Chapter 12 Flashcards
Introduction to Segmentation
In order for a business to be successful its aim should not be to reach every consumer in the marketplace but rather to target specific consumer markets to promote its products more effectively.
Segmenting the market involves establishing consumers’ requirements.
It is critical for businesses to identify customers’ needs and wants and the benefits they require from a product or service and to subsequently create the product or service to meet that particular need.
Knowing what consumers need and want is fundamental to successful marketing.
STP Process
This process begins by:
- Segmenting the market into distinct groups that differ in terms of needs and preferences.
- Target one or more of these specific groups by selecting one or more identified market segments
- Positioning the product or service in such way that it communicates benefits to consumers
Market segmentation
Market segmentation is the process by which a total market is divided into groups consisting of consumers who have relatively similar characteristics and product needs.
It is essential for marketers to understand that segmentation refers to aspects of the consumer and not the product or service.
- For example, Markhams is one of the largest men’s fashion retailers in South Africa, whereas Foschini is the largest women’s fashion retailer. These shops appeal and sell to different target customers.
Market segmentation offers distinct advantages:
- It helps to define and satisfy consumer needs more accurately.
- It makes more effective use of scarce resources.
- It provides opportunities for building long-term relationships with customers.
- It helps to set more accurate goals and objectives, which enhance performance assessments.
There are certain criteria necessary in order for segmentation to be feasible and effective.
- Segments must have enough profit potential to justify developing and maintaining a marketing strategy.
- Consumers must have heterogeneous (different) needs, and segmented consumer needs must be homogeneous (similar).
- It is also essential for a business to reach a certain segment with a marketing strategy.
Steps in Market Segmentation
- Step 1: Identify product-related need sets
- Step 2: Group consumers with similar needs
- Step 3: Describe each group
- Step 4: Select an attractive segment to serve
Step 1: Identify product-related need sets
Most products satisfy more than one need and, therefore, marketing opportunities increase when customer groups with varying needs and wants are identified.
Marketers can make use of the following segmentation bases: (1)
- Usage or behavioural segmentation
- Demographic segmentation
- Lifestyle and psychographic segmentation
- Geographic segmentation
- Needs or benefits segmentation
• Usage or behavioural segmentation (1)
The market can be divided into segments according to:
- regular users
- potential users
- non-users
- heavy users
- moderate users
- light users.
It is essential for businesses to apply frequent user incentives in order to get heavy and regular users to continuously purchase their products.
It is up to five times more expensive to attract a new customer than it is to satisfy existing customers.
• Demographic segmentation (1)
Marketers often segment markets on the basis of demographic information because it is widely available and often related to consumers’ buying and consuming behaviour.
This divides the market into segments according to
- age
- sex
- fertility rates
- migration patterns
- mortality rates
- ethnicity
- income
- education
- occupation
- family life cycle
- family size
- religion
- social class
• Lifestyle and psychographic segmentation (1)
Marketers must be aware of changing lifestyles, social class, personality, activities, interest, opinions and motives and should market products accordingly. SABMiller is a South African company that uses psychographic and lifestyle segmentation particularly well to guide its entire marketing strategy.
Lifestyle segment has identified the following seven personality segments: (1)
- Belongers drink Castle Lager (positioned as the beer of the people) -
- Reclusives drink Castle Milk Stout
- Intellectuals drink Castle Lite
- Macho braves drink Carling Black Label
- Feminists drink Redds
- Cool egocentrics drink Redds
- Home makers are the beer drinkers’ wives and girlfriends and are concerned about family issues
• Geographic segmentation (1)
This form of segmentation divides the market into segments according to geographical location and includes elements such as:
- countries
- regions
- rural
- urban
- climate
- terrain
- natural resources
- population density
- sub-cultural values
- different population growths in different areas
• Needs or benefits segmentation (1)
When applying this kind of segmentation, marketers divide consumers according to their specific needs or the benefits they require from a product or service.
Step 2: Group consumers with similar needs
Using the bases for segmenting the market, the next step is to group consumers with similar need sets.
- For example, sports cars appeal to many young single individuals, young couples with no children, and middle-aged couples whose children have left home. These consumers can be grouped into one segment as far as product features, and perhaps product image, are concerned.
Step 3: Describe each group
Once consumers with similar need sets have been identified, they should be described in terms of their demographic location, lifestyle and media usage. In order to design an effective marketing programme, it is necessary to have a complete understanding of the potential consumers.
Step 4: Select an attractive segment to serve
Once they have a thorough understanding of each segment, marketers must select the target market, which is a segment of a larger market on which they will focus their marketing effort.
