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51 Cards in this Set
- Front
- Back
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Market Segment
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Group of customers responding similarly
to a product or service offer Example: “Snowboarders” vs. “Skiers” |
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Market Segmentation
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Process of dividing customers into market segments
Example: “Skiers” “Downhill”, “Cross Country”, |
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Target Market
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Market that company chooses to serve
Example: Focus on “Teenage Snowboarders” |
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Homogeneity
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Degree to which:
All customers in segment are same, AND Are different from other groups i.e., No Overlap |
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Parsimony
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Ability to describe in just a few groups
Generally, want 3 - 8 groupings |
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Accessibility
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Ease of reach by marketers
Good: All customers in segment that read “Vogue” Bad: All customers in segment who like color Blue |
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Basis
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Dependent Variable
Examples: Needs, Preferences, Decision Processes Basis for why customers respond differently |
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Descriptors
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Independent Variable
Example: B2C: Age, Income; B2B: Firmographic Describes how to reach customers |
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Example of Descriptors
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Solar hot water heater
Relevant descriptor: Different climates (distinct) Irrelevant descriptor: Education level (overlap) |
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STP: Segmentation
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1.Segment market using demand variables (customer needs, wants, benefits sought, problem solutions desired, and usage situations).
2.Determine descriptors to help reach customers (shopping patterns, geographic location, clothing size, spending power, and price sensitivity). |
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Targeting: 3 steps
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3.Calculate attractiveness of each segment
4.Select targets based on profit potential 5. Find customers in targeted segments |
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Positioning: 1 step
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6.Identify positioning concept (See Chapter 4)
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Phase 1: Segmenting Markets
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1.Role Outline role of segmentation in company strategy
Can firm develop new product to meet new need? 2.Variables Select set of segmentation basis & descriptors Basis: Understand what drives customers Example: Pizza: Quality: Round Table; Delivery: Dominos Descriptors: B2C vs. B2B 3.Procedures Choose mathematical and statistical procedures to aggregate customers into homogeneous groups Discrete segments: No overlap or Fuzzy segments: Some overlap 4.Quantity Specify number of segments: One too few; One hundred too many 5.Target Determine how many segments to target |
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Phase 2. Describing Market Segments - Bases
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Needs, Wants, Solutions, Usage
ch 3 slide #7 |
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Phase 2. Describing Market Segments - Descriptors
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Demographics, Psychographics, Behavior, Decisions, Media
ch 3 slide #7 |
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Psychographics
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The use of demographics to study and measure attitudes, values, lifestyles, and opinions, as for marketing purposes.
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Size & Growth
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Size: Market potential
Growth: Forecasts |
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Evaluating Segment Attractiveness -- Structural
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Competition: Barriers to entry & exit
Saturation: Gaps in market Protectability: Patents, Barriers to entry Environmental: Economic, Political, Technological |
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Product-Market Fit
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Fit: Coherence with company’s strengths
Synergy: Relationships with other segments Profitability: Entry costs, Margins Subaru: good gas mileage and good in snow |
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Phase 4. Selecting Target Markets - 5 Options
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Concentrate on single segment (Krispy Kreme)
Select segments in which to specialize (GE) Provide range of products to specific segments (Boeing) Provide single product to many segments (Timken) Cover full market; many products to many segments (IBM) |
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Phase 5: Finding Targeted Customers - Self-Selection
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Customer selects relevant products themselves
Branding same product different ways (GM) Using different distribution channels (Nike) Provide wide variety of products (Safeway) |
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Phase 5: Finding Targeted Customers - Scoring methods
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Consumer answers questions
Profiling process Example: AT&T website: Residential or Business User? |
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Phase 5: Finding Targeted Customers - Dual Objective
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Combines needs data with demographics
Mix of basis & descriptor variables Actionable segments: Jaguar dealership |
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Defining a Market -Traditional Method
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Define markets how consumers view them
e.g., Auto Market (Title); Compact, Full Size (Physical) |
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Defining a Market - Narrow Definitions
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1980s Example: Word Processor market
Increasing market share, but declining market Typewriter market vs. Document market |
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Defining a Market - Purchase Behavior
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Cross-Elasticity of Demand; Implies Same Market
Similarities in Behavior: Advil vs. Aleve Brand Switching: Coke vs. Pepsi vs. Michelin |
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Defining a Market -Customer Perception
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Decision Sequence: Laptop vs. Desktop Dell
Perceptual Mapping: Brand perception & placement Technology Substitution: Plastic bottles Substitutability: Sorting exercise Defining a Market time Total Market, Word |
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Segmentation Research: Collecting Data -Instrument
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Develop measurement instrument; Generally a survey
Demographics, Psychographic, Purchase history |
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Segmentation Research: Collecting Data - Sample
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Select sample
Random sample, Cluster (all on street) Stratified sample: Several homogeneous groups Select and aggregate correspondents |
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Segmentation Research: Collecting Data - Select
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B2B: Organize by role: Purchasing agent, User, Analyst
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Segmentation Research: Collecting Data - Analyze
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Analyze data, then segment market
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Segmentation Methods - Factor Analysis
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Drop irrelevant variables
e.g., Hair Color of purchaser |
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Segmentation Methods - Cluster Analysis
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Define measure (distance between points)
Assign elements to clusters: b>>a Graphical: Intuitive Approach Computer Model: Based on Euclidean distance |
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Clustering Method: Hierarchical
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Break down data row by row
Graphical Approach: Produces trees, called Dendograms Marketing Engineering Excel model: Ward’s (1963) |
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Clustering Method: Hierarchical - Algorithm
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Algorithm: ESS (Error Sum of Squares)
Minimizes loss of information associated with clustering Sum squared deviations of observations from mean of cluster |
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Clustering Method: Partitioning
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Break down data into groups
Then swap data to improve fit; repeat as necessary Marketing Engineering Excel model: K-means |
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Clustering Method: Partitioning - Procedure
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Select two starting points as cluster centers
Allocate each item to nearest cluster center Re-allocate items to reduce sum of internal cluster variability Repeat for 3, 4, 5 clusters Repeat for different starting points until process converges |
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Interpreting Segmentation: Study Results - How Many Clusters?
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Generally 3 – 8, depending on purpose
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Interpreting Segmentation: Study Results - How Good?
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Intuitive sense of clusters
Name clusters: Techno-savvy, Blue collar |
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Interpreting Segmentation: Study Results - Discriminant Analysis
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Seek variables that best separate clusters
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Behavior-Based Segmentation: X-Classification - Goal
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Relate descriptor variable to likelihood to buy
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Behavior-Based Segmentation: X-Classification -Cross-Classification
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Classifies data into 2 or more categories
Also called Contingency Table Analysis Popular, but unwieldy with many variables Excel: Pivot Table function |
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Behavior-Based Segmentation: Regression
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Dependent variable = Sales or similar
Independent variables = Predictor of Sales Multi-variable = Usage, Income, Age Excel: Analysis Tools |
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Behavior-Based Segmentation: Regression - Choice-Based
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Used in Database Marketing
Expected customer profitability = (probability of purchase) x (likely purchase volume) x (profit margin for this customer) |
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Customer Heterogeneity in Choice Models
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Account for heterogeneity (differences) in population
1. Observed: Gender 2. Unobserved: Price sensitivity |
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Customer Heterogeneity in Choice Models - Mktg. Engin. Excel
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Expectation Maximization algorithm
Estimates number & size of segments & parameters |
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Customer Heterogeneity in Choice Models - Goodness of Fit
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Hit Ratio: Observations correctly classified
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