Market Segmentation

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Market Segmentation

• Special Topic
• Mktg 633

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Objectives

• Definition
• Reasons for segmentation
• Bases of segmentation
• Applications
• Product Positioning

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Definition

• The process of dividing all possible users of a
  product into groups that have similar needs the
  products might satisfy.

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Historical Development

• 50s 60s Mass Marketing
• 90s Breaking Up Into Smaller Groups
• Extensive Segmentation and targeting smaller
  consumer groups necessarily produces higher
  marketing costs

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Criteria for Segmentation

• Know Your Customers (Scanner Data)
• Make What Customers Want. Offer many variations
  on a single product.
• Reach Target Customers. Ex smart cash
  registers.

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Segmentation Approaches

• A Priori Approach
• Post Hoc Approach

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Market Segmentation

• Analyze the Consumer/Product Relationship
• Essence of developing effective marketing
  strategies is understanding the special
  relationship that consumers have with products
  and/or brands. Concerns how consumers perceive a
  product as relevant for their lifestyle, salient
  consequences and values, and self-concepts.

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Market Segmentation

• Determine Segmentation Bases
• Geographic
• Demographic
• Sociocultural
• Affective and Cognitive
• Behavioral

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Using VALS 2 in Marketing

• Who your consumers are?
• What are they buying?
• Where are they? (geodemographic)
• How to effectively communicate with customers?
• Why? Relate consumers underlying psychological
  values to their lifestyles and buying behavior
• http//www.sric-bi.com/VALS/l

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Sample Questions from VALS 2

• I am often interested in theories
• I like outrageous people and things
• I like a lot of variety in my life
• I love to make things I can use everyday
• I follow the latest trends and fashions
• Just as the Bible says, the world literally was
  created in six days
• I like being in charge of a group
• I have more ability than most people
• I must admit that I like to show off
• I like trying new things

Measured on a 4-point scale from Mostly Disagree
to Mostly Agree.
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VALS I Typology
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VALS 1

• Classifies the American population into 4 general
  consumer groups
• Need-Driven (Sustainers and Survivors)
• The poor and uneducated (11)
• Outer-Directed (Achievers, Emulators and
  Belongers)
• Lifestyles directed by external criteria (67)
• Inner-Directed (Societally Conscious, Exeriential
  and I-Am-Me)
• Motivated by personal needs than by expectations
  of others (20)
• Integrated
• Those who are able to combine the best of both
  outer- and inner-directed values (2)

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VALS 2

• Classifies the American population into 3 general
  consumer groups and then subdivides into 8
  distinctive subgroups
• Principle-Oriented
• motivated in their choice by their beliefs,
  rather than by desire for approval
• Status-Oriented
• guided by actions, approval, and opinions of
  others
• Action-Oriented
• propelled by a desire for social or physical,
  variety, and risk-taking

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Example of VALS 2 Segment Principled

• 35-64 years, Married
• College graduate
• 11 of U.S. adult
• Well informed, info junkie
• Value education and travel
• Practical consumers
• Prestige, image unimportant
• Watch TV news

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Market Segmentation

• Select Segmentation Strategy
• Do not enter
• Mass market (mass market strategy)
• One segment (concentrated strategy
• More than one segment, separate marketing mix for
  each (differentiated strategy)

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Product Positioning

• Determining how to differentiate ones product
  from those of competitors in the minds of
  consumers
• 1. Position on product attributes
• Ex price (Budget Car Rental)
• 2. Position on benefits
• Ex Close-Ups benefit of fresh breath
• 3. Position on usage
• Ex Michelob special occasion beer
• 4. Position on user category
• Ex Wheaties as the breakfast of champions