Iacobucci_MktgMgmt_6e_PPT_CH03_Final.pptx

iacobucci marketing management chapter 3 segmentation

1. Chapter 3: Segmentation Marketing Management 6e Dawn Iacobucci, Marketing Management, 6th Edition, © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2. Learning Objectives After you have finished this chapter, you should be able to: 3-1: Explain segmentation and why it’s important in marketing 3-2: Identify the types of market segments 3-3: Describe the four bases for segmentation 3-4: Discuss the differences between the two approaches used to identify market segments

3. Marketing Framework

4. Discussion Activity 1 Name a product in which everyone wants the same thing.

5. Discussion Activity 1 Debrief Name a product in which everyone wants the same thing. Answer: It will be difficult to name any such product. Some commodities might qualify, but consumer preferences and attitudes and particular uses of a given product reveal subtle and not-so-subtle differences.

6. Why Segment? 3-1 Dawn Iacobucci, Marketing Management, 6th Edition, © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

7. Segmentation (1 of 2) Psychologists Consumers have different motivations that drive their purchases. Economists Imperfect competition exists; consumers have unique needs. Marketers The market is comprised of different segments.

8. Segmentation (2 of 2) Segmentation Breaking the market into more homogeneous consumer groups A single product, price, or promotion is unlikely to satisfy all consumers’ needs. e.g., Taylor Swift appeals to tweens; Robert Redford appeals to seniors.

9. What Are Market Segments? 3-2 Dawn Iacobucci, Marketing Management, 6th Edition, © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

10. Market Segments Market segment A group of customers who share similar inclinations toward a brand e.g., One segment might purchase a car primarily to get from A to B while another segment may purchase a car primarily to impress their friends. Marketers’ goal Create marketing mixes that meet the segment’s needs.

11. Marketing Segmentation

12. Types of Segmentation (1 of 2) Mass marketing All customers are treated the same. Is usually more efficient but may not meet customer needs. e.g., Pepsi seems to be mass marketed but is not. Pepsi, Diet Pepsi, caffeine-free Pepsi, 2-liters, 12-pack cans, 6-pack bottles, etc.

13. Types of Segmentation (2 of 2) One-to-one marketing Each customer serves as a segment. Product is tailored for each person’s desires. Is usually more effective in meeting customers’ needs, but hard to achieve efficiently and may involve quality issues. e.g., Dell allows customers to “build” their own computers; however, options are limited.

14. Discussion Activity 2 List companies/products that are close to providing: One-to-one marketing Mass marketing What are the pros/cons of mass marketing? What are the pros/cons of one-to-one marketing?

15. Discussion Activity 2 Debrief List companies/products that are close to providing o ne-to-one marketing and mass marketing. Answer: Answers will vary. Customized products and services (home building, personal services, etc.) fall under the one-to-one marketing category. Mass marketing includes many food, chain restaurant, and personal item products. What are the pros/cons of mass marketing? Answer: Pros include efficiency (treats all customers the same) and reduced redundancy in supporting functions. The biggest con is that customers don’t have the same needs/wants. What are the pros/cons of one-to-one marketing? Answer: Pros include effectiveness (each customer is its own segment) in meeting individual customers’ needs. A drawback is the expense in resources to determine and then meet individual customer desires.

16. Segmentation Segmentation falls between one-to-one and mass marketing. As segment size increases, segments become more heterogeneous. As segment size decreases, segments become less profitable. Marketers need the “optimal” segment size.  Niche Targeting small market that firm serves well

17. What Information Serves as Bases for Segmentation? 3-3 Dawn Iacobucci, Marketing Management, 6th Edition, © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

18. Bases for Segmenting in B2C

19. Segmentation: Demographics Demographics Gender, age, household composition, stage in life cycle, education, income, ethnicity Demographic variables are clear and easy to recognize. However, they border on being simplistic stereotypes.

20. Segmentation: Geographic Geographic distinctions between customers can change preferences/needs. Cultural differences can exist between countries or within a country. e.g., residents of southern U.S. states prefers spicier food. Urban living is different than small town. e.g., NYC residents want smaller dishwashers. Hot climates require different products than cold climates. e.g., Minnesotans need snowblowers.

21. Segmentation: Geographic/Demographic Combining geographic and demographic information can be powerful.

22. Segmentation: Psychological Psychological: get inside head and heart of customers Attitudes (e.g., favorable attitude toward “green” products) Knowledge and awareness (e.g., don’t know about the product) Wants and needs (e.g., need for safety) Affiliations (e.g., members of the AMA) Traits (e.g., extroverts who want to socialize) Expertise & involvement (e.g., new motorcycle enthusiasts) Brand attributes sought (e.g., low price and red color) Risk orientation (e.g., risk-adverse late technology adopters) Aspirations (e.g., want to be a better cook)

23. Segmentation: VALS VALS: psychographic segmentation tool based on three consumer motivations Ideals Consumers are guided by knowledge and principles. Achievement Some consumers will buy products and services to demonstrate their success to others. Self-expression Choice of brands express consumer personality to others.

24. Segmentation: Behavioral Consumer-related behaviors people engage in Attitudes can’t be observed; behaviors can. Intentions do not always equal behaviors. Behaviors help predict future behavior. Current users; nonusers Nonusers may use competitors or don’t buy. 80:20: 80% of sales come from 20% of customers. It costs six times more to acquire a new customer than to retain a loyal one. Patterns of co-purchasing Purchase a new house, usually purchase new appliances, curtains, etc. Create opportunities for cross-selling.

25. Concept in Action: Segmentation Variables Insurance industry example Industry is large and competitive. Segment market using cluster analysis Survey customers; identify questions where there is variability in responses. If no variability in responses, do not segment on that variable. Useful segmentation has variation across groups.

26. How Do Marketers Segment the Market? 3-4 Dawn Iacobucci, Marketing Management, 6th Edition, © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

27. How to Segment the Market Iterate between two approaches: Managerial: top-down ideation Customer-based: bottom-up customer needs assessment Begin with understanding the marketplace and then gather information on the customer’s perspective. A segment may look desirable in terms of size and growth but be saturated with competitors and not consistent with firm goals. Doing both approaches is important. Managers may hold beliefs that are not consistent with systematically gathered data.

28. How to Evaluate Segmentation Schemes (1 of 3) Does the segmentation scheme have: Data to identify segments? Census data: available but may not be useful Commercial data through VALS or Prizm: expensive Specific survey may not be available. Databases to access segments? Databases that give access to the specific people within your chosen segments 

29. How to Evaluate Segmentation Schemes (2 of 3) Does the segmentation scheme have: Profitability? Size matters but so does frequency and depth ($) of purchase, price sensitivity, segment stability, growth potential, competitive intensity, etc. Use information to estimate segment value. Be careful not to segment too narrowly. Determine what matters to your product.

30. How to Evaluate Segmentation Schemes (3 of 3) Does the segmentation scheme Fit with corporate goals? Consider your firm’s goals and image. e.g., Subzero (high-end refrigeration) does not “fit” with the low-end refrigerator market. Actionable? Marketers must focus on the right criteria. It is common to link usage, attitudinal, etc., variables to demographic variables to make the segment more actionable.

31. Segmentation Strategies: Segments in the Marketplace

32. Segmentation Strategies: Breadth Strategy: Reaching Multiple Segments

33. Segmentation Strategies: Depth Strategy: Serving One Segment Well

34. Segmentation Strategies: Tailored Strategy: Customizing for Segments

35. Group Activity In groups of 4-6 participants, select one of the following markets: Pizza restaurant near a college campus Specialty grocery store near an urban shopping mall Electric mini-car dealership and respond to the following: What variables do you use to segment the market? After defining a segment, determine an approach (?) to use in expanding your business. As a class, discuss the ways in which segment influenced the approaches used.

36. Group Activity Debrief For one of the following markets—pizza restaurant; specialty grocery store, or electric mini-car dealership—respond to the following: What variables do you use to segment the market? Answer: Answers will vary, but should include categories such as age, gender, income, geographic location, education, etc. After defining a segment, determine an approach (?) to use in expanding your business. Answer: Answers will vary, but should include aspects such as advertising approaches; emphasis on product characteristics; collecting data on various segment demographics; etc. As a class, discuss ways in which segment influenced the approaches used. Answer: Answers will vary, but should address direction of expansion; profitability analysis of various segments; corporate fit of intended expansion, etc.

37. Managerial Recap (1 of 2) Segments should be Profitable Identifiable Accessible Actionable Compatible with company goals Marketers create segments because customers vary in preferences. Market segments are groups of customers with similar reactions to the company’s brand.

38. Managerial Recap (2 of 2) Segments can be formed on nearly any kind of differentiating information. Segments are best created by iterating between the managerial understanding of the marketplace and good data to identify similarities in purchasing propensities. Effective segmentation schemes are based on data, sustained by a customer database, profitable and matched to larger corporate goals and planning, and finally implementable.

39. Knowledge Check Activity In order to better understand how different groups of customers feel about its product, Villalat Company will need to position its product in the market. mass market its product. target market its product. segment the market.