Market Segmentation

C. VIGNESH

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Agenda
 What is market segmentation?

 Why is segmentation necessary?
 How to segment the market?  Developing market-product grids.

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Segmentation examples
 How does DELL computers segment the market for PCs? http://www.dell.com  How does T-Mobile segment the market to meet various consumer needs? http://tmobile.com

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Where does segmentation fit in?

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What is Market Segmentation?
 Market segmentation involves aggregating prospective buyers into groups that have two key characteristics.

o have common needs and o respond similarly to a marketing action.

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Why Segment Markets?
 Satisfy diverse needs by developing different products to suit various consumer needs.  One Product and Multiple Market Segments  Multiple Product and Multiple Market Segments  Segments of One: Mass Customization
• Build-to-Order (BTO) • Synergy

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5 Step Segmentation Process

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Step 1: Grouping Potential Buyers into Segments
 Criteria to Use in Forming the Segments
• Potential for Increased Profit

• Similarity of Needs of Buyers within a Segment
• Difference of Needs of Buyers Among Segments • Potential of a Marketing Action to Reach a Segment • Simplicity and Cost of Assigning Buyers to Segments

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Two Ways to Segment markets
• Customer Characteristics
 Geographic: Region
 Demographic: Household  Psychographic: Lifestyle

Buying Situations
 Benefits Sought: Product Features

 Patronage: Usage Rate
• Frequency Marketing • 80/20 Rule

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S E G M E N T A TI O N
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V A R I A B L E S

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Procedures for Segmentation
 Cross-Tabulations
o usage x age, income x age

 Statistical Methods
o Cluster Analysis

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Step 2: Group Products to be Sold into
Categories

Step 3: Develop a Market-Product Grid and
Estimate Size of Markets

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Market-Product Grid
E.g. Apple Computers
Product Synergies

Marketing Synergies
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Step 4: Select Target Markets
 Criteria to Use in Picking the Target Segments

• Market Size • Expected Growth

• Cost of Reaching Segment

• Compatibility with the Organization’s Objectives • Competitive Position and Resources

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Step 5: Marketing Action
 Take Marketing Action to reach Target Markets effectively
o Price Strategy o Advertising Strategy o Promotional Strategy.

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Questions / Comments?

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