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Contents 1 Preparing for market segmentation 2 4 8 Scope of Segmentation Portraying how a market works and identify decision-makers Developing a representative sample of different decision-makers 6 Accounting for the behavior of decision-makers Forming market segmentation Determining the attractiveness of market segments Assessing company competitiveness and the portfolio matrix 3 5 7 10 Realizing the full potential of market mapping Predicting market transformation 9 12 Setting market objectives and strategies Organizational issues on market segmentation 11

Predetermined approaches used in market segmentation:

Predetermined approaches used in market segmentation Product and Services Demographics Geography The problem with segmenting markets according only to the product or services offered, or the technology type is that in most markets, many different types of customers buy or use the same products or services. Variables such as sex, age, lifestyle and so on, when used to define segments, are by implication claiming, for e.g., that every 30-35 years old will respond to the same proposition. Rather like demographics, segment based on geo-graphic areas, however tightly defined, assumes that everyone in a predetermined area can be expected to react to a particular offer in exactly the same way

International Market Segmentation:

International Market Segmentation Segmentation models in international marketing tend to consist of geographical groups, such as Western Europe, Eastern Europe, North America, ASEAN, Australasia and so on. Unfortunately, such grouping are of very limited value as actionable marketing propositions, since they bear little relationship to actual consumption or usage patterns.

Classifying market segmentation in organization:

Classifying market segmentation in organization BOLT-ON SEGMENTATION This presents an archetype where a high level of customer focus is brought into the defining of market segments. EFFECTIVE SEGMENTATION It combines both a customer focus and a high level of organizational integration. The organization is able to apply customer-based data in order to develop a set of defined segments

Rules for segmentation:

Rules for segmentation Each segment should consist of customers who are relevant to the purchase situation in that they are responsible for making the decisions or can affect buying behavior. Each segment should have sufficient potential size to justify the time and effort involved in planning specifically for the business opportunity. Each segment should be distinguishable from other segments, such that each has a distinctive set of require-ments and can be served by an equally distinctive marketing strategy. Each segment should be reachable by sales and distribution channels currently being used or which could be used. Each segment should be capable of being identified by a set of characteristics

Segmenting consumer markets:

Segmenting consumer markets Geographic segmentation divides the market into different geographical units such as nations, regions, states, countries or cities. Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits. Demographic segmentation divides the market into groups based on variables such as age, gender, family size, income, occupation, race and nationality. Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product.

Ensuring meaningful definition to your company:

Ensuring meaningful definition to your company COMPANY In some case the market definition will not be suitable for few companies, if they are focused on particular part of an overall product. Now, define the potentially available market by taking into account what you company’s products or services and their directly competi-tive products or services could be used for within the totally available market. Finally, therefore define the realistically available market, as this will become the market to be segmented. First, define the totally available market by expressing it as ‘a need that can be satisfied by all the alternative products or services’.

Procedure to be followed when developing micro-segments:

Procedure to be followed when developing micro-segments Divide the market into identifiable groups of customers as this equips with useful points of reference for developing micro-segment. 1 Take one of these reference groups, familiarize yourself with the individuals it represents and develop into a micro-segment by carefully listing the customers in this group regard as their KDFs, with any differences within the group captured as micro-segment. 2 Now, attempt to indicate the relative importance of KDF to the micro-segment using a simple grading structure. 3

From ‘features’ to ‘benefits’:

Benefit What the customer gets that they explicitly need? Advantage What it does? From ‘features’ to ‘benefits’ When looking at the benefits for your market, it is useful if you first consider what issues are of particular concern to the customer. Then to get from a features to a benefit, describe what the feature does, its advantage and finally identify the particular appeal this has to the customer, the ‘benefits’, this being the reason why the feature is of interest to them. The distribution between, a ‘feature’, an ‘advantage’ and a ‘benefit’ can be summarized as Feature What it is, consists of, or is made from?

Using Segmentation in Customer Retention:

Using Segmentation in Customer Retention A company tags each of its active customers with 3 values What retention tactics should be used to retain this customer? For customers who are deemed “save-worthy”, it’s essential for the company to know which save tactics are most likely to be successful. Is this customer at high risk of canceling the company's service? One of the most common indicators of high-risk customers is a drop off in usage of the company's service. For example, in the credit card industry this could be signaled through a customer's decline in spending on his or her card. Is this customer worth retaining? This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer. 1 2 3


Price Clearly , ‘price’ has an important part to play in explaining customer behavior and is obviously a component of customers ‘buying criteria’. Everything has its price!. Not everyone buys the cheapest, and for those who do, it could be because there is nothing available in the market that really meets their requirements. “Price” is simply a measure of value placed by a customer on both the tangible and intangible components of a purchase.

Why segment the market?:

Why segment the market? Better matching of customer needs Customer needs differ. Creating separate products for each segment makes sense and provides customers with a better solution Better opportunity for growth Market segmentation can build sales. For example, customers can be encouraged to ‘trade-up’ after being introduced to a particular product with an introductory, low-priced product More effective promotion By segmenting markets, target customers can be reached more often and at lower cost Gain a higher share of the market Through careful segmentation and targeting, businesses can often become the market leader, even of the market is small

Segment checklist:

Segment checklist Volume/Value The size of each segment must be sufficient to justify the expense of developing specific offers for them and the expense of taking these offers into the market. The ‘size test’ for each segment should already have been cleared. Segments have to be measured 1 2 3 4 5 6 7 8 9 10 Differentiated Is the offer required by each segment sufficiently different from that required by the other segments? This is where marketing strategies appropriate for one segment are checked to ensure they are distinguishable from the marketing strategies developed for the other segments

Directional Policy Matrix for a portfolio of segments:

Directional Policy Matrix for a portfolio of segments High Low Relative company competitiveness Segment attractiveness High Medium Low No change Maintain Manage for cash Invest/build Present position Forecast position in 3 years Segment attractiveness has only been calculated for the final year. Relative company competitiveness has been calculated for both the current year and the final year

Portfolio management – examples :

Portfolio management – examples Poorly balanced portfolio High Low Relative company competitiveness Segment attractiveness High Low ‘Stars’ ‘Question marks’ ‘Cash cows’ ‘Dogs’

Possible dimensions:

Possible dimensions Low price Base quality Low volume Necessity Light Simple Unhealthy Low-tech High price High quality High volume Luxury Heavy Complex Healthy Hi-Tech

Identifying market strategy:

Identifying market strategy TEXT TEXT Strategies Market growth Higher market penetration Sell more to same market (i.e., get current customers to buy more or buy more frequently) If overall market is growing this may not necessarily mean a growth in overall market share If overall market is not growing this means a growth in overall market share Sell to markets or market segments not previously targeted Develop new products for existing customers Develop new products for new customers

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