4-1

Topic #3:

Strategic Market
Segmentation

Dr. Ehsanul Huda Chowdhury

 Segmentation and Market-Driven
4-2

Strategy
SEGMENTS

VALUE
OPPORTUNITIES
CAPABILITIES/
SEGMENT
MATCH
TARGET(S)
POSITIONING
STRATEGY
 4-3

From Mass Markets to Micro Markets

OLD NEW
CONSUMERS Passively receive Empowered media users
whatever TV control and shape content
networks thanks to TiVo, iPod and
broadcast Internet

ASPIRATIONS To keep up with To standout from the

the crowd crowd

TV CHOICE Three networks Hundreds of channels

plus maybe a plus video on demand
PBS station

MAGAZINES Age of the big Age of the special interest

glossies: Time, magazine for every age
Life, Newsweek and affinity group

ADS Everyone hums Talking to a group of

the Alka-Seltzer one, ads go ever
jingle narrower

BRANDS Rise of the big, Niche brands, product

ubiquitous brands extensions and mass
from Coca-Cola customization mean many
to Tide product variations

Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July 12 2004, 58-62
 4-4
Identifying the Health and Beauty Supplies
Market Segments

Level of Product Illustrative Need/Want

Competition Definition Competitors Satisfied

Generic Health & Consumer Enhancement

Beauty Product of Health & Beauty
Aids Companies
Shaving
Product Shaving Gillette,
Type Equipment Remington, Bic

Braun, Electric
Product Electric Norelco, Shaving
Variant Razors Remington,
Panasonic
 Market Segmentation
4-5

Activities and Decisions

Market to be
Segmented

Strategic Decide How

Analysis to Segment
of Segments

Finer Form
Segmentation Segments
Strategies
 4-6

Segmentation Variables

Purchase
Behavior

Buyers’ Needs/ Characteristics

Preferences of People/
Organizations

Use
Situation
 Illustrative Segmentation
4-7

Variables Industrial/
Consumer Organizational
Markets Markets
Age, gender, Type of industry,
income, size, geographic
Characteristics location, corporate
family size,
of people/ culture, stage of
lifecycle stage,
organizations geographic development,
location, producer/
lifestyle intermediary

Use situation Occasion, Application,

importance of purchasing
purchase, prior procedure
experience with (new task, modified
product, user rebuy, straight rebuy
status
Brand loyalty Performance
status, brand requirements, brand
Buyers’ needs/ preference, preferences, desired
preferences benefits sought, features, service
quality, proneness requirements
to make a deal

Purchase Size of purchase, Volume, frequency

behavior frequency of of purchase
purchase
 Requirements for 4-8

Segmentation
Identifiable
segments
Response Actionable
differences segments
Segmentation
Requirements

Favorable
Stability cost/benefit
over time
 4-9

Approaches to Segment
Identification
IDENTIFIERS CUSTOMER
OF CUSTOMER RESPONSE
GROUPS PROFILE

 Characteristics
of People and

Use Situation

Organizations


Buyers Needs
and Preferences


Purchase
Behavior and
Loyalty
 4-10

Segment Dimensions for Hotel

Lodging Services
Illustrative Example: Gasoline
4-11

Buyers
Road Higher-income, middle-aged 16% of
Warriors men, drive 25-50000 miles a year buyers
… buy premium with a credit card
… purchase sandwiches and drinks
from the convenience store
… will sometimes use carwash
True Men and women with moderate to 16% of
Blues high incomes, loyal to a brand and buyers
sometimes a particular station …
frequently buy premium, pay in cash
Generation Upwardly mobile men and women - 27% of
F3 (Fuel, half under 25 years of age - buyers
Food & Fast) constantly on the go … drive a lot
snack heavily from the convenience
store
Homebodies Usually housewives who shuttle 21% of
children around during the day and buyers
use whatever gas station is based on
town or on route of travel
Price Not loyal to brand or station and 20% of
Shoppers rarely buy premium … frequently on buyers
tight budgets.
 Illustrative Consumer 4-12

Perception Map

Expensive
GROUP
• Brand E II • Brand A
• Brand B GROUP
V
Low High
GROUP
Quality I Quality
GROUP
III • Brand C
• Brand D
GROUP
IV

Inexpensive
 4-13

Finer Segmentation Strategies

Logic of finer segments

– customized offerings
– diverse customer base
– close customer relationships
Finer segmentation strategies
– microsegmentation
– mass customization
– variety-seeking strategy
 4-14

SELECTING THE
SEGMENTATION STRATEGY
 Deciding how to segment
 Strategic analysis of market segments
– Customer analysis
– Competitor analysis
– Positioning analysis
– Estimating segment attractiveness
– Segmentation “fit” and implementation
 4-15

Strategic Analysis of Market

Segments

Customer
Analysis
Financial and
Market
Competitor
Attractiveness Analysis

Positioning
Analysis
 4-16

Segmentation “Fit” for

Implementation
Segment Attractiveness and Internal Compatibility
Internal Compatibility
High Low

Attractive segments Attractive segments

High that match with but with poor match
company with company
capabilities capabilities
Market Segment
Attractiveness
Unattractive segments Unattractive segments
Low but with match to that do not match with
company company capabilities
capabilities