EXERCISE 2B: EVALUATION OF END-USER SEGMENTATION

AND TARGETING RESULTS

I. EVALUATION OF SEGMENTATION
1. The group is to conduct cluster analysis on SPSS software to segment the whole markets,
assuming 4 segments.
2. The group is to name individual segments based on their preferred service outputs.
3. Evaluation of segmentation

Criteria 1- Fully 2- Disagree 3- Neither 4 - Agree 5- Fully agree

disagree disagree nor
agree
Measurable?
Accessible?
Substantial?
Differentiable?
Actionable?
Total
NOTE: Assume we select to serve all 4 segments in the Exercise 2B_End-user Analysis Results.
1. Measurable. The size, purchasing power, and profiles of the segments can be measured.
Example: The result from Cluster analysis (from SPSS output)
Cluster (segments) 1 16.000
2 9.000
3 5.000
4 7.000
Valid 37.000
Our customers are segmented into 4 segments, each segment is assigned 1.25 points, and we can measure the
size of individual segments, so we grade 5 (1.25 x 4 segments) in the above table.
2. Accessible. The market segments can be effectively reached and served.
Example: The results from cluster analysis
Final Cluster Centers
Cluster
  1 2 3 4
Bulk_Breaking 1.7 5.7 1.2 7.0
Spatial_Convenience 2.7 6.8 7.0 1.9
Delivery_time 3.6 3.2 5.6 3.1
Product_Assortment 4.5 3.2 5.4 4.4
Product_variety 4.4 2.1 4.0 2.7
Customer_Service 6.3 4.1 4.2 6.4
Information_Sharing 6.0 6.0 2.8 6.3
Low_Price 6.9 4.9 5.8 4.1
 We chose to serve 4 segment segments. It means for each segment we reached and served effectively we will
allocate 1.25 point. Based on information in your case to allocate point for each segment then sum up to
find the final point.
For example, as for segment1, if the company can satisfy both customer service and low prices, we assign
1.25 points, if the company just satisfy either customer service or low price, we assign 0.625 (=1.25/2), if
the company satisfy neither customer service nor low price, we assign 0 point.
And we assign points similarly to segment 2, 3, 4, then sum the points of 4 segment to put in the table.

3. Substantial. The market segments are large or profitable enough to serve. A segment should be the largest
possible homogeneous group worth pursuing with a tailored marketing program.
Guideline: This evaluation depends on the size and resources of the company. You can choose to serve all 4
segments OR less, if you are able to justify your choice, you should give 5 points.

4. Differentiable. The segments are conceptually distinguishable and respond differently to different
marketing mix elements and programs. If men and women respond similarly to marketing efforts for soft
drinks, they do not constitute separate segments.
Example: we have to compare pairs of segments to evaluating their differentiation. With 4 segments we
have 6 comparisons (the right table). Each pair of segments have two output differences, we assign 0.8
points (= 5 points/6 pairs), if they have just one difference, we assign 0.4 point, and so on.
Final Cluster Centers Differentiable ratings
Cluster 1st cluster 2nd cluster Ratings
  1 2 3 4 1 2 0.8
Bulk_Breaking 1. 5. 7.
1.2 3
7 7 0   0.4
Spatial_Convenience 2. 6. 1.
7.0 4
7 8 9   0.4
Delivery_time 3. 3. 3.
5.6 3
6 2 1 2 0.4
Product_Assortment 4. 3. 4.
5.4 4
5 2 4   0.8
Product_variety 4. 2. 2.
4.0 4
4 1 7 3 0.8
Customer_Service 6. 4. 6.
4.2
3 1 4 Total   3.6
Information_Sharing 6. 6. 6.
2.8
0 0 3
Low_Price 6. 4. 4.
5.8
9 9 1

5. Actionable. Effective programs can be designed for attracting and serving the segments. For example,
although one small airline identified seven market segments, its staff was too small to develop separate
marketing programs for each segment.
Based on information from the case and service outputs required from each segment to allocate points. If
your company can serve one segment, allocate 1.25 point, otherwise allocate 0 points.
(Source: Gary Armstrong, Philip Kotler, and Marc O. Opresnik, Introduction to Marketing, 13th, Global
edition, Pearson Education Limited, 2017).
NOTE: If the total points are less than less than 15 points, then we should re-segment by choosing just
3 segment and re-evaluation again. We continue doing it until the total points is greater than or equal
to 15 points.
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