillard &

Co., (undated)

Socio-economic:

occupation, income,

education, life-stage

Michael Amoroso Inc. 1985; P.

Lorillard & Co., (undated)

Geographic International vs.

local

Philip Morris USA 1985

Regions & cities P. Lorillard & Co., (undated)

Motivation &

psychographic

Values & motivation Michael Amoroso Inc. 1985;

Research International 1993

Smoking attitudes &

motives

Philip Morris 1961; P. Lorillard &

Co., (undated)

Personality Michael Amoroso Inc. 1985.

Self perception &

aspirations

P. Lorillard & Co., (undated)

Steps in effective segmentation

1. Strategic orientation – decide / confirm organisational strategy / direction

3. Targeting – enhance understanding of the targeted segments by investigating in

detail their specific habits, attitudes and characteristics

4. Implementation – identify / develop a service / product mix most appealing to the

chosen segments that will facilitate the chosen strategic direction

2. Segment evaluation – develop potential segment profiles THEN evaluate in terms

of DISTINCTIVENESS / SIZE / ACCESSIBILITY / STABILITY / MATCH WITH

ORIENTATION

Exploring & defining segments

Parameters /

differentiators

Segment A Size

/ potential

Segment B Size

/ potential

Segment C Size

/ potential

Segment D Size

/ potential

Key goals & aspirations

(banking services)

Key habits & attitudes

Business potential / value

(monetary measures)

Key drivers of purchase /

motives

Demographic, lifestyle /

life stage, psychographics

Media consumption habits

Typical Consumer Banking Segments

MODEL SEGMENTS DEFINITIONS

Bank loyalty

a. Loyals Use A BANK for most bank transactions

b. Potentials Would positively consider A BANK in future

c. Rejectors Would NEVER consider using A BANK

d. Untouched Not aware of A BANK

Net worth

a. Low net worth

Often based on monthly balanceb. Middle net worth

c. High net worth

Product use

a. Basic level Use up to 5 banking products

b. Middle level Use 6 – 10 banking products

c. High level Use 10+ banking products

Life stage

a. Young adults Aged 18 – 24 years

b. Adults Aged 25 – 34 years

c. Middle aged Aged 35 – 54 years

d. Senior Aged 55+ years

E.g. net worth in perspective (Claimed MEAN annual account balance)

LOW

($5k)

MIDDLE

($20k)

HIGH

($ 50k+)

SEGMENT SIZE ( estimated %) 50% 40% 10%

CLAIMED INCOME / ASSETS

Household annual income ($) 45k 100k 175k

Disposable income ($) 10k 24k 50k

Owns car 30% 65% 95%

Owns home 20% 35% 55%

SOCIO ECONOMIC CLASS AB

C1

C2D

5%

20%

75%

10%

45%

45%

30%

50%

20%

CONSIDERATION

Currently uses A Bank 20% 20% 15%

Would consider using A Bank 45% 40% 30%

Would never consider A Bank 35% 40% 55%

Which net worth segment would you choose for the bank and why?

Model Segments Definitions

Bank loyalty

a. Loyals Use A BANK for most bank transactions

b. Potentials Would positively consider A BANK in future

c. Rejectors Would NEVER consider using A BANK

d. Untouched Not aware of A BANK

Business Scope

a. Domestic Primarily Local National market

b. Regional Wider APAC region

c. International Europe, Asia, America, rest of the world

Product use, e.g., d. Borrowing Credit products in past 12 months

e. Non-borrowing No credit products in past 12 months

Sector Company core business activity, e.g., service, manufacturing,

public, NGO, primary, etc.

Turnover

a. $1-5 million

Company claimed annual turnover b.$ 5-10 million

c. 10-20 million

d. 20 million +

Typical Corporate Banking Segments

Multi variable segmentation Initially single segments are evaluated, before moving to multi-variable segments

Low

Mid

Hi

Level of usage

Current

customer

Potential

customers

Local

National

International

This is where segmentation starts to become extremely complex

Steps in effective segmentation

1. Strategic orientation – decide / confirm organisational strategy / direction

3. Targeting – enhance understanding of the targeted segments by investigating in

detail their specific habits, attitudes and characteristics

4. Implementation – identify / develop a service / product mix most appealing to the

chosen segments that will facilitate the chosen strategic direction

2. Segment evaluation – develop potential segment profiles THEN evaluate in terms

of DISTINCTIVENESS / SIZE / ACCESSIBILITY / STABILITY / MATCH WITH

ORIENTATION