Transcript Market Segmentation

Market Segmentation
This Lecture has been adapted by:
MAXWELL, C. (2014) Marketing – Segmentation. England: South and City
College Birmingham.
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Aim of Today’s Lecture
To introduce the concept of segmentation
and how companies target their products
and services to different / or all segments
of the market.
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Objectives of Today’s Lecture are:


Explain the concept of segmentation in
reference to how companies target their
market when selling products/services.
Explain the concept of segmentation with
reference to social class / socio economic
grouping.
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What is Segmentation?

Segmentation is
about breaking up
a larger market in
to small, more
manageable
chunks
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Definition of Segmentation
Dividing a market into distinct groups of
buyers with different needs,
characteristics or behaviour, who might
require separate products or marketing
mixes.
(Kotler et al 2001)
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Market Segmentation
Segmentation is simply the process of
dividing a particular market into sections,
which display similar characteristics or
behaviour.
There are a number of segmentation
variables that allow an organisation to
divide their market into homogenous
groups.
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Types of Segmentation




Psychographic
Geographic
Demographic
Socio-economic
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Psychographic Segmentation



This type of segmentation classifies people
according to their values, opinions, personality
characteristics and interests.
Lifestyle segmentation deals with person instead
of a product, and attempts to find out the
lifestyle patterns shared by groups of customers.
This can enable a organisation a insight into
their preferences for various products and
services. Marketing Managers can target
products and promotion at particular lifestyle
groups.
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Geographic Segmentation
An area can be divided by the:
 Town
 the region or the country
If an organisation is working on a global scale
they may divide by global regions such as
Europe, North America, South America, Asia
and Africa.
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Demographic Segmentation




Age Businesses often target certain age groups. Good examples
are toothpaste – look at the variety of toothpaste products for
children and adults) and toys (e.g. pre-school, 5-9, 10-12, teen,
family)
Gender We all know that males and females demand different
types of the same product. Great examples include the clothing,
hairdressing, magazine, toiletries and cosmetics markets
Income Many companies target rich consumers with luxury goods
(e.g. Lexus, Bang & Olufsen). Other businesses focus on products
that appeal directly to consumers on low incomes (e.g. Aldi and
Lidl (discounted groceries) and fast-fashion retailers such as TK
Maxx)
Social class Many businesses believe that a consumers
"perceived" social class influences their preferences for cars,
clothes, home furnishings, leisure activities and other products &
services
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Social Class Segmentation
Divides society into 6 distinct groups based solely
on occupation

A
B
C1
C2
D

E




Professional staff
Middle management
Junior management
Skilled manual
Semi-skilled and unskilled
workers
Those dependent on the state.
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Why Segment the Market?
Better matching of customer needs
Customer needs differ. Creating separate
products for each segment makes sense
and provides customers with a better
solution
 Better opportunities for growth
Market segmentation can build sales. For
example, customers can be encouraged to
"trade-up" after being introduced to a
particular product with an introductory,
lower-priced product

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Cont
More effective promotion
By segmenting markets, target customers
can be reached more often and at lower
cost
 Gain a higher share of the market
Through careful segmentation and
targeting, businesses can often become
the market leader, even if the market is
small

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Segments - holidays
Family
Family
Summer Sun
Summer
Sun
Long-haul
adventure
UK
Short
Breaks
Cruises for
Seniors
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20/07/2015
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Limits of Segmentation


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Lack of information and data: some markets are
poorly researched with little information about
what customers want
Difficulty in measuring and predicting consumer
behavior: humans don’t all behave in the same
way all of the time.
Hard to reach customer segments once
identified: it is one thing spotting a segment; it
is another reaching target customers with an
effective marketing message
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Requirements of Segmentation
Before an organisation can target a specific
segment accurately, it must ask itself a
number of questions.
 It is important to evaluate the
effectiveness of a targeting strategy and
the viability of the segment, if this is not
done then money will be wasted.
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The market which is segmented must
meet the following criteria:
Measurability of segment:
Can you measure the size and growth of
the segment?
 Is the segment growing?

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Cont


Accessibility of segment:
Is it easy for you to target and reach
your segment?
Can they be reached with basic
communication tools such as radio and TV
advertising?
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Cont
Suitability of segment:
Is there enough spending power within
the segment for the company to sustain
itself?
 Actionability of segment:
Does the organisation have enough
resources to reach their segments?

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Reasons for choice of target group
Once a business has identified the specific market segment
to target, the business needs to consider the following
before choosing to market tot he segment.
1. Will the identified segment be accessible? The business
must ensure that by having selected a market
segment, it can reach the potential customers through
effective marketing communication.
2. Will the business be able to service this segment? E.g. A
supermarket might identify a market for organic
product produced within 30 miles of the store, but it
will not be able to service this segment as their is no
organic farm in the area.
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3. What are the current and future prospects for
this segment? The business must calculate
whether the segment to be targeted will
provide a good return on the investment.
4. How profitable will this market segment be? It
would be pointless targeting the segment with
the product or service if the cost of production
and distribution were so high.
5. Does the segment fit in with the mission
statement of the business? The values of the
business are an important consideration.
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Summary
By answering the above five questions, the
business will find the choice of which
specific market segment to target easier.
E.g. If a business is marketing fancy
wheels for sports cars, the target market
probably exclude anyone under the age of
17, once the business has narrowed down
who they think their specific market
segment might be, it is time for them to
test the theory.
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