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MKTG 504 - MARKET SEGMENTATION
Breaking the Market into Bits
Dr. Dennis PittaUniversity of Baltimore
MARKET
An aggregate of people who, as individuals or as organizations, have needs for products in a product class and who have the ability, willingness, and authority to purchase such products.
The Basics - the MarketPeople with needs,who have money (or something of value), anda willingness to trade that value to satisfy
those needs
Types of MarketsConsumer Market (made up of ultimate consumers)Industrial Market (made up of producer firms)Intermediate Market (wholesalers and retailers)Government Market (federal, state, county, or local agencies)Institutional Market (non-profit organizations)
Marketing’s Main Task
SATISFYING WANTS AND NEEDS
..........mostly wants....
Needs and Wants: DefinedNEED: Something that is lacking that is
necessary for physical, psychological or social well-being.
WANT: Something that is lacking that is desirable or useful.
Examples of Needs:
FoodClothingShelterWarmthSafetyBelonging Knowledge
Examples of Wants
Food LOBSTERClothing TOMMY HILFIGER - FUBUShelter CONDO IN ST. BARTSWarmth HOT TUBSafety .357 MAGNUMBelonging RAVENS BOOSTER CLUBKnowledge UB – TOWSON MBA
Marketing Lesson #1
WANTS = DEMAND
Why do Wants = Demand?____________________________________________________________________________________________
Why People Buy Products
FEATURESADVANTAGESBENEFITS
= WANTS SATISFIED!
Market Aggregation
The total market is not divided into segments.
Examples:Pabst Blue Ribbon BeerMiller High Life BeerCoke (a few years back)Salt
Market Aggregation Advantages
Lower Production and Marketing Costs
Market Aggregation Disadvantages
Vulnerability to Segmented Products
Market Segment
A group of individuals, groups, or organizations that share one or more characteristics which make them have relatively similar product needs.
Examples of Three Market Segments
Quantity
Age => Age X1
.................
.................
.................
II
III
I
Market Segmentation
A marketing strategy in which a large, heterogeneous market is broken down into small, more homogeneous segments, and a separate marketing program is developed for each segment.
Market Segmentation Advantages
Better match between market wants and product benefits.
Market Segmentation Disadvantages
Higher Marketing CostsHigher Production Costs
Suppose you want to develop and additional segment?
Balance is essential in developing another segment.
There must be a net advantage over the additional costs of serving a new segment with a new product.
Problems with Developing New Segments:
Cannibalism
New Competition
Criteria for Good SegmentsIdentifiableReachableSignificantResponsiveStable
IdentifiableCan you identify the want …..out
there…?
ReachableCan you contact the segment
(efficiently) ….using radio
…..TVnewspapermaildirectly (in a meeting)the Internetthe telephone
ResponsiveDo they respond to your message?
SignificantIs the segment large enough or rich
enough to justify serving them?
StableWill they have the same wants and
needs in a year?
The Chevrolet Camaro example...
Potential Bases for SegmentationDescriptive Bases
Demographic variables Socioeconomic variables Geographic
Behavioral Bases User Status Usage Rate Benefits Sought Personality Life Style Social Class
Potential Bases for SegmentationDemographic Variables:
Age Sex Race Family Size Marital Status Religion Place of Residence
Socioeconomic Variables: Income Occupation Education
Exercise 1 - Use of Descriptive Variables in Segmentation
Richardson Vicks
The number of young adults age 20-24 who have skin problems now exceeds the number of teenagers with blemishes.
Segmentation response: CLEARSIL ADULT CARE
Williams-Sonoma
15 percent of its cookware customers are male. The company has been considering what to do to boost the sales of its catalogs.
Segmentation response: ______________________________________________
COCA-COLA
Coca-Cola’s research found that children of working class parents prefer to GULP their drinks. Coca-Cola, and other carbonated beverages, are difficult to gulp.Segmentation response: MELLO YELLOW - THE FASTEST DRINK IN THE WEST
Behavioral variables are more powerful means of segmenting markets than descriptive variables.
They can be viewed as determining variables.
Behavioral Variables
Product Usage*Benefits Sought**Personality and LifestyleOccasionsSocial Class
Heavy and Light Users of Common Consumer Products
HEAVY HALFHEAVY HALF LIGHT HALFLIGHT HALFPRODUCT (% USERS)PRODUCT (% USERS)
75%71%
Soaps andSoaps anddetergents (94%)detergents (94%) 25%
29%79% 21%
Toilet tissue (95%)Toilet tissue (95%)
Shampoo (94%)Shampoo (94%)
75% 25%17%17%
Paper towels (90%)Paper towels (90%)
Cake mix (74%)Cake mix (74%)
Laxatives (41%)Laxatives (41%)
83%83%
13%
5%
87%19%
===>Beer (40%)===>Beer (40%)
Dog food (30%)Dog food (30%)
Bourbon (20%)Bourbon (20%)
81%95%
What is the implication on sales?One heavy drinker (6+ per day) is
worth scores of light drinkers (6 per year).
Capturing just this segment insures success!
Another exampleOriginally Lite by
Meisterbrau aimed at ladies - light users.
Another example the rest of the story…
Miller bought the brand and repositioned it for men - Heavy users.
They fought - less filling - great taste
And drank a lot of it!
Product Usage ExamplesScheafer is the one beer to have when you’re having more than one.
That little pink pill: Correctol laxative
You’re in the Pepsi generation
Lite Beer from Miller
Benefits Sought in Products
Levi’s Jeans: DURABILITYElmer’s Glue-All : ADHESIONRevlon Cosmetics: HOPELego Toys: POSSIBILITIESClose-Up Toothpaste: WHITER TEETH
AND FRESH BREATH
The Best Segmentation Base
A combination of bases!Like…..BENEFITS + DEMOGRAPHICS
BENEFITS + PSYCHOGRAPHICS
USAGE RATE + BENEFITS
Steps in the Segmentation Process
Determine Market BoundariesDecide which Segmentation Bases to
UseAnalyze (Consider) Segmentation DataDevelop a Profile of Each SegmentTarget the Segments to be ServedDesign a Marketing Plan
Targeting Segments
Targeting a segment involves choosing the one or ones that are potentially most profitable.
Also important is response sensitivity - the likelihood that the segment will react favorably to a marketing program.
Reasons Not to Target the Largest SegmentLarge segments do not always offer the best opportunity.
Often the largest segment faces very heavy competition.
Consumers in those segments may be very satisfied with the products or brands of competitors.
Differentiated Marketing
Differentiated marketing is a marketing strategy that aims at several market segments, varying the marketing mix for each segment.
Positioning
A process in which a marketer communicates with consumers to establish a distinct place for its product or brand in their minds.
On the following scale please place a check on the position that describes your beliefs about the brand:
Miller
Heavy taste Light taste|--------------------|--------------------|--------------------|--------------------|
Dark color Light color
|--------------------|--------------------|--------------------|--------------------| Budweiser
Heavy taste Light taste|--------------------|--------------------|--------------------|--------------------|
Dark color Light color
|--------------------|--------------------|--------------------|--------------------|
On the following scale please place a check on the position that describes your beliefs about the brand:
Miller
Heavy taste Light taste|--------------------|--------------------|--------------------|--------------------| -10 -5 0 5 10
Dark color Light color
|--------------------|--------------------|--------------------|--------------------| -10 -5 0 5 10 Budweiser
Heavy taste Light taste|--------------------|--------------------|--------------------|--------------------| -10 -5 0 5 10
Dark color Light color
|--------------------|--------------------|--------------------|--------------------| -10 -5 0 5 10
Heavy tasteHeavy tasteD
ark
Col
orD
ark
Col
or
Light tasteLight taste
Light colorLight color
o Budweiser
O MILLER LITE
O MILLER BEER
O GUINESS STOUT
High price/oz.High price/oz.
Low
in c
alor
ies
Low
in c
alor
ies
Low price/oz.Low price/oz.
High in calories
High in calories
Product & Brand Positioning(a) Product-positioning(a) Product-positioning
mapmap(breakfast market)(breakfast market)
ExpensiveExpensive
Slow
Slow
InexpensiveInexpensive
Quick
Quick
Baconandeggs
Pancakes Instantbreakfast
Coldcereal
Hotcereal
b) Brand-positioningb) Brand-positioningmapmap
(instant breakfast market)(instant breakfast market)
Brand C
Brand BBrand A
High price/oz.High price/oz.
Low
in c
alor
ies
Low
in c
alor
ies
Low price/oz.Low price/oz.
High in calories
High in calories
Product & Brand Positioning(a) Product-positioning(a) Product-positioning
mapmap(breakfast market)(breakfast market)
ExpensiveExpensive
Slow
Slow
InexpensiveInexpensive
Quick
Quick
Baconandeggs
Pancakes Instantbreakfast
Coldcereal
Hotcereal
b) Brand-positioningb) Brand-positioningmapmap
(instant breakfast market)(instant breakfast market)
Brand C
Brand BBrand A
What position does this one occupy?
The Night Time cough medicine
Why --- it originally was 25% alcohol
Antihistamines + alcohol = unconsciousness
Name the products....
The night-time cough remedy.It's after work, it's ______ time.We're No. 2, we try harder.______ fights cavities.The refrigerator deodorant. Here's to good friends. The quicker picker-upper.The number one in rent-a-car.
Upcoming Topics
Consumer Behavior
