Marketing Fundamentals Part 2 Target Market & Segmentation
- 2. What we will cover… Researching & Selecting Target Markets • A Model of Consumer Behavior • Market Segmentation – Identifying Segmentation Variables & segmenting the market – Profiling the Segments • Market Targeting – Evaluate attractiveness of each segment – Select the target segment for the business • Product Positioning (Session 3)
- 3. A Model of Consumer Behavior
- 4. Categories of Buying Decisions - Exercise • Categorise the following into 3 groups – Those requiring very little time and effort – Those requiring moderate time and effort – Those requiring considerable time and effort • Bread Magazines • Tissue Chewing Gum • Home • Coffee • Detergent • Lipstick • Shampoo • Car • Laptop • Shaving Foam • Butter • Soda • Luxury Handbag
- 5. Types of Buying Decisions Types of Buying Decisions Impulse Buying Extended Problem Solving Habitual Buying Now, consider the products on the earlier slide – where would you place each of them – and what do we learn from this?
- 6. Model of Consumer Behavior Outside Stimuli Marketing - 4 Ps Environment - Economic, Technological, Political, Cultural Buyer’s Black Box Buyer Profile - Cultural, Social, Personal, Psychological Decision Process - Need Recognition, Information Search, Evaluation, Decision, Post-purchase Outcomes Choices on Product, Brand, Channel, Timing, Amount
- 7. Model of Consumer Behavior Outside Stimuli Marketing - 4 Ps Environment - Economic, Technological, Political, Cultural Buyer’s Black Box Buyer Profile - Cultural, Social, Personal, Psychological Decision Process - Need Recognition, Information Search, Evaluation, Decision, Post-purchase Outcomes Choices on Product, Brand, Channel, Timing, Amount
- 8. The Buyer Profile … in Detail Cultural & Social Factors •Culture/Subculture (Nationality Groups, religious groups..) •Social Class (based on variables like wealth, income, occupation, education etc) •Reference Groups incl. family, friends, colleagues, etc. Personal Factors •Age •Lifecycle Stage •Occupation/Economic status •Lifestyle •Personality/Self- concept Psychological Factors •Motivaton (Maslow’s theory/Herzberg’s Theory) •Beliefs, Attitudes, Perceptions
- 9. Buyer Profile – Exercise 1 • Visit any 1 of the sites below • Choose 1 ad from the work portfolio • Prepare a profile of the target buyer that the ad seems to be aimed at and reasons • http://www.jwt.com/worldwide/work JWT • http://www.bbdo.com/#!/the-work BBDO • http://www.ogilvy.com/#/{filter:The-Work} Ogilvy
- 10. The Buyer Decision Process…. In Detail Need Recognition Information Search Evaluation of Alternatives Purchase Decision Post- purchase behavior Stacey Brown is looking to upgrade her computer skills – but she does not have a computer at home to practice She begins to notice ads for computers (heightened attention) or starts looking for recommendations/m aterial/visiting outlets etc. for information (active search) Stacey prepares an initial ‘awareness set’ but then starts zoning onto a smaller set of brands that she is actively considering (consideration set) Based on the benefits, she is looking for, and the product attributes, she develops a set of brand beliefs/image evaluations With these evaluations in mind, Stacey forms a Purchase Intention for a brand – which is then executed/otherwise based on situational factors (offers/availability/pe rsonal changes) Finally, the product experience kicks in and the satisfaction/otherwis e from this refines the brand image perceptions and consequent Word of Mouth recommendations etc. Note: You may not always go through all the steps all the time – examples ??
- 11. Buyer Behavior - Exercise • Now consider 2 products that you have bought in the recent past – 1 should be of low value – The other of high value • Trace the Decision Process you went through for each product using the framework just introduced
- 13. 13 What is segmentation? • Segmentation is a key principle of marketing ; it involves dividing up of the market into a series of sub groups on the basis of selected criteria Why Segment? • Many markets can not be treated in an aggregate way • Segmentations provide companies with a way to tailor their marketing spend to particular consumers to maximise return on investment • Segments must be actionable and identifiable • Before conducting a segmentation exercise it is essential to determine – What are the objectives of the segmentation – What variables will segmentation be based on
- 14. Features of Good Segmentation Homogeneous within : Respondents within a segment will be as similar as possible Substantial : Segments need to be large enough so that any targeting of segments is cost effective Heterogeneous Between : Respondents in different segments will be as different as possible Operational : Segments must be identifiable using variable such as demographics and/or attitudes
- 15. Segmentation Variables Geographic • Region/State • Climate Demographic • Age • Gender • Family Size/Stage • Income • Occupation • Religion/race Psychographic • Social Class • Lifestyle • Personality Behavioral • Usage status • Usage Rate • Benefits VALS (Values/Attitudes/Lifestyles) AIO Framework (Activities/Interests/Opinion s)
- 16. Segmentation Examples Category Segmentation Base Identified Segments Toothpaste Benefit Whitening, Sensitive Teeth, Fresh Breath, Cavity Protection Credit Card Demographic Young & single, DINK, Young families, Middle- aged with families, Empty Nesters, Retired Cars Demographic + Psychographic Young Speed-Cravers, Young, Affluent Socially Mobile, Middle-Aged Practicals, Middle-Aged Status Conscious.. Hotels Behavioral/Occasions Business Meetings, Family Vacations, Honeymoon/Special Occasions Local Health Club Behavioral Heavy Users, Regular users, Occasional Users, Program Attenders…
- 17. Segmentation – Exercise 1 • Suggest suitable segmentation variables for: – Breakfast Cereal Maker – Coca Cola – Washing Detergent – Apple Iphone – Coffee – Toyota Lexus
- 18. Profiling the Segments • Once the segments have been defined, need to focus on creating a more granular fingerprint of the segment – Profiling the segment in detail so that decisions regarding attractiveness and suitability of the segment for the marketer can be taken – Need to access various sources of information for this – Surveys are key for segmentation • Niche Segments: – These are segments (usually small), characterized by highly defined characteristics – Example – high-end sports cars, a very specific type of coffee, stem cell storage facilities etc. – Since niche segments are very narrowly focused, marketers need to aim to be the only one/of a few serving the small segment – for profitability
- 19. Segment Profiles* Decaffeinated Non-decaffeinated Ground Size 35% 33% 32% Distinguishing features Decaffeinated Not make me nervous Prepared quickly Not wake up Concentrated form Not decaffeinated Wake up Convenient package Well-known brand Easy to prepare Not prepared quickly Not easy to prepare Special Equipment Not concentrated form Frequency of Use Light Medium Heavy Type Usage Instant Both Ground Demographics Older Widowed Lower income More minorities Average Age Divorced Average Income More minorities Younger Married Higher Income Fewer minorities * Source: Market Segmentation, Robert Smythe – an NFO pamphlet Exercise: What brands do you think each of the segments is likely to be using?
- 20. Market Targeting
- 21. Tools for Segment Evaluation Segment Size and growth Segment Structural Attractiveness Company Objectives & Resourcese.g. structural shift to online travel
- 22. Segment Structural Attractiveness • Porter’s 5 Forces Model Industry Competitors (Segment Rivalry) Threat of New Entrants Threat of Substitutes Buyer PowerSupplier Power
- 23. Selecting Market Segments • Based on evaluation, company now must select 1 or more segments to target • 5 patterns of target market selection (Source: Derek F.Abell: Defining the Business: The Starting Point of Strategic Planning) M1 M2 M3 P1 P2 P3 Note: M: Market; P : Product Single Segment Concentration M1 M2 M3 P1 P2 P3 1 2 Selective Specialization Examples? Class Discussion
- 24. Selecting Market Segments M1 M2 M3 P1 P2 P3 Note: M: Market; P : Product Market Specialization M1 M2 M3 P1 P2 P3 3 4 Product Specialization M1 M2 M3 P1 P2 P3 5 Full Coverage Examples? Class Discussion
- 25. 25 Segmentation for Netflix – An Exercise • Given the data in the next slide, identify the different types of segments emerging. – Assign descriptive names to these segments based on their profiles • Which segment/s should Netflix target? Develop initial thoughts on possible marketing strategies for these segments
- 26. Segmentation for Netflix Total # of customers – 200 Cluster 1 Cluster 2 Cluster 3 Cluster 4 Size 68 32 45 55 Age of Customer (Mean) 32 26 44 58 Gender (in %) Male Female 58% 42% 47% 53% 36% 67% 64% 36% # of children in Household (mean) 1.03 0.54 2.4 1.1 # of movies rented in last 3 months 10 12 3 8 Genre of movies rented in last 3 months (mean %) Action Comedy Child Romance Drama War 30% 22% 20% 4% 15% 9% 26% 31% 2% 27% 12% 2% 18% 27% 32% 3% 15% 5% 32% 20% 1% 2% 17% 28%
- 27. Thank You!
Editor's Notes
- #24: M1, P1 – Tesla – Clear high-tech, high-net worth segment – Single Segment Concentration Selective Specialization – e.g. Karate West – children for life, adults for self-defense, expert karate masters for advanced training – different types of classes
- #25: Market specialization – Saks 5th Avenue, Product Specialization – Bose Full Coverage – Pepsico – water acquisitions, etc.
- #27: We used these independent variables to cluster the Netflix customers –