Chapter 3

Strategic
Market
Segmentation
*
* Strategic market segmentation (1)
*
* Levels and types of market
segmentation

1-2
*
* Levels and types of market segmentation
*
Vision
Strategic Strategic intent
Segmentation Product benefits
Resource allocation
Alignment
Managerial Planning
Segmentation
Marketing programs
Operational - Advertising
Segmentation - Sales
- Distribution

1-3
*
* Best Buy segmentation strategy
*
* Jill’s - “soccer moms”
* Barry’s - wealthy professionals
* Buzz’s - “tech enthusiasts”
* Ray’s - the family man
* Mr Storefront - the small business customer
* Carrie’s - young, single females
* Helen and Charlie’s - older couples whose
children have left home
* Gov. Palin’s “_________________” moms

1-4
* 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 1-5
*
* Strategic market segmentation (2)
*
* Market-driven strategy and
segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning

1-6
*
Segmentation and Market-Driven
*
Strategy
* SEGMENTS

VALUE
OPPORTUNITIES

CAPABILITIES/
SEGMENT
MATCH

TARGET(S)

POSITIONING
STRATEGY 1-7
*
* Strategic market segmentation (3)
*
* Market-driven strategy and
segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning
* Activities and decisions in market
segmentation

1-8
*
* Market Segmentation Activities and
* Decisions
Market to be
Segmented
Strategic
Analysis Decide How
of Segments to Segment

Finer Form
Segmentation Segments
Strategies
1-9
*
* Strategic market segmentation (4)
*
* Market-driven strategy and
segmentation
* Market segmentation, value opportunities
and new market space
* Market targeting and strategic positioning
* Activities and decisions in market
segmentation
* Defining the market to be segmented

1-10
*
* Strategic market segmentation (5)
*
* Identifying market segments
* Segmentation variables
* Characteristics of people and organizations
* Consumer markets
* Organizational markets
* Product use situation segmentation
* Buyers’ needs and preferences
* Consumer needs
* Attitudes
* Perceptions
* Purchase behavior

1-11
*
Segmentation Variables
*
*

Purchase
Behavior

Buyers’ Needs/ Characteristics

Preferences of People/
Organizations

Use
Situation

1-12
*
* Illustrative Segmentation Variables
*
Consumer Industrial/
Markets Organizational Markets
Characteristics Age, gender, income, Type of industry, size,
of people/ family size, lifecycle geographic location,
organizations stage, geographic corporate culture, stage of
location, development, producer/
lifestyle intermediary
Use situation Occasion, importance of Application, purchasing
purchase, prior Procedure (new task,
experience with product, modified rebuy, straight
user status rebuy
Buyers’ needs/ Brand loyalty status, brand Performance requirements,
preferences preference, benefits sought, brand preferences, desired
quality, proneness to make features, service
a deal requirements
Purchase Size of purchase, Volume, frequency
behavior frequency of purchase of purchase

1-13
*
* Strategic market segmentation (6)
*
* Forming market segments
* Requirements for segmentation
* Response differences
* Identifiable segments
* Actionable segments
* Cost/benefits
* Stability
* Approaches to segment identification
* Customer group identification
* Forming groups based on response differences

1-14
*
* Miller Brewing’s beer brand targets
*
* Miller Genuine Draft - “mainstream
sophisticates”
* Milwaukee’s Best Light - “hardworking
men”
* Pilsner Urquell - “beer afficionados”
* Miller Icehouse - for “drinking buddies”

1-15
*
* Requirements for Segmentation
*
Identifiable
segments
Response Actionable
differences segments
Segmentation
Requirements

Stability Favorable
over time cost/benefit

1-16
*
Approaches to Segment
*
Identification
*
CUSTOMER
IDENTIFIERS
RESPONSE
OF CUSTOMER
PROFILE
GROUPS

 Characteristics
 Use Situation

of People and
Organizations

 Buyers Needs
and Preferences

1-17
*
* Segment Dimensions for Hotel Lodging Services
*

1-18
*
* Illustrative Example: Gasoline Buyers
*
Higher-income, middle-aged men, drive 25-
Road 50000 miles a year… buy premium with a 16% of
Warriors credit card … purchase sandwiches and drinks buyers
from the convenience store… will sometimes
use carwash
Men and women with moderate to
True high incomes, loyal to a brand and
Blues 16% of
sometimes a particular station …
buyers
frequently buy premium, pay in cash
Generation Upwardly mobile men and women -
F3 (Fuel, half under 25 years of age -
27% of
Food & Fast) constantly on the go … drive a lot
buyers
snack heavily from the convenience store
Usually housewives who shuttle
Homebodies children around during the day and
21% of
use whatever gas station is based on
buyers
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.
1-19
*
* Strategic market segmentation (8)
*

* 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

1-20
*
* Strategic Analysis of Market Segments
*

Customer
Analysis
Financial and Competitor
Market
Attractiveness Analysis

Positioning
Analysis
1-21
*
* Segmentation “Fit” for Implementation
*
gment Attractiveness
d 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

1-22
Strategic Marketing
1. Imperatives for Market-Driven Strategy
2. Markets and Competitive Space
3. Strategic Market Segmentation
4. Strategic Customer Relationship Management
5. Capabilities for Learning about Customers and Markets
6. Market Targeting and Strategic Positioning
7. Strategic Relationships
8. Innovation and New Product Strategy
9. Strategic Brand Management
10. Value Chain Strategy
11. Pricing Strategy
12. Promotion, Advertising and Sales Promotion
Strategies
13. Sales Force, Internet, and Direct Marketing Strategies
14. Designing Market-Driven Organizations
15. Marketing Strategy Implementation And Control