• Lecture 3, created by Malik Najjar for the third year, first semester of the 2023/2024 academic year, covers identifying market segments and targets.

Segment Marketing

• A market segment consists of customers sharing similar needs and wants
• A segment is partly a generalized view, as individual wants vary

Bases for Segmenting Consumer Markets

• Consumer markets can be segmented using geographic, demographic, psychographic, and behavioral factors

Geographic Segmentation

• Divisions are made based on geographical units like nations, states, regions, counties, cities, or neighborhoods
• Companies may focus on one or several areas, adjusting to local customs
• For example, Hilton Hotels tailors rooms and lobbies by location
• Geographic variables include world region/country, country region, city/metro size, density, and climate

Demographic Segmentation

• Markets are divided into groups based on variables like age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, nationality, and social class
• Common demographic age ranges include Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, or 65 and over
• Family size could be 1-2, 3-4, or 5+
• Family life cycle can be young single, married with or without children, single parents etc
• Income brackets include under $20,000, up to over $250,000
• Occupations range from professional and technical to students, homemakers, or retirees
• Religions could be Catholic, Protestant, Jewish, Muslim, Hindu, or other
• Races include Asian, Hispanic, Black, and White
• Generations such as Baby Boomers, Generation X, or Millennials are considered
• Nationalities such as North American, British, etc
• Demographic variables are popular because they link to consumer needs and are easily measurable
• Non-demographic target markets benefit from demographic links for market size and media strategy

Demographic Segmentation - Life Stage

• People in the same life cycle phase may have diverse life stages
• Life stage defines major concerns like divorce, remarriage, elder care, cohabitation, or buying a home

Demographic Segmentation - Gender

• Differences in attitude and behavior between men and women stem from genetics and socialization
• Women are more communal-minded, men are self-expressive and goal-directed
• Men need product interaction, while women readily pick up products
• Men seek product details; women connect with products personally

Psychographic Segmentation

• Psychographics uses psychology and demographics to understand customers
• Buyers are grouped by psychological/personality traits, lifestyle, or values

Psychographic Variables

• Social Class, Lifestyle, Personality

Behavioral Segmentation

• Marketers group buyers based on knowledge, attitude, product use, or response to a product

Behavioral Segmentation - Needs and Benefits

• Buyers have different needs and seek varied product benefits
• Needs-based segmentation is used often because it finds distinct markets with marketing applications

Behavioral Segmentation - Decision Roles

• There are five key roles in purchasing: Initiator, Influencer, Decider, Buyer, and User
• All roles are vital for decision-making and satisfaction
• For example, ICI targeted women for Dulux paint ads after finding women decide 60% of the time

Behavioral Segmentation - Usage

• Many marketers use occasions, user status, usage rate, buyer-readiness, and loyalty status to define market segments

Behavioral Segmentation - Occasions

• Purchase occasions are based on time of day, week, month, year, or other temporal factors
• Buyers can be segmented based on when they develop a need, buy, or use a product
• Air travel can be triggered by business, vacation or family occasions
• Occasion segmentation helps with product usage

Behavioral Segmentation - User Status

• Products have nonusers, ex-users, potential, first-time, and regular users
• Blood banks must get first-time and ex-donors, and regular donors To attract potential/no users, understand why not
• Investigate their attitudes, beliefs or if they lack knowledge of the product benefits

Behavioral Segmentation - Usage Rate

• Markets divided into light, medium and heavy users
• Targeting one heavy user is favorable to attracting several light ones
• Heavy users may be brand loyal, not loyal at all or looking for the cheapest
• Not much room to expand their consumption

Behavioral Segmentation - Buyer-Readiness Stage

• Some are unaware, aware, informed, interested, have desire for the product and intend to buy

Behavioral Segmentation - Loyalty Status

• There are four groups based on brand loyalty:
  • Hard-core loyals (one brand)
  • Split loyals (2-3 brands)
  • Shifting loyals (from one to another)
  • Switchers (no loyalty)
• Analyzing brand loyalty reveals valuable insights: what are the product strengths and how competitive are other brands
• What make customers shifting away, reveals marketing weaknesses

Behavioral Segmentation - Attitude

• Attitudes towards products: enthusiastic, positive, indifferent, negative, and hostile
• Campaign workers utilize voters' attitudes

Multiple Bases Segmentation

• Combining different behavioral bases gives a full view of a market and its segments

Segmenting Business Markets

• Business markets segmented into demographic, operating variable, purchasing approaches, situational factors, and personal characteristics

Segmenting for Business Markets - Demographic

• What industries should we serve?
• What company sizes should we serve?
• What geographical locations should we serve

Segmenting for Business Markets - Operating Variable

• What customer technology should we focus on?
• Should we serve heavy, medium, light or non users?
• Customer Capabilities: Should we serve customers needing many or few services?

Segmenting for Business Markets - Purchasing Approaches

• Should we serve companies with highly centralized or decentralized purchasing organization?
• Power Structure: Engineering/financially dominated?
• Nature of existing relationship: strong relationship or most desirable companies
• General purchasing: service contracts? Or sealed bidding?
• Purchasing Criteria: Seeking pricing or service advantages?

Segmenting for Business Markets - Situational Factors

• Should we serve companies that need quick and sudden delivery/ and service?
• Focus on certain applications of a product or all applications?
• Large or small orders in should we focus on?

Segmenting for Business Markets - Personal Characteristics

• Should we serve companies whose people and values are similar to ours?
• Attitude toward risk: risk-taking or risk avoiding customers?
• Serve companies that show loyalty to their suppliers?

Steps in Segmentation Process

• Needs-based segmentation
• Segment identification
• Segment attractiveness
• Segment profitability
• Segment positioning
• Segment test

Effective Segmentation Criteria

• Measurable
• Substantial
• Accessible
• Differentiable
• Actionable
• Size, purchase power and characteristics can be measured
• Segments are large and good enough to serve
• Can be effectively reached and served
• Conceptually distinguishable and respond differently
• Programs can be formed for attracting and serving the segments

Evaluating and Selecting Market Segments

• Segments overall attractiveness and company's objective and resources

Full Market Coverage

• With full market coverage, a firm attempt to serve all consumer groups with all the product they might need
• Only very large firms
• Microsoft, General Motors and Coca-cola can undertake a full market coverage strategy
• Ignoring segment differences and goes after the whole market with one offer
• When different groups of consumers have different needs and wants, marketers can define multiple segments
• Sell different products to all the segments within the market
• Typically creates total sale than undifferentiated but increases costs of doing business

Multiple Segment Specialization

• Select subset of all possible segments

Single Segment Concentration

• With single-segment concentration, the firm markets to only one particular segment
• Niche is a more narrowly defined customer group seeking a distinctive mix of benefits
• Marketers identify niches by divided in segments into subsegments

Individual Marketing

• Leads to segments of one or one to one marketing
• Customization combines operationally driven more marketing with customized marketing empowers consumers to design the product and service offering of their choice