Market Segmentation Flashcards
Market Segmentation
First step in defining a target market -> Stepping stone
Process of splitting entire market of consumers/potential into 2+ group of different types of consumers
Each market segment has similar traits/features (behaviour, purchasing habit)
Consumers that have similar product needs
Goal: Use segment as the target market
STPD Process
Segmentation
Targeting
Positioning -> Differentiation (Apart of Positioning)
History
Found in late 1950’s to meet needs of specific consumers rather than mass marketing
Why Use Marketing Segmentation
Mass marketing is not effective approach for most consumers
Marketing segmentation gives more defined consumer base from precise target market = more money
Advantages of Marketing Segmentation
Better understanding of consumer needs & overall market
Targets gaps in the marketplace
Gives choice of attacking or avoiding the competition which = advantage
Get closer to target consumers
Gives a defined marketing strategy
Perserves resources of the company & relevant market research & clear positioning
Company becomes more focused which simplifies their strategy & product mix decision
Creates stronger brand for their select consumers
Benefits = Profits
Clear focus w/ strategy
Increase in market share for target consumer
Brand loyalty = more protection from competitors
Market Segmentation Trade-Off
Excludes certain segments for focus of 1-2 similar target markets
Trade-off: Focuses on small portion of market rather than mass market to entire market
Not ignoring the entire market, just focusing on one particular segment
More Consumer ≠ Better
Ex. Law Firm Specializing in Large Corporation
Wouldn’t help giving advice to individuals
Increases target market but can devalue reputation = decrease in profit (+ more costs)
Construct Market Segment
Seems straightforward, but approach is challenging
Takes time + trial & error (Consider all variations)
Requires consumer data base
Different approaches for different segments for same product
Data Sources for Marketing Segmentation
Consumer Database: Array of Information
Marketing Survey Results - Has mix of purchase history, attitude, demographics, media
Publicly available info (Census, Industry Report)
Third Party Data
Types of Marketing Approaches
Mass Marketing
Appeal to everyone with the same marketing strategy (same product, positioning)
**Product-Vareity Marketing **
Lots of choices in similar product line, yet has no segmentation in mind
Market Segmentation
Seperating the overall market into groups w/ similar traits & features
Niche Marketing
Targetting very small target markets
Localized Marketing
Targetting local consumers
Individualized Marketing
Giving product based on a one-to-one basis
Cons of Mass Marketing
Intense competition, as every competitor is reaching to same target: everyone
Product is “okay” fit for most, but better fit for some
More specialized marketers take market share, as they target specific type of consumer
Prone to risk of environmental change, as only has one business model and one prime offering
Ex. Resturant that sells all cuisines, compared to one restaurant specializing in pizza, people will likely get pizza from that place, as they known as experts
Key Requirement for Market Segmentation
STP Process
Clearly Identifiable - Knows everything about consumer is each segment
Easy to Measure - Measure size+growth of segment
Size - Large enough to be profitable
Mutally Exclusive - All consumers fit into one segment
Unique Consumer Behavior - People in that segment purchase differently
Provides insight on consumer behavior
Workable as target market segment - Reachable communication
Informative - Useful info of consumers in segment to consumer
Strategic Fit - Segment works well with business objectives
Logical & Easy to Communicate - Makes sense enough to communicate w/ staff
Acceptable Amount of Segments
Divide market into 4-5 segments, and choose 1-2 target markets
1 segment=entire market
Segmentation Bases
Geographic
Demographic
Psychographic
Behavioural
Geographic Segmentation
Where consumer lives
Similarities that impacts consumers purchasing behaviour
Assumes that geographic segmentation effects behaviour, preferences, purchases
Geographic Segmentation Variables
Climate
Terrain
Type of Area: Urban, Suburban, Rural
City/Town Size
Population density
Region/City
Pros of Geographic Segmentation
Cost and Efficiency Advantages for Marketer
Focuses on particular geographic area, so can place advertisements there
Ex. Billboards, TV ads, Train Stations
Cost- Effective for Logistics
Approaches international marketers, and can group companies with similar features
Most effective, when in one country there are diverse groups of people
Ex. English & French Canadians
Types of Businesses Geographic Segmentation is Most Helpful For
Local marketing for small businesses
Selecting new location for major brand/retailer
International brands selecting new area(country/city) to expand in
Firms operating in various countries w/ diverse group
Logistics dependent businesses (manufacturing/logistics)
Cons of Geographic Segmentation
Relies on Assumption of..
Geographic location = consumers behaviour
All people at location have similar needs
Limits Insight on..
Consumer motivation
Consumer needs & preferences
Can be outperformed by competitors w/ more marketing segment knowledge
Demographic Segmentation
Measurable aspects: Age, Gender, Religon, Race, Occupation, Income Level
Goal of Demographic Segmentation
View how variables effect consumer behavior to understand the market
Demographic Variable
Age
Gender - Cosmetics, clothes, jewllery
Income
Education
Occupation
Family size & life stage/cycle
Religion
Ethnic background - Influence clothes, food
Demographic Information Application
Describe/segment identified with a variable. If organization has segmented market for product usage and use demographics to describe heavy users
Used as a starting point for market segmentation
