Any colour you like as long as it’s black - segmentation: the basis of marketing

1. Any colour you like as long as it’s black - segmentation: the basis of marketing Marketing Hoorcollege blok 2 week 2

2. Or:Why I am not in the same target group as Brad Pitt & Johnny Depp (at least) when it comes to cars

3. Learning goals • By the end of the colleges and reading you should: • Know the three elements of marketing core strategy: segmentation, targeting & positioning (STP) • Understand how STP helps organizations deal with one of the main trends in western and some developing markets today • Be in a position to develop a marketing segmentation, choose a target group and create a positioning for an offer * You should have also read chapters 9 & 10 in the last blok

4. Agenda • A quick recap • The aims of blok 2 • If you’re not segmenting, then you’re not marketing • Segmentation • Summary

5. Previously on… Marketing: In Search Of Exchange

6. Exchange is the process where you willingly give something of value to another, in return for getting something of value to you We argued that marketing is about creating mutually beneficial exchange

7. And that marketing is a process that creates offers to customers

8. Our aim in blok 2 is to • Take you through the process of creating a marketing offer • With the exception of promotion - which will be covered in blok 3 or 4 • Give you some tools (in addition to the UCD tools) you can use to do this • Help you understand why this process is even more important in today’s marketing environment

9. If you’re not segmenting, then you’re not marketing

10. Any colour you like, as long as it’s black • The Model T Ford is regarded as the first car to be built on using a production line • Henry Ford wanted to produce quickly • Black paint dried more quickly so the only colour you could have was black • Soon Ford lost share to companies that offered other colours

11. No cup holders please we’re German • In the 1990’s cup holders became popular in the USA • German companies such as BMW and Mercedes didn’t see them as necessary (cars were about engineering not cup holders!) • Their market share fell in the USA

12. The mobile phone is just a device • Early mobile phones were seen as just devices to make calls • The idea of a mobile phone as a fashion accessory was at first not accepted by many companies • Nokia did understand this and were the first company to offer different designs and colours • Nokia gained huge market shares

13. The lessons of these stories • The customer really is king • One offer never appeals to everyone • Offers to everyone will be beaten by offers to targeted groups • Marketing is becoming more complex (and more exciting - no honestly it is…)

14. In the developed economies at least the idea of mass marketing is essentially dead One product for a large market does not work anymore Consumers are becoming more sophisticated (verfijnd) and choosy They have better access to information They have more choice They are overloaded with marketing messages They are more cynical This is especially true in our “always on” world Markets are becoming more fragmented

15. Result: the old model is broken

16. What’s wrong? • The problem is that there are too many “me too” offers on the market today • These are products (and price, place, promotion) that try to reach the same broad market segment with basically the same offer

17. What’s the solution? • One solution suggested by Seth Godin in his book Purple Cow is to: Make remarkable products that appeal to a smaller better defined segment

18. So how do we do this?

19. The start of the answer is… • Better market segmentation • Since this allows you to • Target the right segment to approach • Which means you can position your offer more effectively • Which leads to better marketing mixes • Which leads to your customers choosing your offer • And telling their friends

20. Segmentation Not everyone will love you, but some might if you know who they are

21. Segmentation • A market segment is just a group of potential customers with the same needs and wants • Marketers use different factors that might reveal needs and wants to make segments • For example age and gender are very popular

22. But this isn’t good enough…Remember this? Based on age & gender we are in the same target group! Yeah right! But how can we tell us apart?

23. Well marketers tend use segmentation variables…

24. Task:What would allow you to separate Brad, Johnny & Charlie? • As I go through each of the segmentation variables use the sheet I have given you to work out which might separate Brad, Johnny and me if you were company wanting to develop a car

25. Geographic variables • Region • Continent, groups of countries such as Benelux, country, areas with a country such as the Randstad, area within a city such as Amsterdam Noord • Country size • City size • Population density • Climate

26. Demographic variables • Age • Gender • Family size • Family life-cycle • Life stage • Income • Occupation • Educational level • Religion • Race • Nationality

27. Psychographic variables • Social class • Lower, working, middle, upper • Lifestyle • Interests, hobbies, beliefs, attitudes • Personality • Ambitious, introvert, extrovert, social

28. Behavioural variables • Purchase occasion • Benefits desired • User status • Usage rate • Loyalty • Readiness stage • Attitude to the product, brand or company

29. Multivariable segmentation • For most products one variable is not enough, it will tell you little about the target group • So organizations tend use multivariable segmentation • This is simply combining segmentation bases: • Simple multivariable segmentation uses two or more bases from one category • E.g. Age and gender from demographic variables • Advanced multivariable segmentation uses two or more bases from two or more categories • E.g. Lifestyle, age, family life cycle and attitude to the product • Multistage segmentation uses different variables at different times • E.g. Region, then lifestyle and age • In general multivariable segmentation leads to better customer insights

30. What makes a good market segmentation? • A good market segmentation is one that is: • Measurable - you know how many members it has and you can track their purchases • Accessible - you can contact them and make your offer • Sustainable - you can make a profit by serving them • Actionable - you are able develop offers that are attractive to the segment • In addition a good segmentation allows you to understand the customer from their point of view so that you can make offers that will meet their needs better than your competitors

31. Summary • The aim of marketing is to create mutually beneficial exchange by creating offers that are more attractive to customers that alternatives • But the consumer is becoming more choosy about what they consider beneficial • In the Internet age this is even easier • As a result offers aimed at “everyone” will be beaten by more targeted offers • To survive in this environment we must become better at segmenting the potential market into meaningful groups that can be approached profitably • If you’re not segmenting, then you’re not marketing

32. Brad, Johnny & Charlie:My answer