Professor S.J. Grant

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Segmentation and Targeting Usage

• Professor S.J. Grant
• Spring 2007

BUYER BEHAVIOR, MARKETING 3250
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Outline

• What is segmentation?
• Why segment?
• How to segment?
• Traditional
• Usage based
• Non-users, current users, competitors users
• Benefits

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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

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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

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How to Segment

• Segmentation divides diverse set of consumers
  into homogeneous groups that can be addressed
• With common positioning
• With common benefits
• With common media vehicle

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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

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Traditional vs. Usage Segmentation

• 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

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Why Segment by Descriptors?

• No other information is available
• Most useful way of addressing specific segments

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Why Segment by Usage?

• Communicating with consumers about a category is
  facilitated when a pre-existing knowledge
  structure in place
• Allows storage of information that is consistent
  with prior notions
• Persuasion is difficult when you are
  contradicting beliefs

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Benefit Segmentation
Gentle

• Segmentation acknowledges consumer heterogeneity
• Heterogeneity is represented by different ideal
  points
• Market segments are formed by clustering
  individual ideal points together

Ideal Point Segment 1
Tylenol
Ideal Point Segment 2
Effective
Bufferin
Bayer
Private Label
Excedrin
Anacin
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Market Segmentation Example


















18 of buyers
16 of buyers
27 of buyers
21 of buyers
20 of buyers
Mobil Oil Company
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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

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Current Users

• Current users are the most important segment to
  target
• Current users have already favorable associations
  to the product
• Customer 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

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Current Users

• Current users are most likely to sustain,
  increase consumption
• Heavy users account for disproportionate share of
  brands volume
• 80/20 rule applies to beer drinkers
• Men, age 18-34, eat several meals a week at
  McDonalds
• Heavy users of Campbells Soup purchase 300 cans
  per year
• A brands first obligation is to address current
  users

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Competitors Users

• Success of a strategy that targets a competitors
  users depends on the brands ability to convince
  consumers of its superiority
• Difficult to change beliefs
• Making a challenging claim often encourages
  consumers to rehearse their own thoughts

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Non-Users

• Targeting non-users may be warranted if targeting
  other segments do not enhance opportunities for
  growth
• Point-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

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Segmentation Example 1

• What is the most useful way to segment diaper
  market?
• Traditional variables
• Babys sex
• Babys age
• Babys weight
• Usage variables
• Benefits?

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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

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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

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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

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Segmentation Example 2