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1. What is Market Segmentation?
Market Segmentation
Market Segmentation can be defined as the process of
dividing a market into distinct subsets of consumers with
common needs or characteristics and selecting one or more
segments to target with a distinct marketing mix.
Segmentation studies are designed to discover the needs
and wants of specific groups of consumers, so that
specified goods and services can be developed and
promoted to satisfy each groups needs.
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Market Segmentation
Before the widespread acceptance of market
segmentation, the prevailing way of doing business
with consumers was through MASS MARKETING.
Mass Marketing that is offering the same product
and marketing mix to all consumers.
In Mass Marketing, the seller engages
in the mass production, mass distribution
and mass promotion for one product for all the buyers.
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Market Segmentation
Mass (Undifferentiated) Marketing:
If all consumers were alike, if they all had the same needs, wants,
and desires, and the same background, education, and experience,
Mass (Undifferentiated) Marketing would be a logical strategy.
Primary advantage is that it costs less. Only one advertising
campaign is needed, only one marketing strategy is developed and
usually only one standardized product is offered.
Some companies, primarily those that deal in agricultural
products or very basic manufactured goods, successfully follow a
mass marketing strategy.
Other marketers, however, see major drawbacks in an
undifferentiated marketing approach.
This strategy often means that sell the same to everyonethis
can lead to selling to no one.
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Why is Segmentation Necessary ?
Consumer needs
differs
Differentiation helps
products compete
Segmentation helps
identify media
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Who Uses Market Segmentation?
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Who Uses Market Segmentation?
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2. Criteria for Targeting selected
Market Segments Effectively
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3.Bases for Segmentation
The first step in developing a segmentation strategy is to
select the most appropriate bases on which to segment
the market. Nine major categories of consumer
characteristics provide the most popular bases for
market segmentation. These categories are:
Geographic Factors Use-related Characteristics
Demographic Factors Use-situation Factors
Psychological Factors Benefits Sought
Psychographic (Lifestyle) Hybrid Segmentation
Characteristics
Socio-cultural Variables
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Bases for Segmentation
1. Geographic Segmentation
In Geographic Segmentation, the market is divided by location. The theory
behind this strategy is that people who live in the same area share some
similar needs and wants and that these needs and wants differ from those
of people living in other areas.
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Bases for Segmentation
2. Demographic Segmentation
Demographic segmentation is the process of segmenting the market based
on demographic characteristics.
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Demographics help to locate a target
market. It is the most accessible and cost
effective way to identify a target market.
These characteristics are easy to measure.
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Bases for Segmentation
2. Demographic Segmentation
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
DEMOGRAPHIC SEGMENTATION
PSYCHOGRAPHIC
Lifestyle Segmentation Economy Minded, Couch Potatoes, Outdoors Enthusiasts,
Status Seekers
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Bases for Segmentation
5. Socio-cultural Segmentation
Socio-cultural segmentation studies sociological and anthropological group
characteristics, as opposed to individual characteristics.
Socio-cultural variables provide further bases for market segmentation.
Consumer markets have been subdivided into segments on the basis of stages
in the family life cycle, social class, core cultural values, sub-cultural
memberships, and cross-cultural affiliation.
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Bases for Segmentation
6. Use-Related Segmentation
Use-related segmentation categorizes consumers in terms of product-
service, or brand usage characteristics such as usage rate, awareness status,
and degree of brand loyalty.
Rate of usage segmentation differentiates among heavy users, medium
users, light users, and nonusers of a specific product, service, or brand.
Brand loyalty identifies those customers who continually purchase the same
brands, as opposed to those consumers who continually switch brands.
Awareness status encompasses the notion of buyer readiness, consumer
awareness, or interest level.
Marketers need to determine whether potential customers are aware of the
product, interested in the product, or need to be informed about the product.
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Bases for Segmentation
6. Use-Related Segmentation
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
USE-RELATED SEGMENTATION
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Bases for Segmentation
7. Usage Situation Segmentation
The occasion or usage situation often determines what
consumers will purchase or consume.
Some marketers try to install the idea of suitability for a
particular occasion.
Many products are promoted for special usage occasions.
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
USE-SITUATION SEGMENTATION
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4. Concentrated (Niche) Vs Differentiated
(Segment) Marketing
Once an organization has identified its most promising market
segment, it must then decide whether to target several segments or
just one. The premise behind market segmentation is that each
targeted segment receives a specially designed marketing mix.
Differentiated Marketing is when the marketer targets several
segments using individual marketing mixes. This strategy is highly
appropriate for financially strong companies that are well
established in a product category and competitive with other firms
that are also strong in the category.
Concentrated Marketing is when the marketer targets only one
segment with a unique marketing mix. This strategy is better for
small firms or firms new to the field.
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Concentrated Vs Differentiated Marketing
A
UNDIFFERENTIATED Company Marketing Mix Market
MARKETING
C Segment 1
CONCENTRATED Company Marketing Mix Segment 2
MARKETING Segment 3
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5. Targeting
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Target marketing is the process of evaluating each market
segments attractiveness and selecting one or more segments to
enter.
- Characteristics for targeting effective segment:
Segment size and growth
Segment structural attractiveness
Company objectives and resources
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END OF CHAPTER # 3
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