Unit 1: Perform Market Segmentation PDF

**UNIT 1: PERFORM MARKET SEGMENTATION** 1.1 Basic Marketing Terms ------------------------- Marketing is about identifying and meeting the needs of the consumers in a way that aligns with the company's goals. It refers to any actions a company takes to attract an audience to the company's product...

**UNIT 1: PERFORM MARKET SEGMENTATION** 1.1 Basic Marketing Terms ------------------------- Marketing is about identifying and meeting the needs of the consumers in a way that aligns with the company's goals. It refers to any actions a company takes to attract an audience to the company's product or services through messaging. The aim of marketing is to deliver value to prospects and consumers and strengthening brand loyalty, thereby increasing sales for the company. +-----------------------+-----------------------+-----------------------+ | **Term** | **Definition** | **Example** | +-----------------------+-----------------------+-----------------------+ | Needs | Basic requirements | 1\. **Physical | | | essential for humans | needs** (food, | | | to survive. | clothing, warmth, | | | | and safety) | | | | | | | | 2\. **Social needs | | | | (**belonging and | | | | affection) or | | | | | | | | **3. Individual | | | | needs** (knowledge | | | | and self-expression) | +-----------------------+-----------------------+-----------------------+ | Wants | Wants are needs | An American who needs | | | shaped by one's | food may want a bag | | | culture and personal | of potato chips and a | | | preferences. It is | carbonated drink, but | | | something that one | a Japanese who needs | | | desire but would be | food may want sushi | | | able to live without. | and a hot green tea. | +-----------------------+-----------------------+-----------------------+ | Demand | When a want is backed | A person might want a | | | by consumer buying | Ferrari for a car. | | | power, it becomes a | They can buy a | | | demand. | Ferrari, provided | | | | they has the | | | | financial ability to | | | | do so. | +-----------------------+-----------------------+-----------------------+ | Target Market | A market consists of | Total population. | | | a set of actual and | | | | potential buyers of a | | | | product. | | +-----------------------+-----------------------+-----------------------+ | Target Audience | A group pf people | A company selling eye | | | characterised by | cream wants to target | | | behaviour and | females, 25 -- 50 | | | demographics. | years old and have a | | | | minimum monthly | | | | income of \$1,500. | +-----------------------+-----------------------+-----------------------+ **1.1.1 Marketing Mix** The marketing mix refers to the set of actions or strategies that a company uses to promotes its brand, product or service in the market. It comprises of 4Ps namely product, price, place and promotion. A diagram of a marketing plan Description automatically generated +-----------------+-----------------+-----------------+-----------------+ | **Product** | **Price** | **Place** | **Promotion** | +=================+=================+=================+=================+ | A product is a | Price refers to | A place is | An activity to | | good or service | the amount of | where and how a | communicate the | | that the | money customers | company | value of a | | company is | must pay to | distributes its | product. | | offering to | acquire the | product or | | | satisfy a | product or | service to the | Promotion | | customer's | service. | customer. | includes all | | needs. | | | the methods | | | Pricing a | Place is also | companies | | The product's | product | known as a | undertake to | | features and | correctly can | channel, | inform | | attributes can | determine a | distribution, | consumers about | | help a company | company's | or | their products | | differentiate | profit or | intermediary. | and to | | itself from its | survival. | | encourage | | competitors. | | *"Where will | potential | | | *"What is the | you be selling | customers to | | *"What are you | price?"* | the product?"* | buy these | | selling?"* | | | products. | | | Pricing | Products can be | | | Examples of | strategies can | sold physically | Promotion can | | products: | include | in a | boost their | | clothes, | competitors' | brick-and-morta | brand | | electronics, | pricing, cost | r | recognition and | | bags | of goods, | store or online | sales. | | | profit margin, | via e-commerce | | | Examples of | target market | shopping | *"Where will | | services: | and perceived | platforms. | you be | | aircon repair, | value. | | promoting the | | manicure | | | product?* | | service, | | | | | insurance | | | Promotion | | | | | strategies | | | | | include | | | | | advertising, | | | | | sales | | | | | promotions, | | | | | social media | | | | | and personal | | | | | selling. | +-----------------+-----------------+-----------------+-----------------+  1.2 Importance of Marketing Mix ------------------------------- The marketing mix is important in the success of a business. Once the marketing strategy has been finalized, the company will develop an optimal marketing mix that will support the positioning of its product in the marketplace. This requires suitable product(s) to be designed and developed, at a suitable price, with suitable distribution channels, and an effective promotional campaign. Here are the key reasons why the marketing mix is important: i. **Customer focus** ii. **Competitive advantage** iii. **Efficient resource allocation** iv. **Strategic decision making** v. **Measurable results** vi. **Customer satisfaction** 1.3 Creating value for customers -------------------------------- Creating value for customers involves understanding their needs and wants and delivering products or services that meet or exceed their expectations. It is about offering something that customers perceive as worth more than the price they pay. Here are some key strategies to creating value for customers: i. **Understand customer needs and wants** ii. **Develop a value proposition** iii. **Delivering exceptional customer experience** iv. **Build rapport with customers** v. **Gather and act on feedback** [Examples of value creation] Both Netflix and Spotify provide personalized content recommendations and seamless streaming experience. **Source: ** **1.3.1 The Marketing Process** The marketing process is a step-by-step guide to ensure that the company's marketing efforts are well planned and effective. Here is an overview of the marketing process: **[Step 1: Conduct Market Research]** The process begins with a detailed market analysis, usually through market research such as customer surveys, focus groups and competitor analysis. It enables companies to understand their target audience and the marketing environment so that they can uncover growth opportunities, develop products or services that meet those needs, stand out from their competitors and attract more customers. For example: Apple conducts extensive market research to identify trends in consumer electronics before launching new products. **[Step 2: Develop a customer-driven marketing strategy]** There are a few steps in developing a customer-driven marketing strategy. - Set marketing goals which are specific, measurable, achievable, relevant and timely (SMART). - Determine the optimal combination of product, price, place and promotion using the marketing market to meet the consumers' needs. - Develop a positioning strategy that defines how the product or service will be perceived in the minds of the target audience. - Creating a compelling value proposition that differentiates the product or service from competitors. For example, Nike targets athletes with a value proposition focused on performance and innovation in sportswear. **[Step 3: Create an integrated marketing plan]** This would involve allocating budget and resources to different marketing activities using the marketing mix. - Product: Develop a product or service that provides superior value. - Price: Set a price that aligns with the perceived value of the product. - Place: Select the most effective channels to reach the target audience (e.g. social media, email, print advertising) For example, Coca-Cola uses a mix of television ads, sponsorships and social media campaigns to promotes its beverages. **[Step 4: Build long-term customer relationships]** Build and maintain customer loyalty through loyalty programs, personalisation interactions and regular communication. The company should also provide high quality products or services that would ensure a higher customer satisfaction. With high customer satisfaction, it is easier to retain current customers, which leads to greater profits for the company. For example, Grab has a strong loyalty program that rewards its customers via the mobile app. Customers can earn GrabRewards Points and use the points for discounts off Grab deliveries and rides. **[Step 5: Implement the marketing plan and monitor its effectiveness]** It is crucial to calculate and evaluate the financial return of the marketing campaign to determine the return on investment (ROI). This helps the company measure the effectiveness of its marketing campaign and to make adjustments for improvements if necessary. The formula for marketing ROI is as follows: Marketing ROI = \[(Sales -- Marketing Cost) / Marketing Cost\] x 100% 1.4 Customer segmentation analysis ---------------------------------- Customer segmentation analysis is the process of dividing a customer base into distinct groups of individuals that share similar characteristics. These characteristics can include demographics, purchasing patterns, needs or any other criteria relevant to the business. Most companies have moved away from mass marketing and toward market segmentation and targeting. The goal of customer segmentation analysis is to identify and understand these groups to tailor marketing strategies, products, and services to meet the specific needs and preferences of each segment. It helps businesses improve customer satisfaction, increase loyalty, and optimize their marketing efforts by targeting specific segments more effectively. Instead of using a 'one size fits all' approach to marketing campaigns, the purpose of market segmentation and market targeting is to identify the parts of the market so that the company can tailor marketing strategies, products and services to meet the specific needs and preferences of each target segment. This is done by grouping customers with similar attributes together. Market segmentation also helps companies minimize risk by figuring out which products are more appealing and what are the best ways to market the products. In traditional marketing, segmentation of the market allows for some economics of scale in delivering value to the segments served. Digital marketing enables very targeted marketing at a lower cost because companies can directly engage with its customers on various online platforms. For example: Nike has a wide range of shoes designed for running, tennis, cycling, training, basketball and football. a. Segmentation by age: Nike offers Nike Kids collection and limited-edition sneakers for adults. b. Segmentation by lifestyle: Nike targets various groups of people such as athletes, fitness enthusiasts and casual wearers. 1.5 Benefits of market segmentation ----------------------------------- i. **Targeted communication** ii. **Improve marketing efficiency** iii. **Customer retention** iv. **Increased customer satisfaction and loyalty** v. **Increased market share** 1.6 Types of market segmentation -------------------------------- Market segmentation divides a market into smaller groups of buyers who share a similar set of needs, characteristics, or behaviours. There are four common types of market segmentation - Demographic - Behavioural - Psychographic - Geographic https://www.questionpro.com/blog/wp-content/uploads/2021/09/types-of-market-segmentation-min-1-1.jpg Source : **Demographic Segmentation** Demographic segmentation divides the market into groups based on variables such as age, gender, marital status, income, occupation, education, religion. It is a very popular way of segmenting the target market and these attributes are often associated with the consumer needs and wants. Here are some common types of demographic segmentation: - Age (teenagers, young adults, working adults, elderly) - Gender (female, male) - Martial Status (single, married, widowed, divorced) - Income (low income, middle income, high income) - Occupation (executives, middle management, top management) - Education (primary, secondary, tertiary, postgraduate) - Family Size (married with no kids, families with young children, families with more than 5 members) Example: A luxury car brand targeting high-income professionals for the launch of their latest electric car model. **Geographic Segmentation** Geographic segmentation splits the target market by physical location such as where they live or work. This is useful for companies which are expanding into new locations. Some examples are - Country - State/Province - City - Neighbourhood Example: McDonald's has incorporated local food in their menu served at different locations. Satay Burger in Singapore, McVeggie in India and McArabia in Dubai. **Psychographic Segmentation** Psychographic segmentation divides consumers based on their lifestyles, interests, attitudes, values and personality traits. - Lifestyle (active, outdoorsy, family-oriented) - Interests (hobbies, sports, entertainment) - Attitudes (opinions, beliefs) - Values (ethics, social responsibility) - Personality (ambitious, friendly, outgoing) Example: A health food brand targeting fitness enthusiast who prioritise healthy living. **Behavioural Segmentation** This segmentation divides the market based on consumers' buying behaviour such as: - Purchase occasion (gift, daily use, birthdays, anniversaries) - Usage rate (heavy, medium, light or past users) - Loyalty status (brand loyal, non-brand conscious) - Benefits sought (product features, performance) - Expenditure (heavy, medium or light spenders) Example: A gym offering different membership packages for casual users and fitness enthusiasts. 1.7 Best practices for market segmentation ------------------------------------------ Market segmentation enables businesses to know more about their target audiences so that they can better tailor their messages to their target audience's preferences and needs. The following are some industry best practices for market segmentation: - **Establish Specific Goals** - **Accurate Data Collection** - **Create Detailed Segment Profiles** - **Set Segment Priorities** - **Customise Marketing Strategies** - **Track and Adjust** - **Maintain Consistency Across Platforms**