TIØ4165 Marketing Management

1. TIØ4165Marketing Management Segmentation and Targets Arild Aspelund IØT, NTNU

2. Emerging Trends in Consumer Behavior Metrosexual – Straight urban man who enjoys shopping and using grooming products

3. Outline • The purpose of segmentation • Levels of segmentation • Categories of segmentation variables • Segmentation process and criteria • Cost considerations

4. Why Segmentation? • Properties of ”mass markets” makes it hard to earn above-average rent on merely selling products to customers • This is due to the unfortunate economic postulate that prices in the long run tend to equal marginal costs of production in perfect markets; that is… • Homogeneous products • Perfect information symmetry • Perfect competition • No “friction” or switching costs • It is therefore paramount to • Clearly identify your segment – where the customer that are willing to pay a disproportional high price in sufficient volumes • Differentiate your product to offer superior value to your key segments • Monopolize your key segments through • Shade information • Create favorable customer preferences • Loyalty

5. Levels of Segmentation • Mass marketing • Volumes to the masses! • Segment marketing • Group of customers that share a similar set of needs and wants • Niche marketing • Group of customers that share the same distinctive mix of benefits • Local marketing • Tailored to meet the needs and wants of a local customer group

6. Levels of Segmentation- Mass Marketing • No customization or market adoption • Cost oriented • Volumes to the masses! • Are there any examples of this in the modern Norwegian economy?

7. Levels of Segmentation- Segment Marketing • Groups of customers that share needs and wants

8. Levels of Segmentation- Segment Marketing

9. Levels of Segmentation- Niche Marketing • Targeting a narrowly defined customer group seeking a distinctive mix of benefits • Often identified by sub-segments

10. Levels of Segmentation- Local Marketing • Tailored to meet the needs and wants of a local customer group • Endeavors to get as close and personally relevant to individual customers as possible • An increasing trend in terms of “glocalization” and “customerization”

11. Geographic Demographic Psychographic Behavioral Segmentation of Consumers

12. Geographic Segmentation • Dividing the market into multiple geographical units • Nations , states, regions, counties, cities or neighborhoods • Firms may operate in only one, a few or all, but adopts local variations • Many areas may have similarities and knowledge of such are valuable • Are there any similarities in the localization of new consumer concepts such as Lidl?

13. Demographic Segmentation • Age and life-cycle stage • People’s needs and preferences change with age and life-cycle stage • Defining the persons major concern • Gender • No, in terms of consumer behavior we are not equal… • Income • Goes without saying. Think of Maslow’s hierarchy… • Generation • Generations share experiences, and to some extent outlooks and values • Social class • A reference to Maslow again…

14. Psychographic Segmentation The VALS Segmentation System

15. Behavioral Segmentation • Decision Roles • Initiator, Influencer, Decider, Buyer, User • Behavioral Variables • Occasions • Benefits or value orientation • User status • Nonusers, ex-users, potential users, first-time users and regular users • Usage rate • Buyer – readiness stage • Loyalty status • Hard-core loyals, split loyals, shifting loyals, and switchers • Attitude • Enthusiastics, positive, indifferent, negative, and hostile

16. Behavioral Segmentation

17. Needs-based segmentation Segment identification Marketing-Mix Strategy Segment attractiveness Segment profitability Segment positioning Segment acid test Segmentation Process

18. Effective Segmentation Criteria • Measurable • Can you measure your key variables? • Substantial • Is it large and profitable enough? • Accessible • Can they be effectively reached and served? • Differentiable • Are they conceptually different from other groups and do they respond differently to marketing actions? • Actionable • Can you design an effective targeting program for attracting attention, communicating and serving the target segment

19. Selecting Target Markets I

20. Selecting Target Markets II

21. Selecting Target Markets III

22. Cost Considerations • Segmentation and targeting most likely increase sales, but also inflict costs in terms of • Product modification costs • Manufacturing costs • Administrative costs • Inventory costs • Promotion costs • It is often nicer to think of increase of revenues per new customer, but a top manager would worry about new customer costs inflicted over the whole value chain

23. Segmentation • Some typical examples of firms and their segments • Volvo • Toyota • Body Shop

24. Summary and Continuation • Summary • We have established an argument of why segmentation is a valuable tool in terms of increasing profitability • We have identified categories of segmentation variables • We have also presented some features of good segmentation variables and a feasible way of conducting market segmentation • Finally, we have touched upon the concept of targeting through the process of selecting market segments • Continuation • Positioning and competition