Unit 2

MARKET
SEGMENTATION
Lecturer: Ph.D Le Hong Dac
Learning Objectives
1. Understand the importance of market segmentation and the role that
lists serve in direct marketing

2. Be able to differentiate between house, response and compiled lists

and critically evaluate the value of each for direct marketers.

3. Be familiar with the five bases (geographic, demographic, social,

psychological and behavioral) used in segmenting.

4. Understand the importance of Zip Codes as a geographic

segmentation tool, the criteria used to create a Zip Code and what
each digit of the Zip Code represents
Introduction “Why need to learn Segmentation”

o Results will be significantly greater and profits higher when

customers are targeted

o Finding new customers is an important activity for all business

and organizations

o Maintain a balance between customer and prospects marketing

efforts is one key to business success.

o Effective customer prospecting is considered a highly valuable

task in enabling a company or organization to grow
Introduction

“How do marketers identify and locate the “right”

prospects?”

Þ They rent lists

Þ A lists = a specifically defined group of
organizations of individuals who possess
common characteristics
Lists Viewed as Market Segments

 Lists identify prospects and current customers who are likely to

respond to an offer

 Lists are a perishable commodity

THREE TYPES OF LISTS

1. HOUSE LISTS

2. RESPONSE LISTS

3. COMPILED LISTS
 THREE TYPES OF LISTS
1. HOUSE LISTS:

• Lists of an organization’s own customers (active as well as

inactive)

• House lists are simply the databases of an organization

• House lists are the most productive mailing lists available

in terms of response
 THREE TYPES OF LISTS
1. HOUSE LISTS:
- House lists include current customer, former customers and prospects (inquiries)
- House lists must be maintained and updated constantly
- Each organization builds its house list to fit its unique needs
- Records may be cleaned from a variety of internal sources, such as direct mail,
phone, retail or internet transaction
- House lists can age quickly
 THREE TYPES OF LISTS
2. RESPONSE LISTS:
• Are the house lists of other organizations.

• Lists of those who have responded to another

direct marketer’s offer

• Response list are right behind house list in terms

of future productivity
 THREE TYPES OF LISTS

- They are made up of individuals with an identifiable product

interest and a proven willingness to buy, subscribe, join,
contribute, inquire, or otherwise respond to specific offers.

- Response lists are most often used in the consumer

marketplace where customer files are larger than in the
business market
 THREE TYPES OF LISTS
- Response lists are made up of individuals who have
exhibited a particular kind of behavior (response)

- Marketers have learned that previous behavior is the

greatest predictor of future behavior

- Marketers try to match up previous behavior with the kinds

of behavior they are trying to duplicate
 THREE TYPES OF LISTS
Response lists can be broken into a number of categories
1. Buyer lists
2. Membership lists
3. Subscription lists
4. Donor lists
5. Credit Card Holder lists
 THREE TYPES OF LISTS
3. COMPILED LISTS

Lists that have been generated by a third party or market research firm of individuals who do
not have a response history

Lists are created from a number of different public and private sources: property records,
driver’s license and auto registration

Are made up of individuals or companies without any previous indication of willingness to

respond, but with some defined and identifiable characteristics known as segments or selects

Compiled lists fall behind both house list and response list in expectations
 THREE TYPES OF LISTS
3. COMPILED LISTS

There are three kinds of compiled lists

Consumer Compiled Lists
Consumer Lifestyle Enhanced Lists
Business Compiled Lists
 THREE TYPES OF LISTS
3. COMPILED LISTS

There are three kinds of compiled lists

Consumer compiled lists: An automobile manufacturer may have a clear

demographic picture of the buyers of the brand. There may be differences among
purchasers of different models of the brand (family, sport, and utility vehicles).

There might be differences in the popularity of each model in different geographic

regions of the country. Compiled lists are the only rented lists that would yield
broad national or geographic penetration and pinpoint targeting
 THREE TYPES OF LISTS
3. COMPILED LISTS
There are three kinds of compiled lists

Consumer lifestyle Enhanced lists: knowing customer demographics is not

enough. Compilers use syndicated surveys or warranty cards to capture a
broad range of consumer information, including hobbies, personal interests, and
brand usage
 THREE TYPES OF LISTS

3. COMPILED LISTS
There are three kinds of compiled lists

Business Compiled lists: compiled from a number of sources, contain address

and phone numbers and key firmographics that describe the size of a company
and the type of business that it is in
 Principle#
Consider just what purpose the data will serve in the future.
Collection of information costs money and must therefore produce
benefits commensurate with its cost.
 PROFILING
Profiling is a first step in understanding an organization's customers by
identifying demographics, firmographics or lifestyle attributes of each
customer

Appending this information to he customer file adds valuable

information for targeting future promotions, understanding customer
defections, and identifying cross-selling and other new business
opportunities
 The List Industry

Virtually every direct marketer uses lists.

There are literally thousands of response and compiled

lists available from which to choose.

The starting point is usually the direct marketer's own list.

 Mapping The List Industry

1. List users
2. List owners
3. List managers
4. List compilers
5. List brokers
6. Service bureaus
 List
Broker

List List List List

Owner Manager Compiler Users

Service
Bureau

THE LIST INDUSTRY

 The List Industry

2. List owners:
Those who describe and acquire prospects (as market
segments) who show potential of becoming customers
of the list user.

They make the final decisions on any list rental and

determine the appropriateness or competitiveness of a
prospective renter’s request
 Every direct marketer is a List owner.

 Many direct marketers consider their house lists as profit

centers in their own right.

 Firms rent their house list to other direct marketers under

specified conditions and this activity becomes an important
source of added revenue.

 Nearly all credit card companies participate in list rental

activities.
Usual rental arrangement:

The rented list may be mailed only one time

List owner must approve the offer in advance

Directly competitive offers may not be approved except in an

exchange that occurs when two competitive list owners provide each
other with comparable numbers of their respective house lists.
An advantage of renting a list rather than purchasing it
outright is that the list owner maintains the list, keeping
it current and accurate

Another advantage is that the names on such lists have

a history of responding to direct marketing activity, thus
they are termed “response lists”

A history of prior response, whether by mail, phone or

the internet
 The List Industry

3. List brokers:

• Those who serve as intermediaries who bring list

users and list owners together.
• They are the key link in the list rental process.
• A list broker provides timely and informed
recommendations about which lists should be
tested and why.
List brokers:

Do not actually own lists but serve as middlepersons

in the industry.

They should have a very clear picture of the products

of the list owner as well as the needs of the list user.

They work on commission basis, which is paid by the

list owner or manager.
 The List Industry
3. List Managers:
 Managers who represents the interests of list
owners and have responsibility to be in
contact with list brokers and list users.

 List mangers administer the lists for list

owners

 They generally manage a number of lists and

handle fulfillment, billing and list hygiene
 The List Industry

List Managers:

• Perform the advertising and sales functions and often

maintain the lists they manage in their own facility.

• Like list brokers, list managers receive a commission

from the list owner.
 The List Industry

3. List Compilers:
Organizations that develop lists and data about them, often
serving as their own list managers and brokers
List Compilers:

Usually develop their lists from public records such as

driver‘s licenses , newspaper clippings, directories, trade
show registrations.

The compiler owns such lists and then resells them,

rather than renting them for one-time use.
 The List Industry

4. Service Bureaus:

Provide data processing, data mining, outsourcing, on-line analytical

processing (OLAP), etc. to support the interchange of lists and
database information within the direct marketing industry.
 List Selection Guidelines

Evaluating list selection is not easy

There are many categories of lists, types of lists and ways of
creating lists.

There is no perfect way to select information from list but some

guidelines based on experience can help.
 List Selection Guidelines

Description:

Who is on the list?

There may be mail-order buyers, former buyers,
subscribers, donors.

It is important to match the offer and target group as

closely as possible to the description of those on the
lists that are mailed.
 List Selection Guidelines

Affinity:
A close relationship with the target group that the marketer is trying to reach.
It is not possible to rent competitive response lists.

Marketers try to rent relevant list choices that approximate their target group as
closely as possible.

A marketer of holiday fruit baskets might test lists of other food products sold at
holiday time.

Opera season ticket holders might be targeted for a subscription to the

symphony.
 List Selection Guidelines

List Source:

The origin of the names on the list.

Knowing the source of a list is important.

Individuals who purchased via direct mail or a catalog are more likely
to respond to direct mail than a buyer who responded to a print ad,
television, etc.

It is also a clue to the accuracy of the information.

 Evaluation of Lists

Measurement of Results
The evaluation of a list begins with selecting a Key Code, a unique
identifier placed on the response device or order form prior to mailing
a promotional piece.
 Evaluation of Lists

Measurement of Results
Marketers should keep ongoing records of lists and
monitor them.

Many direct marketers have achieved the highest

response rate when they have used so-called Hotline
names (also called “hotline buyers”.
 Evaluation of Lists

Measurement of Results

Hotline names the most recent names acquired by specific list

owners, but there is no uniformity as to what chronological period
“recent” describes

Many lists specify “three-month hotline” or “Six-month hotline” to

detail the name categories by recency
 Evaluation of Lists

Response Differences Attributable to timing.

Response differences can occur as a result of timing alone.

Economic conditions and climate variations can have a

profound effect on results when lists are developed over a
period of time.
 Evaluation of Lists

Response Differences Attributable to timing.

Other uncontrollable factors include major events that divert

public attention from the everyday.

Each direct marketer should develop an index of monthly

responses and determine which month generates the highest
relative response.
 Market Segmentation

“is the process that companies use to divide large

heterogeneous markets into small markets that can be
reached more efficiently and effectively with products
and services that match their unique needs.”
Market Segmentation
 The Nature of Market Segmentation
Market segmentation is a marketing plan devised to
attract and meet the needs of a specific sub-market
 The Nature of Market Segmentation

This subgroups are referred to as market segment.

Market segments: placing people (customers or potential

customers) into homogeneous groups based on certain
attributes such as age and income.
 The Nature of Market Segmentation

Each segment should be:

-Homogenous, (that is its members should be similar to one
another).
-Heterogeneous (meaning its members should all be different
from the members of other segments),
-Substantial in size (so as to be profitable)
 Product Differentiation

Marketers target products and services to select market

segments, rather than the total market

It is necessary to differentiate products for particular market

segments and position these products so that they will have
special appeal to the intended market
 Product Differentiation
• Product Differentiation is a strategy which attempts to
make a clear distinction between products serving the
same market segment
 Product Differentiation

• Product Differentiation: Uses innovative design,

packaging, and positioning to make a clear
distinction between products and services serving
the same market segment
 Product Differentiation

• Product Differentiation: is an alternative to price competition,

can distinguish a product from that of its competitors. The
difference might be real or simply an advertised difference
 Product Positioning
• Product Positioning: is a marketing strategy that enables
marketers to understand how each consumer perceives a
company’s product or service based on important attributes
(also called “positioning”)
 A Matter of Creative Meaning

Positioning statement: is the central idea that encapsulates a

brand's meaning and distinctiveness with competitive brands

10/9/2010
 Product Positioning
• Product Positioning

Helps consumers to rank products or services according

to perceived differences between competing products
or brands within a single product category
 Ways to Position Products:

1.Product quality
2.Product size
3.Product color
4.Distribution method
5.Time of day
6.Price
Ways to Position Products:

Distribution method Time of day

Product
quality BRAND Price

Product Product
size color
MINIMALIST
GRAYSCALE
PITCH DECK
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 01 Problem vs. Solution
Topic of the section

Product
02
Topic of the section
Table of contents
03 Market & Competition
Topic of the section

04 Business Model
Topic of the section
 01
Problem vs.
Solution
Enter a subtitle here if
you need it
introduction
Mercury is the closest planet to the Sun and
the smallest one in the Solar System—it’s
only a bit larger than the Moon. The planet’s
name has nothing to do with the liquid metal
 Our company
Do you know what helps you make your point clear?
Lists like this one:

● They’re simple
● You can organize your ideas clearly
● You’ll never forget to buy milk!
 Our team

Lyssa Turner Peter Rose John Dublin

You can replace the You can replace the You can replace the
image on the screen image on the screen image on the screen
with your own with your own with your own
 Problem
Mercury is the closest planet to the Sun and the smallest one in
the Solar System—it’s only a bit larger than the Moon. The
planet’s name has nothing to do with the liquid metal
 Them
Mercury is the closest planet to the
Sun and the smallest one in the
Solar System. Mercury’s name has
nothing to do with the liquid metal
Us
Venus has a beautiful name and is
the second planet from the Sun. It’s
terribly hot—even hotter than
Mercury—is extremely poisonous
 Solution
Mercury is the closest planet to the Sun
and the smallest one in the Solar
System. The planet’s name has nothing
to do with the liquid metal
An image is worth a
thousand words
Images reveal large amounts of data, so remember:
use an image instead of a long text
AWESOME WORDS
 Strengths Opportunities
Despite being red, Mars is actually Jupiter is a gas giant
a very cold place. It’s full of iron and the biggest planet
oxide dust in the Solar System

SWOT

Weaknesses Threats
Mercury is the closest planet Saturn is a gas giant,
to the Sun and the smallest composed mostly of
one in the Solar System hydrogen and helium
 Our services

Planning Photography
Venus is the second planet Saturn is a gas giant and has
from the Sun several rings
 Our plans

Basic Pro Premium

Despite being red, Mars is Saturn is composed mostly of It’s a gas giant and the biggest
actually cold place hydrogen and helium planet
 Traction
People
Mercury is a 90% 458K
small planet
85% Neptune is the farthest

Sales
$7,520,000
Mars is a very
cold place It has a beautiful name

Market 10% 86%

Jupiter is a gas Mars is a very cold place
giant
Follow the link in the graph to modify its data and then paste the new one here. For more info, click here
Product Demo

Insert your multimedia content here

 Case study

Challenge Results Solution

Despite being red, Mars is Jupiter is a gas giant and Venus has a beautiful name
a cold place. It’s full of the biggest planet in the and is the second planet
iron oxide dust Solar System from the Sun
 reviews

Helena James Jenna Doe John Smith

Mercury is the smallest Venus has a very Despite being red,
planet beautiful name Mars is cold

Jessica Jones Peter Harris Maria Wilson

Jupiter is the biggest Saturn is the ringed Neptune is the
planet of them all one. It’s a gas giant farthest planet
 2020 Awards

Mercury Venus Mars

Mercury is the closest Venus has a beautiful name Despite being red, Mars is
planet to the Sun and the and is the second planet actually a cold place. It’s full
smallest one from the Sun of iron oxide dust
Market size
Mercury
It’s the closest
planet to the Sun

Mars
Despite being red,
it’s cold

Venus
Venus has a
beautiful name
Our target

Job Age
Interior 50-60
Designer

Gender Salary
Female $15,000.00

Interests Average spent

Shopping $80.00
Reading
Trends
 Competitors

Mars Jupiter Saturn

Despite being red, Jupiter is a gas giant Saturn is composed
Mars is actually a cold and the biggest planet mostly of hydrogen
place of them all and helium
 Our business model

Marketing
Neptune is the
farthest planet
Technology
Saturn is the
ringed one

Training
Mercury is a
Assessment small planet
Venus is the
second planet
 Timing

Hours Mon Tue Wed Thu Fri

09:00 - 10:00 Meeting Home office Home office

10:00 - 11:00 Meeting Brunch Meeting

11:00 - 11:30 Project Meeting

11:30 - 12:30 Accounting

12:30 - 13:30 Project Meeting Project

13:30 - 14:30 Lunch Lunch Lunch Lunch Lunch

14:30 - 15:30 Accounting Meeting

 Predicted growth

20,000 100 500

Expected customers New Employees Upcoming Projects
$90,000
Expected Income
Investment

45% Mercury
Mercury is the closest
planet to the Sun

10% Mars
Despite being red, Mars
is a cold place

45% Market
Jupiter is the biggest To modify this graph, click on it, follow the link, change the data
planet of them all and paste the new graph here
 Thanks Do you have any question?
addyouremail@freepik.com
+91 620 421 838
yourcompany.com

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Table of contents

01 02
Introduction Company
You can describe the topic of You can describe the topic of
the section here the section here

03 04
Analysis Conclusion
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the section here the section here
Introduction

“How do marketers identify and locate the “right”

prospects?”

Þ They rent lists

Þ A lists = a specifically defined group of
organizations of individuals who possess
common characteristics
And here comes the slide title!

Do you know what helps you make your point

clear? Lists like this one:
● They’re simple
● You can organize your ideas clearly
● You’ll never forget to buy milk!
And the most important thing: the audience won’t
miss the point of your presentation
 Whoa!
This can be the part of the presentation where you introduce
yourself, write your email…
 01
Introduction
Insert a subtitle here if you need it
This is a graph
Jupiter
It’s a gas giant and the
biggest planet

Venus
Venus has a beautiful
name

Mars Jupiter Venus Mars

Mars is actually a very Follow the link in the graph to modify its data and then paste the new one
cold place here. For more info, click here
Maybe you need to divide the content

Mercury Venus
Mercury is the closest planet to Venus has a beautiful name and
the Sun and the smallest one is the second planet from the
Sun
A picture is worth is a
thousand words
145,245
Big numbers catch your audience’s attention
Schedule

Phase 1 9:00 10:00 11:00 12:00

Task 1

Task 2

Phase 2
Task 1

Task 2
02
Company
This is the subtitle that makes it
comprehensible
Forecast
Jupiter
1,254 It’s a gas giant and the Jupiter
biggest planet
Venus

Venus
4,215 Venus has a beautiful Mars
name

Mars
8,554 Mars is actually a very
cold place Follow the link in the graph to modify its data and then paste the new one
here. For more info, click here
Target
Gender Age
25% 50% 80%

75% 50% 18 - 25 26 - 35 +36

A picture
always
reinforces the
concept
Images reveal large amounts of data,
so remember: use and image instead of
long texts
Your can use three columns

Mars Venus Mercury

Mars is actually a cold Venus has a beautiful Mercury it’s the closest
place. It’s full of iron name and is the second planet to the Sun and the
oxide dust planet smallest
This is a timeline

Jupiter Mars
It’s a gas giant and Mars is actually a
the biggest planet very cold place

01 02 03 04
Mercury Neptune
Is the closest Neptune is the
planet to the Sun farthest planet
This is a table

Mars Venus Jupiter

Task 1
Task 2
Task 3
Task 4
Percentages

20% 40% 60%

Mars Venus Mercury
Mars is actually a cold Venus has a beautiful Mercury is the
place name smallest planet
Your can use six columns

Mars Venus Mercury

Mars is actually a cold Venus has a beautiful Mercury is the smallest
place name planet

Neptune Jupiter Saturn

It’s the farthest planet Jupiter is the biggest This is the ringed one.
from the Sun planet It’s a gas giant
Awesome
Words
This is a map

Jupiter Venus
Is a gas giant and the Venus has a beautiful
biggest planet name

Mars Mercury
Mars is actually a very Mercury is the smallest
cold place planet
Your can use four columns

Mars Venus
Mars is actually a cold Venus has a beautiful
place name

Neptune Jupiter
It’s the farthest planet Jupiter is the biggest
from the Sun planet
This is an infographic

Mars Venus
Mars is actually a
very cold place
01 02 Venus has a
beautiful name

Jupiter Saturn
It’s a gas giant and
the biggest
03 04 It’s the planet with
rings
Monthly data

125K 250K 540K

January June November
Mars is actually a cold Venus has a beautiful Mercury is the smallest
place name planet
Our goals

Mars Venus
Mars is actually a cold Venus has a beautiful
place name

Neptune Jupiter
It’s the farthest planet Jupiter is the biggest
from the Sun planet
Statistics

Phase 1 Phase 2 Phase 3

Mercury 1,254 9,145 8,145

Mars 5,214 6,541 3,214

Saturn 3,418 3,214 5,415

 24h 37m 23s
Earths is the Sun’s mass

333,000.000
is Jupiter's rotation period

386,000 km
is the distance between the Earth and the Moon
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Out team

Jenna Doe John Smith

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 Thanks
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