John T' Drea

1
Turning Marketing Information Into Action/Market
Segmentation

• John T. Drea
• Associate Professor of Marketing
• Western Illinois University

2
Five Steps in Marketing Decision Making

• Define the problem
• Assess the situation (decision factors)
• Collect relevant information (data)
• Find a solution (analyze the data)
• Evaluate the results

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Define the Problem

• What is it that you want to know (the research
  question).
• Must be specific.
• Be careful not to define the solution in the
  problem When sales are down 10
• Why do our customers no longer prefer our
  products?

4
Primary vs. Secondary Data

• Primary data Information collected specifically
  for the purpose of the investigation at hand
• Secondary data Information not gathered for the
  immediate study at hand but for some other
  purpose.

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Available Census Data

• 100 Component
• household relationship
• sex
• race
• age
• marital status
• of units in structure
• of rooms
• own/rent

• Sample Component
• education
• ancestry
• language at home
• employment/occup.
• industry
• income experience
• of cars
• of bedrooms

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Advantages/Disadvantages, Secondary Data

• Advantages
• Saves time
• Saves money

• Disadvantages
• problems of fit
• problems of accuracy
• primary source
• purpose of the publication
• general evidence of quality

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Sampling

• Fundamental issue Does the sample represent the
  population for which it is to infer?
• Random sample each member of the population has
  an equal chance of being included in the sample
• Convenience sample sample members are selected
  for their convenience

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Collecting data

• Keys to writing good surveys
• Pre-test.
• Scale questions with analysis in mind (nominal,
  ordinal, interval, ratio data)
• Use multiple-items when possible
• Be sure the questions you ask will answer your
  research question.
• Look for evidence of reliability and validity.

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Asking Good Questions Things to Avoid

• Leading questions
• Would you like a car that gives you more quality
  for your money?
• Impossible questions
• How many Cokes did you drink last year?
• Double-barreled questions
• Are price and quality important to you?

10
Asking Good Questions Things to Avoid
(continued)

• Ambiguous words
• How often do you drink alcoholic beverages?
• __never __occasionally __sometimes
  __often
• Inappropriate dichotomous categories
• Will you buy a new car this year? __ yes __no
• Overlapping categories
• Age ___lt16 __16-25 __25-40 ___41

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Asking Good Questions Things to Avoid
(continued)

• Implicit alternatives
• Would you like to have a job? __yes __no
• Would you prefer to have a job, or do you prefer
  to do just your housework?
• __job ___housework

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Avoid problem words whenever possible

• Avoid extreme words All, always, every, never,
  nobody, only, none.
• Do you always select the best value in buying
  food?
• ___Always ___Sometimes ___Never
• How often do you seek the best value in buying
  food?
• ___Always ___Sometimes ___Never
• Avoid you
• How many times did you go to grocery store last
  month? ______ times

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Avoid problem words when possible (continued)

• Avoid bad
• Ok if it is used as a bi-polar adjective with
  good
• Poor choice of words if you are asking What is
  bad about your current supplier?
• Most people dont like to put negatives down in
  writing

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Avoid problem words when possible (continued)

• Government (local, state, or national). It is
  also an emotionally charged word for some people
• Where (Where did you read that?)
• Possible answers
• In the newspaper
• At home in my living room
• In an advertisement

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Can you fix the following questions?

• Are service and selection important to you in
  buying a new car?
• __always __sometimes __never
• Are you in favor of a 20 reduction in your
  property tax?
• ___yes ___no
• Are you interested in buying from a dealer with a
  reputation for honesty and service? ___yes
  ___no

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How good are your measures?

• Reliability similarity of results provided by
  independent but comparable measures of the same
  construct.
• Validity how well does a scale measure what it
  is supposed to measure.
• Convergent Validity agrees with alternative
  measures of the same construct
• Discriminant Validity does not agree with scales
  intended to measure something else

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Ex How do you convert research to strategy?Top
7 Reasons for Selecting a Fast Food Restaurant
(in order)

• Convenient location
• Fast service
• Specific food craving
• Easy access
• Good value
• Friendly service
• Price

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Example Other Key Research Findings

• 48 of pizza eaters frequent only one chain
• 39 of chicken eaters frequent only one chain
• 25 of burger eaters frequent only one chain
• Burger eaters choose chains on location and
  value. Chicken eaters are also motivated by
  food craving.

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Strategic Implications from the Previous Research

• Value and price-oriented messages are important ,
  particularly for burger chains.
• However, price messages must be supported with
  features which address other needs e.g.,
  convenience specific food cravings
• Nearly ½ of pizza customers have considerable
  brand loyalty (need to retain existing customer
  base.)

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Market Segmentation Defined

• Aggregating prospective buyers into groups that
  have common needs and will respond similarly to a
  marketing action (Berkowitz et.al.), or
• The process of dividing a heterogenous population
  into smaller, homogenous submarkets as it applies
  to a given product/service

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When Should You Segment?

• -When groups of the population respond
  differently to different marketing mixes AND the
  additional gross income more than offsets the
  additional costs of developing the marketing
  mixes.

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Segmentation Bases

• Demographic
• Geographic
• Psychographic
• Benefit
• Usage Rate