Professor S.J. Grant Spring 2007
Segmentation and Targeting: Usage
BUYER BEHAVIOR, MARKETING 3250
Outline
What is segmentation? Why segment? How to segment?
TraditionalUsage based
• Non-users, current users, competitor’s users
• Benefits
Goal of Segmentation
Why segment? Segments seek different benefits and will,
therefore, respond to different positionings Segmenting allows a firm to identify which
consumers can be most effectively reached instead of employing a broad reach
Appealing to a diverse set of users with a common product is difficult, prone to failure
Market Segmentation
Market segmentation allows firms to: Take into account consumers’ diverse needs and differing
behaviors (heterogeneity) Design marketing mix to be more closely matched with
consumer needs and deliver value by precisely meeting consumer needs (i.e., consumer propositions not diluted by intra-target variance)
Improve the efficiency and effectiveness of resource allocation, boosting profitability
How to Segment
Segmentation divides diverse set of consumers into homogeneous groups that can be addressedWith common positioningWith common benefitsWith common media vehicle
How to Segment
Criteria for selecting segments as your target? Measurable (have to be able to find them) Addressable (once you find them, must
identify media to reach them) Substantial enough to support a business
Traditional segmentation Define segments on key descriptors (sex, age) Measure response differences across segments
Usage-based segmentation Identify segments that differ on key usage
dimensions Profile resulting segments on key demographic and
psychographic descriptors
Traditional vs. Usage Segmentation
Why Segment by Descriptors?
No other information is available Most useful way of addressing
specific segments
Why Segment by Usage?
Communicating with consumers about a category is facilitated when a pre-existing knowledge structure in placeAllows storage of information that is
consistent with prior notionsPersuasion is difficult when you are
contradicting beliefs
Benefit Segmentation
Segmentation acknowledges consumer heterogeneity
Heterogeneity is represented by different ideal points
Market segments are formed by clustering individual ideal points together
Gentle
Eff
ecti
ve
Ideal Point Segment 1
Ideal Point Segment 2
Bayer
Excedrin
Tylenol
Bufferin Private Label
Anacin
Road Warriors: Generally higher-Income, middle -aged men who drive 25,000 to 50,000 miles a year . . . buy premium with a credit card . . . purchase sandwiches and drinks from the convenience store . . . will sometimes wash their cars at the carwash.
18% of buyers
True Blues: Usually men and women with moderate to high incomes who are loyal to a brand and sometimes to a particular station . . . frequently buy premium gasoline and pay cash. 16% of buyers
Generation F3 (for fuel, food and fast): Upwardly mobile men and women-half under 25 years of age-who are constantly on the go . . . drive a lot and snack heavily from the convenience store.
27% of buyers
Homebodies: Usually housewives who shuttle their children around during the day and use whatever gasoline station is based in town or along their route of travel.
21% of buyers
Price Shoppers: Generally aren't loyal to either a brand or a particular station, and rarely buy the premium line . . . frequently on tight budgets . . . efforts to woo them have been the basis of marketing strategies for years.
20% of buyers
® Mobil Oil Company
Market Segmentation Example
Segmentation Schemes
Once the benefits underlying segments are understood, organizing segments according to usage is necessary for targeting Current users
• Heavy users• Moderate users• Light users
Competitors’ users Non-users
Current Users
Current users are the most important segment to targetCurrent users have already favorable
associations to the productCustomer retention pays off, much more
cost effective than pursuing new users• Due to high cost of customer acquisition,
relationship may be profitable only after 1 year
Current Users
Current users are most likely to sustain, increase consumption
• Heavy users account for disproportionate share of brand’s volume
• 80/20 rule applies to beer drinkers• Men, age 18-34, eat several meals a week at
McDonald’s• Heavy users of Campbell’s Soup purchase
300 cans per year
• A brand’s first obligation is to address current users
Competitors’ Users
Success of a strategy that targets a competitors’ users depends on the brand’s ability to convince consumers of its superiority Difficult to change beliefsMaking a challenging claim often
encourages consumers to rehearse their own thoughts
Non-Users
Targeting non-users may be warranted if targeting other segments do not enhance opportunities for growthPoint-of-entry strategy
• Consumers who may be considering using the category, e.g. new parents, diamond ring
Category build strategy• Consumers who buy category for uses other
than conventional ones, e.g. baking soda
Segmentation: Example 1
What is the most useful way to segment diaper market?Traditional variables
• Baby’s sex• Baby’s age• Baby’s weight
Usage variables• Benefits?
Segmentation: Diapers
Pampers aims at parents who are expecting their first child
• Premium diaper• Outstanding softness• Rash-care• Sesame Street
• First-time parents have unique mindset• Nothing but the best• Cautious• Baby is precious
Segmentation: Diapers
Luvs targets parents of 2nd or 3rd child• “No leaks” point of difference• Cheaper diaper• “Live, learn and then get Luvs”• Barney Rewards loyalty program
Segmentation: Example 2
Makers of shower gels have complex segmentation schemes Category Crazies – buy all the latest products Thrifty Concerned – want gels, but price sensitive Shower Freaks – men seeking ‘squeaky clean’ Sensible Selectors – older women seeking pH
balance, buying for families Promiscuous Practicals – brand switchers Unsophisticated Bathers – prefer baths to showers Cynical Pragmatists – soap is soap
Segmentation: Example 2