3866421marker seg1

Embed Size (px)

Citation preview

  • 8/2/2019 3866421marker seg1

    1/9

  • 8/2/2019 3866421marker seg1

    2/9

    108 HBR Sept.-Oct. 1965er, and how this has led manufacturers to seekconstantly to be "innovators" and to introducenew products.^ An d David Ogilvy offered thishighly practical advice in his Confessions of anAdvertising Man:

    "Always try to inject news into your headlines,because the consumer is always on the lookout fornew products, or new ways to use an old product.The two most powerful words you can use in aheadline are free and neiv. You can seldom usefree, but you can almost always use new if youtry hard enough." *

    The marketing executive applying the varietystrategy does not really eare whether the womenwho buy one of his detergents constitute a dif-ferent market segment from the women who buyanoth er. He knows the odds are good that bothgroups of women will switch detergents eventu-ally, and probably to brands that are new on thema rket. Co nseq uen tly, his strategy is to offer avariety of detergents in the hope that when thetime comes, the women will switch within hisproduct line instead of outside it.

    Knowing that much switching is to new prod-ucts, the marketing manager will continuallybring out new or improved detergen ts. He willstrive, however, to make his products as widelyappealing as possible, and not lose sight of thefact that the mass market is the big market.An analogy to market segmentation would bethe ecological nic he in biology. Ce rtain plan tsand animals, have manag ed to adapt themselvesto environments hostile or lethal to other organ-isms. They thus avoid competition from otherforms of life. Th is kind of adap tation can behighly successful as long as the extreme condi-tions to which the organism is adapted do notchang e. In the event of chang e, however, thespecialized organism unfitted to survive inother environments is most likely to perish.The businessman who aims his produet at aparticular marketing target is deliberately for-going othe r m arke ts. Instead of trying to cap-ture a share of a large market, he seeks to domi-nate a smaller one. He is basing his strategyon the differences among people, rather than ontheir similarities.

    Other Cons ide ra t ionsTo clear the ground , there are obviously m anyinstances of market segments which have highly

    New York, The Tw entie th Century Fund, 1962 .* New York, Athcneum Publishers, 1963; reprinted byDell Publishing Co., Inc., 1964, p. 131.

    specialized needs not shared by other segmThe market target for prosthetic devices isbest examp le. It is hard to imagine anyone ing dentures, or a hearing aid, or crutchesless he has a real need setting him off from peop le. Sex is ano ther source of segm entasince certain products are used only by meonly by wom en (altho ugh instanc es of theter are far more comm on). Some mark et ments are formed by major prior commitma person who buys a boat, a hi-fi set, or a sming pool becomes a customer for many oproducts previously not needed or wanted.But there are constraints on the extenwhich consum er tastes and wants differ. all have the same general physical configuraand the same biological needs and capabilThere is a six-fingered work glove on the ket, for example, but it is not for six-fingpeople; it is double-thumbed, with a reverpalm for extra wear.

    ^,.AJsp^*igranting the existence of subcult' %ei:e: is ..an Smaiiiig uniformity to the geAm erican cultu re from border to borde r. example of this uniformity can be seen in ily structure, which is such that household varies only within narrow limits; as a result,than 10% of the cars on the road seat er than four people or more than six.Kurt Mayer, in commenting on the imp

    sive uniformity of American spending pattewrote:"By and large everybody . . . wants to buysame things everyone else buys. Americans exa remarkable homogeneity of tastes, attitudes,buying habits, regardless of occupation." ^

    Different MarketsSome companies have policies of market mentation, not through choice but because canno t do otherwise. A small business mayhave the financial strength to attack directproduct firmly entrenched in the mass maIts only alternative may be to exploit the frmarkets disdained by the giant. In other cbaked-in distribution systems or other historigidities restrict a company to dealing with one market segment. Defense-contract fifor example, have not been too successfutheir efforts to diversify into consumer good

    "D iminis hing C lass Differentials in the United Stin Marketing and Behavioral Sciences, edited by Bliss (Boston, Allyn and Bacon, Inc., 1963), p. 203.

  • 8/2/2019 3866421marker seg1

    3/9

  • 8/2/2019 3866421marker seg1

    4/9

    110 HBR Sept.-Oct. 1965Ford sales with the Mustang amount to some$300,000,000 more than Ford would have hadwithout the Mustang."Strong Appeals

    Marketing executives often have an exagger-ated idea of the amount of motivation necessaryto induce a sale. They usually have beh ind themlong and bitter years in sales work, and theyconsequently tend to want products which willsweep a consumer off his feet.However, marketing managers recognize thatit would be difficult to design a product whichwould have this kind of overwhelming appealfor the total pop ulation . Th eref ore , they seekto match products as closely as possible to theneeds of a particular m arket segment. In corpo-rate discussions of product strategy, it is usuallythe marketing executive who presents the casefor additional products to "fill out the line" special models for special market segments, andin a variety of colors and sizes. His idea l is aline of procluets, each of which while it mightleave most people indifferent will have stron gappeal to some smaller group.

    Fred T. Schreier has pointed out that motiva-tional power is one of two factors involved inthe success of a product; the other is the "poten-tial" of a product that is, the number ofpeople who might consider it or try it:

    "Speaking mathematically, we must consider theproduct of motivational power and potential. Theoptimal appeal will be the one for which the prod-uct of these two factors is the greatest. Th us , anappeal with high potential and low motivatingpower may turn out to be better than one withhigh motivational power but low potential." ^Another way of saying this is that a productwith wide but shallow appeal might be more

    successful than one with narrow but deep ap-peal.Also, there is a fallacy in the behef that wid-er appeals are necessarily weaker than narrowerappeals. A prod uct designed for a particularmarket segment may even lose out in its ownsegment against a product with broader appeal.Young people, for example, buy more standard Una uthorized inferences from conversation w ith ayoung Ford vice president.' "Seven Fallacies in Marketing Logic," HBR September-

    October 1959, p. 115.'* See Alfred A. Kuchn and Ralph L. Day, "Strategyof Product Quali ty," HBR November-December 1962,

    American cars than sports cars, for which theconstitute the primary target. Similarly, moadults eat the breakfast cereals they buy ftheir children, instead of the cereals aimed the adult market.

    Matched ArraysThe key idea in market segmentation is thof two matched arrays one of consumpreferences, the other of product characteristicUsing beer as an example, we would have, othe one hand, an array of beer drinkers classifiaccording to the degree of heaviness or lightnethey prefer. On the other ha nd , we would habeers ranging from heavy to light. Inspectiof the two arrays would indicate the extent

    which consumer preferences are met by tbeers on the ma rket. A gap on the product sifacing a sizable preference group on the cosumer side would presumably indicate a nicfor a new product and a marketing opportuniThree extreme cases should be noted:(1) It is conceivable that all beers might pretty much alike (or so perceived by consumerbut with the consumers differing widely in thindividual preferences.(2) Consumer preferences might be relative

    uniform, with many different kinds of beer on tmarket.(3) There might be almost perfect market sementation, with a point-to-point correspondence tween the two arrays.^The basic assumption is that the people wprefer a beer which scores, say, 2.7 on the heaness scale constitute a different market frothose who prefer one at 7.5. The inferendrawn from this is that a beer scoring 2.7 the product characteristic scale would not be

    direct competition with one scoring 7.5 or, least, that it would perform better among peple scoring 2.7 on the preferen ce scale. Is tnecessarily true? Migh t not a beer drinker siply like beer, and on some occasions drink okind and on other occasions anoth er? Is thereally one market segment attracted to one kiof beer and another market segment attractto another kind?Genera l i za t ion Gradient

    The market segmentation policy assumeshigh degree of discrimination on the part of

  • 8/2/2019 3866421marker seg1

    5/9

    and only one, hrand from an array ofs. Th e concept of the generalization gradi-

    Generalization is the opposite of discrimina-on. One woman might discriminate hetweenone hrand and flavor most preferred. An-

    inds of cake mixes. A grad ient isre typical. Bran d A, let us say, is a p referred

    similar. T h e steepness of the slope fromf the exten t to which Brand A is discriminated.

    Interestingly, generalization is related posi-vely to drive. A thirsty person will drin k al-he finicky in his tastes. Re turn ing to our heer

    less among heers than someone whoeave it alone. H e will not in-

    John A. Howard comments, "It is well es-t is determ ined by the level

    "The principle that increased drive causes in-

    . Th rough his advertising, he may increase

    the advertiser walks the tightrope between

    This casts some douht on the concept of theed arrays. Consu mers cannot really heinuum . A consumer may have one hrand whichot prospect, however, with a strong drive touy, there will he other brands which he willlike almost as well and will consider in his pur-

    chase decision. He will select a hr an d from anarray of "acceptable" hran ds. A produ ct with

    Market Segmentation 111general appeal will he considered in many suchpurchase decisions, with a certain chance of"winn ing" in each one. A produ ct with limitedappeal may "win" more often when it is con-sidered, but it will he considered less frequently.

    False Segmentation . . .Some market segments are more apparentthan real. T his is often the case with respect tothose segments which are defined after the fact,in term s of the prod uct houg ht. If two or moreproducts seem to differ greatly from each other,it is easy to conclude that the people who buythem must also be different from each other andconstitute different market segments.Daniel Yankelovich may have fallen, in partat least, into this error, in his article on "NewCriteria for Market Segmentation," when heAvrote:

    "In neither automobiles, soaps, nor cigarettes dodemographic analyses reveal to the manufacturerwhat products to make or what products to sellto what segments of the market. Obviously, somemodes of segmentation other than demographic areneeded to explain why brands which differ so littlenevertheless find their own niches in the market,each one appealing to a different segment." ^^Market S imi la r i ty

    It is not n ecessary to assume, as does Yankelo-vich, that products similar to each other, whichnevertheless find niches in the market, appealto different m arket segments. Even productsthat are objectively quite different from each oth-er may still appeal to the same general market.Homes, for example, in spite of the drearyuniformity of many suhurhan tracts, vary a greatdeal in arch itectu ral style. On e family m ighthuy a Cape Cod house, a second a Colonial, anda third a trilevel or a ran ch ho use . T his does notnecessarily mean that these several types ofhouses appeal to different ma rkets. T h e familythat hought the Cape Cod might well have con-sidered the Colonial and suffered agonies of in-decision. T he wife may have preferred one, andthe hu sban d the other. Th ey may huy a Co-lonial for their next house, and a trilevel thetime after that. Variety, rath er tha n segmenta-tion, is probably the strategy followed hy thesuccessful huilder.

    A house of an extreme and unconventiona

  • 8/2/2019 3866421marker seg1

    6/9

    112 HBR Sept.-Oct. 1965enormously attracted to it, but most of themrepe lled. A house of this sort is usually ha rd tosell. Un like other hou ses, it can not be soldto the family that is "looking for a nice place tolive at a price we can afford."Franklin B. Evans actually urged marketersto build ambiguity into their products to avoidlimiting their markets unnecessarily:

    "In promoting a brand, it would appear safestto be somewhat ambiguous with regard to both per-sonality and objeetive variables. People of all kindsare customers, and creation of too strong an imagein certain personality terms may narrow one's mar-ket unneeessarily. If the image is ambiguous, thereis a tendeney for customers to read into it whatthey want and to attribute what they value highlyto their own brand." ' ^Ford Motor's highly successful Mustang was

    deliberately designed to appeal to as wide a mar-ket as possible, and not only to youth, its primetarget. T he car was priced low to attract econ-omy buyers, with options available for those in-terested in performa nce an d/ or comfort. Itsseating capacity was fixed at four passengersinstead of two, in order to make it a feasiblevehicle for famihes w ith child ren . It was givenan "American look" instead of advanced Euro-pean styling. It was designed no t for the "youthmarket" (to the exclusion of other markets), hutfor the car ma rket in genera l. (It is heing ad-vertised and promoted as a "young person's car,"but this is an appeal as effective to older peopleas to younger.)

    . . .VS. T ru e Segm entationGenuine market segmentation is indicatedwhen a product appeals strongly to some peoplehu t not to othe rs. Ra ting scales can be used to

    identify produc ts of this kind. A prod uct wh ichappeals only to one market segment should re-ceive high ratings from that segment and rela-tively low ratings from the rest of the popula-tion. A useful check on this conclusion is toexamine the demographic and other characteris-tics of the people who like the produ ct. Th ereshould be perceptible differences between themand other people, in addition to the fact thatthey happen to like the product.U n o c c u p i e d N i c h eThe market segmentation strategy, however,

    with preferences not met by existing produIt is not enough simply to find a product whseems to appeal strongly to a particular marsegment. It must also be estabUshed th at other product of the same general class appeto the same segmen t. A firm w hich seeks finds a marketing niche must be sure that niche is not already occupied.Michael Gort's definition of diversificatfurnishes a clue to understanding true marsegmentation:"In economic theory, it is usual to propose eroelasticity of demand as a basis for identifying sarate markets, and hence separate products for purpose of measuring diversification. If cross-eticity is high, the products are close substitutes ahence, belong to the same market; if it is low, products belong to separate markets." ^^Suppose that a company wishes to determwhether two brands, A and B, appeal to same market segment or to different market sm en ts. Simple cross-tabulation of a hke-disHor yes-no question can be used to divide a saminto four groups:

    1. Like A but not B.2. Like B but not A.3. Like both A and B.4. Like neither A nor B.

    Assuming that brands A and B both appeaabout 20% of the population. E X H I B I T I shothe relationships which would exist if they pealed to the same market segment and, in ctrast, to different m arket segments. In the case, those liking A would also like B, and two brands would divide a market amounting2 0% of the population 10% each (if thma rketin g efforts we re equally efficient). In other, the two brands would appeal to differmarkets, and each could be successful in sell2 0 % of the population twice as much asthe first case.

    Real market segmentation can thus be extradinarily rew ardin g. T he problem is that iextra ordin arily difficult to atta in. Peop le wlike dark chocolate also like light, and peowho like Falcons also hke M ustangs. Th e silarities among American consumers and thtendencies to generalize rather than to discri" "The B rand Image Myth," Business Horizons,

    1961, p. 26.'- Diversification and Integration in American InduNational Bureau of Economic Research, No. 77 (Pri

  • 8/2/2019 3866421marker seg1

    7/9

    Market Segmentation 11 3

    n a prod uet line. Too many m odels

    leave some custom er needs un m et. As a

    Salesmen natura lly think more in termsT he retail salesman tries to think

    o has w and ered into his store, know ing tha tright for anoth er. Th e industrial salesman

    he is doing business. Both

    ucts never fit markets exactly. Th us it is

    f a pu rch ase decision. In selling,product must be empha-

    motives of the potential cus-ignore d. If a prospe ct is intereste d in

    Th e salesman tries simultaneously to

    two into congruen ce. Differences among

    E X H I B I T I . M A R K E T A P P E A L B R A ND A A NDBRAND B

    RELATIONSHIP IF THE TWO BRAN DS APPE AL TOSAME M A R K E T S E G M E N T '

    - LIKE

    DON'T

    3_- "^BRAND

    LIKEBRAND

    T O T A L

    bA 1

    A /

    7

    / UKEJ BRAND

    f2 0 %

    2 0 %

    DON'T \LIKE I

    BRAND \B \

    ' " 8 0 % ' ' \.*......._

    8 0 %

    TOTAL.

    2 0 %

    8 0 %

    \ i o o %

    RELATIONSHIP IF THE TWO BR ANDS APPEA L TODIFFERENT MARKET SEGMENTS

    ^ ^LIKE BRAND A

    DON'T LIKE /BRAND A /

    TOTAL /

    / LIKEA BRANDr ^

    20%.

    2 0 %

    DON'T \LIKE \

    BRAND \B \

    2 0 % \

    ' 6 0 %

    -^ ..8 0 %

    T O T A L ,.

    2 0 %

    \ 80%

    1 100%

    preference scale to another point somewhat moreclosely matching the characteristies of the prod-uct he is selling. W itho ut misrepresenting hisproduct, the good salesman will try to convincethe prospect that its characteristics are not toofar from what the prospect has in mind.The salesman cannot accomplish this taskwith products that are honed too precisely to theneed s of specific co nsum ers. It is his job tofit the product to the prospect, and the prospectto the produ ct. It is the job of the produ ct

  • 8/2/2019 3866421marker seg1

    8/9

    114 HBR Sept.-Oct. 1965can be altered to fit almost anyone who happensto walk in the door. To the product planner,the similarities among people are more impor-tan t than their differences. H e should ask:What human needs could we serve better thanthey are now being served?

    The answer to this question should be a prod-uc t of more or less general app eal. It is then upto the salesman to show how this product fitsexactly the needs of the thousands of marketsegments composed of one individual each.Conclusion

    The market segmentation strategy sees themarket as composed of many different segments,each differing in its wants and needs, and urgesmarketers to design their products and aim theirappeals for specific mar ket segm ents. Some com-panies pursue the segmentation strategy be-cause of competitive weaknesses which make itimpossible for them to attack the mass market.Increasingly, however, market segmentation isadvised in the literature, not as a counsel of des-peration, but as the soundest policy for a firmto follow.This raises certain questions:(1) Are people really so different tha t the seg-mentation strategy is the only one appropriate?Bight Guard, formerly a deodorant for men, iscurrently succeeding in establishing itself as "adeodorant for the whole family," ignoring sex,

    which has heretofore been an important sousegmentation in the deodorant market.(2) Is cannibalization of one product by aalways bad? Th e M ustang has eut into the sother Ford lines, but has produeed suflieientmental sales to be one of the major marketincesses of the 1960's.(3) Are narrow appeals to a single markement necessarily stronger than broad appealsoverall market? It is better for a brand to bsidered in 1,000 purehase decisions and w100 than to be considered in 50 and win in (4) Can consumers really be fitted neatlslots by their preferences for particular brandproducts? Evidence suggests tha t they selecan array of acceptable products, and thstronger the drive to buy, the more likely to be the ease.(5) Is not much of what appears to be msegmentation no more than the result of eonsmaking random purehases of a variety of proCandy lovers like one kind of eandy at oneand another kind at another time. Th e persueeess of the Whitman Sampler is a standingment against the segmentation concept.There are obviously real instances of msegmentation, and the manufacturer whoa new market previously overlooked will

    deserved success. Most large on-going cnies, however, follow a policy of offering aety of products to the general market, rathethe alternative policy of attempting to semultitude of small markets.

    Announc ing a New Ser ies . . .C Businessmen concerned with marketing problems will be interested to knowthat a new three -part series of HB B artieles has now beeome available. Eaehpart of the "M arketing Plan ning & Strategy" series is bound and contains i 5artieles.C Par t I ineludes some of the most popular and still significant articles pub-lished between 1955 and i960, with special attention to fundamentals of mar-keting philosophy and product analysis. Part II contains articles published be-tween 1961 and 1963 on such topics as forecasting, advertising strategy, andinnovations at the retail level. Par t III has more recent articles on pricing, organi-zational questions, and new concepts for marketing strategists. I^ote that these

    three parts take the place of and supplement the various series formerly publishedunder the titles of "Marketing Planning" and "Marketing Strategy."

  • 8/2/2019 3866421marker seg1

    9/9

    Harvard Business Review Notice of Use Restrictions, May 2009

    Harvard Business Review and Harvard Business Publishing Newsletter content on EBSCOhost is licensed for

    the private individual use of authorized EBSCOhost users. It is not intended for use as assigned course material

    in academic institutions nor as corporate learning or training materials in businesses. Academic licensees may

    not use this content in electronic reserves, electronic course packs, persistent linking from syllabi or by any

    other means of incorporating the content into course resources. Business licensees may not host this content on

    learning management systems or use persistent linking or other means to incorporate the content into learning

    management systems. Harvard Business Publishing will be pleased to grant permission to make this content

    available through such means. For rates and permission, contact [email protected].