The process of subdividing general markets into distinct segment with different needs, and which respond differently to marketing efforts
What are 2 benefits to segmentation?
1. Increase customer satisfaction
2. Increase marketing effectiveness
The selection of market segments to advertise to
What is important to remember about targeting?
You can’t please everyone
Activities to make consumers perceive that a brand occupies a distinct position relative to competing brands
What are 5 STP advantages?
1. Concentration of force
2. Customer satisfaction
3. Competitive advantage
4. Niche marketing
Expand on concentration of force and give an example
Focus core competencies on relevant market segments
A smaller movie theater may only cater to cost conscious consumers and not cater to people demanding newly-released movies
Expand on customer satisfaction and give an example
Consumers get what they want
Tide has over 41 different detergent variations and methods for various consumer segments (large detergent, packs, ToGo Stick)
Expand on competitive advantage and give an example
Tool to survive even the most formidable of competitors
Hertz and Enterprise are both big competitors in the rental car industry, but succeed because they cater to different segments
Expand on niche marketing and give an example
Untapped segments can be identified
Panasonic targets people with ‘rigorous physical demands’ such as law enforcement and military personnel, with its special Panasonic Toughbook
Expand on profitability and give an example
Acknowledges that different segments put different needs and values on goods
Price wise, cost conscious consumers may prefer to buy in bulk, versus people that need the travel size, and will pay more because they value the convenience the size gives them.
What are the 4 sample market segments?
1. Quality oriented segment
2. Cost oriented segment
3. Durability oriented segment
4. Style oriented segment
What is an example of quality oriented segment?
What is an example of cost oriented segment?
What is an example of durability oriented segment
Briggs and Riley Travelware
What is an example of stylish oriented segment?
What are some segment selection criteria?
1. Internal homogeneity (individuals in groups respond similarly)
2. External heterogeneity (one group differs from another)
3. Parsimony (as few segments as possible)
4. Accessibility (easy to reach with marketing
5. Size (large enough to be profitable)
What are two types of segmentation variables?
Response and identifier variables
Define response variables
Describe how individuals respond to an offer
What are 5 response variables?
1. Functional (performance, reliability, durability)
2. Financial (cost savings, revenue growth)
3. Psychological (trust, esteem, status)
4. Usage (scenario and rate)
5. Service and Convenience (time savings, convenience)
Define identifier variables
Categorize and describe the individuals into segments
What are the two types of identifier variables?
Business and Consumer
What 3 variable categories would a business identifier use?
1. Demographics (industry, company size)
2. Geographics (company location)
3. Situational (specific applications like order size)
What 3 variable categories would a consumer identifier use?
1. Demographics (age and income)
2. Geographics (country, region, city)
3. Psychographics (lifestyle, interests)
What is the dependent variable?
Define A Priori
Segmentation done before market research
Define Post Hoc
Segmentation done after market research
What are two segmentation techniques?
Descriptive and Predictive
Define descriptive technique
To describe similarities and differences between groups
Define predictive technique
To predict the relationship between the independent and dependent variables
Define cross tabulation segmentation
‘A Priori’; descriptive segmentation technique where two variables have their relationship expressed on a table
What is the cross tabs procedure?
Gather market data > Examine market data > Construct a cross tab > Interpret a cross tab
Expand on gathering market data
Conducting surveys to gather response and identifier info
Expand on examining market data
Consider relationships between the response and identifier variables
Expand on constructing a cross tab
Use purpose build tool to create a data table
Expand on interpreting the cross tab
Consider how to apply the results
Define regression based segmentatoin
‘A Priori’; predictive segmentation technique where the relationship between the D/I variables is determined
What is the regression based segmentation procedure?
1. Gather market data
2. Examine market data
3. Execute regression analysis
4. Interpret regression results
Expand on interpret regression results
Plug in Part-Worths as regression coefficients
Define cluster analysis
‘Post Hoc’; descriptive technique; use a numerically based index to indicate the degree of similarity and then group those based on segments
What are two clustering methods?
Hierarchical and Partitioning
Groups clusters in a hierarchy
What is a top to bottom hierarchy?
What is a bottom top hierarchy?
What is Ward’s clustering method?
Agglomerative clustering hierarchy that results in a tree like diagram (dendogram)
What is the K-Means clustering method?
Specify K (the number of final clusters to expect) and then execute a K-Means algorithm to form groups based on distance from the centroid
What are 3 types of segments to target?
1. Financial Potential
2. Alignment with mission
3. Marketability access
What are 5 targeting approaches?
1. Single Segment Concentration
2. Selective Specialization
3. Product.Service Specialization
4. Market Specialization
5. Full Market Coverage
Define single segment concentration and give an example
Concentrate efforts on one specific market segment
Bare Escentuals originally concentrated its efforts on mineral-based cosmetics
Define selective specialization
Marketing multiple independent products to multiple segments
Define product/service specialization and give an example
Focusing on specific product or service
Motel 8 hotel chain focuses on providing lodging services to travelers
Define market specialization and give an example
Market a variety of goods and services to one market
AHS sells a variety of equipment and supplies to hospitals
Define full market coverage and give an example
Offer multiple categories of products to multiple markets
Oracle markets 100 different products in over 20 industries
What are 4 marketing to target segments?
1. Full Marketing Mix Campaigns (use all 4 P’s)
2. Direct Marketing (sell directly to customer)
3. Website Marketing Campaigns (online shopping)
4. Retail Marketing (show off collection of products)
Give an example for each of the 4 marketing to target segments
1. Chanel (full mix)
2. Amazon.com (direct)
3. Cisco (web)
4. Home Depot (retail)
The idea that you own in the customer’s mind
What is important to remember about positioning?
It is also important to differentiate
What two powers does positioning key in on?
The power of the mind (first associated thought) and focus (owning the idea)
What are some ways to differentiate?
Own an attribute
Leadership (sales, technology, performance)
How a product is made
Define perceptual mapping
A graphic representation of a customer’s perceptions of important attributes that interest them
What are 5 perceptual mapping applications?
1. Cluster identification
3. Choice of new opportunity
4. Communications vehicle
5. Customer perceptions
Expand on cluster identification
Can identify clusters (segments) of potential customers with similar interests
Why would you use cluster analysis?
You can look at clusters of individuals and see what they have in common
Expand on competition
Can asses the perception of different competitor
What is the significance of distance in competition?
A close distance can signify that customers view the competitors as being very similar
Expand on new opportunity
Blank areas in perceptual maps that could suggest an opportunity
What is one thing to watch out for when assessing a blank on a perceptual map?
The face that there may be a good reason no one is there
Expand on communication vehicle
Marketers can use this as a vehicle to communicate with mangers and other higher ups
Expand on customer perceptions
If done at regular intervals is can alert management of changes in customer perceptions over time