Segment Evaluation

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Segment Evaluation Positioning

• 25th January, 2005

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Today

• What must we consider when evaluating segments?
• Degrees of segmentation
• What must we consider when choosing how to
  position in our segment?

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Segment Evaluation

• Segment surplus
• Market power
• Company objectives

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Segment Surplus

• Customers willingness to pay
• Cost of satisfying customers needs
• Size and growth of segment
• gt Expected profitability

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Segment Size Growth

• How do we calculate size and growth rate?
• Segmentation variables should be measurable
• Size
• Purchasing power
• Profile
• Cannot evaluate segments without this information
• Consider product life cycle

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Product Life Cycle

• Consider PLC when evaluating segments
• Illustrates size and growth of segment over time

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PLC Types
Gain rapid acceptance, peak early, and decline
quickly. Tend to attract limited market. Products
that are novel and do not address basic needs.
Basic and distinctive mode of expression. Once
accepted, popularity will vary over time
A currently accepted or popular style. Gains
acceptance, peaks, then declines. Tend to go in
cycles with generations.
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Market Power

• Number of competitors
• Future competition is competitive advantage
  sustainable?
• Quality of competition / differentiated from
  competition
• Power of buyers (e.g. Walmarts RFID)
• Power of suppliers
• Evidenced by market share and profit margins
• gt Competitive rivalry Porters Five Forces

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Segment Evaluation Summary

• Surplus
• Cs WTP
• Segment size growth over time
• Cost of satisfying needs
• Horizontal Competition
• Number and quality of competitors
• Sustainable competitive advantage
• Vertical Competition
• Upstream supplier power
• Downstream customer power

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Levels of Market Segmentation
Mass marketing
Segment marketing
Niche marketing
Micromarketing
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Level of Segmentation

• Level of segmentation and choice of segments will
  depend on
• Heterogeneity of market and subsequently derived
  market clusters
• Evaluation of defined segments
• Ultimately, market forces will constrain degree
  of market segmentation

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Segmentation Mass Marketing

• Provide a single marketing offering
• No distinction made across customers
• Marketing mix designed to appeal to as many
  customers as possible
• When would we mass market?
• Cost of primary importance (E.O.S.)
• Homogeneous needs
• May be profitable when there are few substitutes
• Vulnerable to targeted marketing offerings

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Mass Marketing Examples

• Model T Ford
• Molson
• Coca-Cola

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First brewery founded in 1786 by John Molson in
Montreal Not until 1903 that segmentation was
introduced with Molson Export Not until 1950s
that new brands were introduced in earnest
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• Developed by John Pemberton in Atlanta in 1886
• Now has 300 brands in 200 countries

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• Caleb Bradham renames Brads Drink, Pepsi-Cola,
  in North Carolina in 1898
• In 1934 Pepsi-Cola began selling 12oz bottles for
  5 cents, the same price as competitors 6oz
  bottles
• How were they segmenting the market?

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Segmentation

• When needs vary there is always an opportunity to
  segment the market
• Often identified by competition
• Be proactive in identifying customers needs and
  changes in those needs
• Segmenting the market can increase the size and
  value of the market. Why?
• Be wary of over-segmenting this is inefficient
  and will result in cannibalization. Why?

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Positioning

• Arranging for a product to occupy a clear,
  distinctive, and desirable place in consumers
  minds relative to the competition
• How do we choose an effective position?

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Positioning

• Position should appeal to primary needs of
  segments we have chosen to enter
• Should be rooted in companys sustainable
  competitive advantage
• Need to think about connections between our
  brand, the needs we fulfill, the product
  category, and even the competition

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Mini-Experiment
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Mini-Experiment

• Sentence
• The notes went sour because the bag
• was ripped

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Mini-Experiment

• Sentence about Bagpipes
• The notes went sour because the bag was ripped

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Consumer Behaviour Process
Pre- purchase
Purchase
Post- purchase

• Problem Recognition
• Needs

• Motivation

• Information search
• Internal

• External

Judgment and Decision Making

• Post decision processes
• Dissonance
• Satisfaction

• Fairness
• Learning

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Information Search

• Consumers engage in internal and external search
• Internal search typically first
• The process of recalling stored information from
  memory
• Extent of search depends on
• Motivation
• Knowledge
• Internal search requires delving into our
  long-term memory

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Internal Search LT Memory

• Information is encoded from short-term memory to
  long-term memory
• Virtually unlimited capacity permastore
  (savings and relearning method, brain
  stimulation)
• Forgetting is a failure to retrieve rather than
  information loss or decay

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Internal Search LT Memory

• Based on semantic (meaning related) code
• Information is linked or associated with other
  similar bits of information to form concepts
• Information in long-term memory is linked with
  other information to form schemata

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LT Memory Biases

• Hindsight biases
• Mood-congruency effects
• Suggestion and false memories
• Message-source disassociation sleeper effect

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Schema Example
Content
Directional??
Young
Favourability /-
Study
Poor

Trace Strength
- -
Student

Subject
Party
Associations
University
Spreading Activation
Campus
Beer
Informational Nodes
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Schemata Features

• Informational Nodes individual chunks of
  information within schema
• Associations links that connect informational
  nodes (priming effect)
• Content attributes, evaluations, users, usage,
  occasions, etc.
• Favourability nodes tend to have positive or
  negative evaluations

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Schemata Features

• Salience extent to which nodes are conscious
• Spreading activation one node fires many more
• Trace strength strength of associations.
  Informational nodes are more likely to activate
  one another the greater the trace strength.
  Fades over time
• Directional Is the strength of an association
  equivalent in either direction?
• Categorization taxonomic and goal derived

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Mini-Experiment

• Write down the sentence that you saw earlier
• Sentence The notes went sour because the bag was
  ripped
• How many of you recalled the sentence correctly?
• How many recalled the meaning of the sentence?