Week 4 | Segmentation and Targeting Flashcards
Segmentation
Organisations identify different types of customers so that they can deal with a manageable number of groups as opposed to dealing with millions of individuals. Those groups or types of customers are called market segments. They form the basis of the process to develop an overarching marketing strategy to guide all marketing activities.This approach to marketing strategy is called target marketing.
Three main steps to target marketing
- segmentation
- targeting
- positioning.
Approaches to segmentation
Buyers in any market differ in their wants, resources, locations, buying attitudes and buying practices. Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs.(Amstrong et al. 2013, p. 171)
Outside-in strategy
- Who are we creating value for?
- How do we do it better than others?
Inside-out strategy
typically starts with a design and then tries to position it to appeal to a market. The marketing ‘logic’ here is that people generally aspire to be better versions of themselves. This means that marketers need to know what consumers aspire to, so they can tap into it. This is where market research comes in. A marketer also needs to know more specifically who has what aspirations, and this is where we use market research and segmentation combined.
Market Segmentation
In its simplest form, market segmentation can be defined as dividing a market into smaller groups of people that have common needs, wants, characteristics and behaviours, and who will respond similarly to a marketing action.
Benefits of market segmentation
The key to good segmentation is identifying a logical characteristic by which to split your customer base. If done effectively, market segmentation can benefit an organisation in the following ways
- Helps to design effective marketing programs to reach groups of buyers.
- Identifies opportunities for new product development.
- Improves allocation of marketing resources.
How do we segment?
- Select a market or product category.
- Select bases for segmentation and segment descriptors.
- Profile segments and identify target markets.
- Select and develop targeting strategies.
- Develop a positioning strategy.
MADAS. It stands for
Measurable,
Accessible,
Differentiable,
Actionable, and
Substantial.
4 commonly used ways to segment a market
The four commonly used ways to initially segment a market are: geographical (e.g. region, country, climate), demographic (e.g. age, income, ethnic background), psychographic (e.g. personality, lifestyle) and behavioural. The last option is often split further, e.g. by benefits, behaviour towards the product, loyalty status.
Geographical
- Region
- City size
- Density
- Climate
Demographic
- Age
- Sex
- Family size
- Income
- Occupation
- Education
- Religion
- Nationality
Psychographic
- Socioeconomic
- Status
- Values
- Lifestyle
- Personality
Behavioural
- Purchase occasion
- Benefits sought
- User status
- Usage rate
- Loyalty
- Readiness
- Attitude to product
Bases for segmenting a market
Step 1 - Conduct either secondary or primary research
Step 2 - determine the whole potential customer base
Step 3 - identify the key characteristics of consumers
Step 4 - narrowed down your one or two key characteristics, you should decide on a logical way to split consumers into categories.
