Market Market SegmentationSegmentation

Lesson Objectives

Understand market segmentationKnow benefits and disadvantages of market segmentationHave relevant examples for each methodAble to analyse a market using the most appropriate tools

Who are these products targeted at?

Market SegmentationMarket Segmentation

DefinitionDefinition

Is the process of breaking down a market Is the process of breaking down a market into sub groupsinto sub groups

Uses market research to find information Uses market research to find information on people who would fit into the product or on people who would fit into the product or services’ target marketservices’ target market

E.g. E.g. ThreshersThreshers used such information to make used such information to make sure each store was stocked with goods sure each store was stocked with goods suitable to the population of the area it suitable to the population of the area it servesserves

BenefitsBenefits

Should allow a business to sell more Should allow a business to sell more products and increase profitsproducts and increase profits

Understand customers better and vary Understand customers better and vary products to suite their needsproducts to suite their needs

Helps target products at specific customer Helps target products at specific customer groupsgroups

Prevent wrong product promotion, leading Prevent wrong product promotion, leading to a waste of resourcesto a waste of resources

Allow marketing a wider range of Allow marketing a wider range of differentiated productsdifferentiated products

Develop business loyalty when needs are Develop business loyalty when needs are metmet

Types of market segmentationTypes of market segmentation

There are four main types:There are four main types:

1.1. GeographicalGeographical – – where they live? where they live?

2.2. DemographicDemographic – – by gender, class, age, by gender, class, age, ethnicity or religionethnicity or religion

3.3. Psychographical Psychographical – – by lifestyle and by lifestyle and personalitypersonality

4.4. BehaviourBehaviour – – by how they act (repeat by how they act (repeat purchases)purchases)

E.g. E.g. TescoTesco use storecard to gain customer use storecard to gain customer informationinformation

Geographic segmentationGeographic segmentation

•Including where the consumers live and the nature of the region

•Type of house or area of the city they live in

•Global businesses will sell different products in various parts of the world (Nestle sells profiteroles in France)

•Goods can also be priced differently across the globe - car manufacturers (economy, production)

•However, consumers tastes are becoming more uniform across geographic boundaries (football club supporters)

Demographic Segmentation

Age – music gets targeted at different categories of age

Gender – targeting males and females because they have different spending patterns (Ford Ka targeted women)

Social Class – Look at table 1 in text books, based on employment status and conditions (used by banks and insurance companies)

Income – A self employed electrician and a middle manager could have the same income (watch companies in magazines)

Religion – Food producers may specialise in Kosher food for Jewish people, also sky Christian channels

Ethnic grouping – Radio stations gear towards certain groups, Radio 1 extra for black music

Market segmentation

A Higher managerial, administrative or professional

B Intermediate managerial, administrative and professional

C1 Supervisory, clerical, junior administrative or professional

C2 Skilled manual workers D Semi and unskilled manual workers E State pensioners, widows, lowest grade

workers.

Psychographic Segmentation

Groups customers according to attitudes, opinions and lifestyles

Sports products aimed at different groups, football boots in a football magazine

Attitudes used to segment the market Mobile phones offer internet access for

business travellers Newspapers geared towards how people

vote However, it can be difficult for businesses

to collect this data and may require hiring in a specialist

Behavioural Segmentation

Segments on how consumers relate to a product

Usage rate – consumers are categorised according to quantity and frequency of purchase (BA has executive club)

Loyalty – The Tesco Clubcard offers discounts for loyalty to store

Time and date of consumption – Bars encourage different groups on certain nights of the week

On its own may fail to capture the target market so needs to be used in accordance with other methods

TASKTASK

Choose one of the products listed below and state how it has been segmented for the market.

Market Segmentation and Market Segmentation and strategystrategy

Market Segmentation and Market Segmentation and strategystrategy

Recap on segmentationRecap on segmentation Understand different marketing Understand different marketing

strategiesstrategies Know targeting and positioning Know targeting and positioning

strategiesstrategies

Market Segmentation and Market Segmentation and strategystrategy

Think of different Ford Products

Why do they have so many products?

Who are their target market?

How do they segment the market?

Segmentation, targeting and Segmentation, targeting and positioningpositioning

Planning a marketing Planning a marketing strategystrategy

Market segmentation

Market targeting

Market positioning

Identify the market

Developing customer profiles

Evaluating market segments

Selecting market segments to target

Positioning for each market segment

Developing a marketing mix for each target segment

TargetingTargetingUndifferentiated strategy :Undifferentiated strategy : Try to promote the business to the whole market,Try to promote the business to the whole market,

some newspapers for examplesome newspapers for example Businesses producing commodities like oil do not Businesses producing commodities like oil do not

need to produce products for specific market need to produce products for specific market segments, segments, PG TipsPG Tips

A detergent manufacturer might sell cleaning A detergent manufacturer might sell cleaning products to consumers and cleaning companies, but products to consumers and cleaning companies, but it could use different packaging for both productsit could use different packaging for both products

Concentrated strategy :Concentrated strategy : Targeting just one market segment, Targeting just one market segment, GucciGucci

TargetingTargeting

Differentiated strategy :Differentiated strategy : Different products are marketed to different groups Different products are marketed to different groups

of people, banks services for teenagers and retired of people, banks services for teenagers and retired peoplepeople

Some businesses are trying to move away from Some businesses are trying to move away from undifferentiated marketing strategies to better undifferentiated marketing strategies to better target consumer needs. Milk for example was target consumer needs. Milk for example was marketed in this way, now it is differentiated by fat marketed in this way, now it is differentiated by fat levels, skimmed etc.levels, skimmed etc.

Consumer profiles Consumer profiles – information that tells businesses – information that tells businesses about consumers of a particular product and their about consumers of a particular product and their characteristics. Cinemas have 50% of customers characteristics. Cinemas have 50% of customers between the age of 15-24. between the age of 15-24.

PositioningPositioning Takes into account the views and perceptions that Takes into account the views and perceptions that

consumers have about productsconsumers have about products Consumers catagorise products according to Consumers catagorise products according to

quality, status or value for moneyquality, status or value for money These catagories define the products’ positionThese catagories define the products’ position

How to gain a strong position?How to gain a strong position? Use a unique selling point to establish a position Use a unique selling point to establish a position

within the market, like within the market, like Purdey’sPurdey’s drinks with herbs drinks with herbs and mineralsand minerals

Attributes like Attributes like Flora pro-active Flora pro-active having cholestrol having cholestrol reducing qualitiesreducing qualities

Origins, Origins, FostersFosters emphasises it is an Australian beer emphasises it is an Australian beer Luxury, such as Luxury, such as ThorntonsThorntons chocolates chocolates

PositioningPositioning

As markets and consumers’ tastes change a As markets and consumers’ tastes change a business may try to business may try to repositionreposition its product. its product. This can involve changing the image of the This can involve changing the image of the product , its features or its target market.product , its features or its target market.

E.g.. E.g.. LucozadeLucozade was changed from a drink was changed from a drink which people took when they were ill to which people took when they were ill to one used for sport.one used for sport.

QuestionsQuestions

1.1. How can a market be How can a market be segmented geographically? (3)segmented geographically? (3)

2.2. How might a business, plan How might a business, plan concentrated marketing concentrated marketing strategy? (6)strategy? (6)

Marketing strategyMarketing strategy

Segmenting the market Segmenting the market – Identify how to segment the – Identify how to segment the marketmarket

Develop customer profiles Develop customer profiles – Who are your customers? – Who are your customers? Done through market research and once identified Done through market research and once identified draw up a consumer profiledraw up a consumer profile

Evaluating market segments Evaluating market segments – Which segments are – Which segments are worth targeting? worth targeting?

Selecting market segments Selecting market segments – Which will be the target – Which will be the target market?market?

Position the product for the target segment Position the product for the target segment – How to – How to position the product within the market? Look at position the product within the market? Look at competition and how will it differentiate itselfcompetition and how will it differentiate itself

Marketing strategyMarketing strategy

Developing a marketing mix for each target segment Developing a marketing mix for each target segment - - Finally the business must develop a marketing mix. Finally the business must develop a marketing mix. Take into account the 4 p’s suited to the market Take into account the 4 p’s suited to the market segment. Always responding to market and segment. Always responding to market and customer needs.customer needs.

ProblemsProblems Sometimes the buyer is not the main influence on Sometimes the buyer is not the main influence on

the product, especially the increasing effect of the product, especially the increasing effect of pester power. Some researchers say this results in a pester power. Some researchers say this results in a purchase 2/3 of the time. purchase 2/3 of the time.

CASE STUDYCASE STUDY

The power of the Muslim poundThe power of the Muslim pound

Page 71 in text booksPage 71 in text books

Answer questions b,c and d.Answer questions b,c and d.

PlenaryPlenary

Everyone should understand :Everyone should understand : Market segmentationMarket segmentation Market targetingMarket targeting Market positioning Market positioning Marketing strategiesMarketing strategies

Questions

1. What is meant by a market segment? (3)

2. How can market segmentation benefit a business? (3)

3. List three ways, with examples, of how a business can differentiate the product. (3)