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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 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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