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TIØ4165 Marketing Management. Segmentation and Targets Arild Aspelund IØT, NTNU. Emerging Trends in Consumer Behavior. Metrosexual – Straight urban man who enjoys shopping and using grooming products. Outline. The purpose of segmentation Levels of segmentation

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Ti 4165 marketing management

TIØ4165Marketing Management

Segmentation and Targets

Arild Aspelund

IØT, NTNU


Emerging trends in consumer behavior
Emerging Trends in Consumer Behavior

Metrosexual –

Straight urban man

who enjoys shopping

and using grooming

products


Outline
Outline

  • The purpose of segmentation

  • Levels of segmentation

  • Categories of segmentation variables

  • Segmentation process and criteria

  • Cost considerations


Why segmentation
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


Levels of segmentation
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


Levels of segmentation mass marketing
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?


Levels of segmentation segment marketing
Levels of Segmentation- Segment Marketing

  • Groups of customers that share needs and wants


Levels of segmentation segment marketing1
Levels of Segmentation- Segment Marketing


Levels of segmentation niche marketing
Levels of Segmentation- Niche Marketing

  • Targeting a narrowly defined customer group seeking a distinctive mix of benefits

  • Often identified by sub-segments


Levels of segmentation local marketing
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”


Segmentation of consumers

Geographic

Demographic

Psychographic

Behavioral

Segmentation of Consumers


Geographic segmentation
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?


Demographic segmentation
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…


Psychographic segmentation
Psychographic Segmentation

The VALS Segmentation System


Behavioral segmentation
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



Segmentation process

Needs-based segmentation

Segment identification

Marketing-Mix

Strategy

Segment attractiveness

Segment profitability

Segment positioning

Segment acid test

Segmentation Process


Effective segmentation criteria
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





Cost considerations
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


Segmentation
Segmentation

  • Some typical examples of firms and their segments

    • Volvo

    • Toyota

    • Body Shop


Summary and continuation
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


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