Dissecting a broad target market can be a daunting task, but it’s critical to success in media planning and advertising. By performing a proper market segmentation, your business will know exactly who, where, when, and how to target its advertising. Common Market Segmentation VariablesThis is by no means an exhaustive list of variables, but they can provide a great starting point for a business to begin grouping together users with similar characteristics or tendencies. Geographic. Demographic. Behavioral.
Psychographic. Occasion.
Benefits. CulturalMarket Segmentation ToolsTelmar’s software offers users the ability to segment audiences easily and effectively with the touch of a button.
.Market segmentation is the activity of dividing a broad consumer or business, normally consisting of existing and potential customers, into sub-groups of (known as segments) based on some type of shared characteristics.In dividing or segmenting markets, researchers typically look for common characteristics such as shared needs, common interests, similar lifestyles or even similar. The overall aim of segmentation is to identify high yield segments – that is, those segments that are likely to be the most profitable or that have growth potential – so that these can be selected for special attention (i.e. Many different ways to segment a market have been identified.
(B2B) sellers might segment the market into different types of. While (B2C) sellers might segment the market into demographic segments, lifestyle segments, behavioural segments or any other meaningful segment. The STP approach highlights the three areas of decision-makingMarket segmentation assumes that different market segments require different marketing programs – that is, different offers, prices, promotion, distribution or some combination of marketing variables. Market segmentation is not only designed to identify the most profitable segments, but also to develop profiles of key segments in order to better understand their needs and purchase motivations.
Insights from segmentation analysis are subsequently used to support marketing strategy development and planning. Many marketers use the S-T-P approach; Segmentation → Targeting → to provide the framework for marketing planning objectives. That is, a market is segmented, one or more segments are selected for targeting, and products or services are positioned in a way that resonates with the selected target market or markets. Contents.Definition and brief explanation Market segmentation is the process of dividing up mass markets into groups with similar needs and wants.
The rationale for market segmentation is that in order to achieve competitive advantage and superior performance, firms should: '(1) identify segments of industry demand, (2) target specific segments of demand, and (3) develop specific 'marketing mixes' for each targeted market segment. ' From an economic perspective, segmentation is built on the assumption that heterogeneity in demand allows for demand to be disaggregated into segments with distinct demand functions. The Model-T Ford (1921) is an early example of a mass marketing (undifferentiated segmentation) approach. Initially it was produced only in black.The business historian, identifies four stages in the evolution of market segmentation:. Fragmentation (pre-1880s): The economy was characterised by small regional suppliers who sold goods on a local or regional basis. Unification or (1880s–1920s): As transportation systems improved, the economy became unified. Standardised, branded goods were distributed at a national level.
Manufacturers tended to insist on strict standardisation in order to achieve scale economies with a view to penetrating markets in the early stages of a product's lifecycle. The Model T Ford. Segmentation (1920s–1980s): As market size increased, manufacturers were able to produce different models pitched at different quality points to meet the needs of various demographic and market segments. This is the era of market differentiation based on demographic, socio-economic and lifestyle factors. Hyper-segmentation (post-1980s): a shift towards the definition of ever more narrow market segments. Technological advancements, especially in the area of digital communications, allow marketers to communicate with individual consumers or very small groups. This is sometimes known as one-to-one marketing.
By the 1930s, Ford was producing Deluxe models in a range of colours such as this Ford Deluxe Coupe (1931)The practice of market segmentation emerged well before marketers thought about it at a theoretical level. Archaeological evidence suggests that Bronze Age traders segmented trade routes according to geographical circuits. Other evidence suggests that the practice of modern market segmentation was developed incrementally from the 16th century onwards. Retailers, operating outside the major metropolitan cities, could not afford to serve one type of clientele exclusively, yet retailers needed to find ways to separate the wealthier clientele from the 'riff raff'. One simple technique was to have a window opening out onto the street from which customers could be served. This allowed the sale of goods to the common people, without encouraging them to come inside. Another solution, that came into vogue from the late sixteenth century, was to invite favored customers into a back-room of the store, where goods were permanently on display.
Yet another technique that emerged around the same time was to hold a showcase of goods in the shopkeeper's private home for the benefit of wealthier clients. Samuel Pepys, for example, writing in 1660, describes being invited to the home of a retailer to view a wooden jack. The eighteenth-century English entrepreneurs, and, both staged expansive showcases of their wares in their private residences or in rented halls to which only the upper classes were invited while Wedgewood used a team of itinerant salesmen to sell wares to the masses.Evidence of early marketing segmentation has also been noted elsewhere in Europe.
A study of the German book trade found examples of both product differentiation and market segmentation in the 1820s. From the 1880s, German toy manufacturers were producing models of for specific geographic markets; London omnibuses and ambulances destined for the British market; French postal delivery vans for Continental Europe and American locomotives intended for sale in America.
Such activities suggest that basic forms of market segmentation have been practised since the 17th century and possibly earlier.Contemporary market segmentation emerged in the first decades of the twentieth century as marketers responded to two pressing issues. Demographic and purchasing data were available for groups but rarely for individuals and secondly, advertising and distribution channels were available for groups, but rarely for single consumers. Between 1902 and 1910, George B Waldron, working at Mahin's Advertising Agency in the United States used tax registers, city directories and census data to show advertisers the proportion of educated vs illiterate consumers and the earning capacity of different occupations etc. In a very early example of simple market segmentation.
In 1924 Paul Cherington developed the 'ABCD' household typology; the first socio-demographic segmentation tool. By the 1930s, market researchers such as recognised that demographics alone were insufficient to explain different marketing behaviours and began exploring the use of lifestyles, attitudes, values, beliefs and culture to segment markets. With access to group level data only, brand marketers approached the task from a tactical viewpoint. Thus, segmentation was essentially a brand-driven process.Wendell R. Smith is generally credited with being the first to introduce the concept of market segmentation into the marketing literature in 1956 with the publication of his article, 'Product Differentiation and Market Segmentation as Alternative Marketing Strategies.' Smith's article makes it clear that he had observed 'many examples of segmentation' emerging and to a certain extent saw this as a 'natural force' in the market that would 'not be denied.' As Schwarzkopf points out, Smith was codifying implicit knowledge that had been used in advertising and brand management since at least the 1920s.Until relatively recently, most segmentation approaches have retained a tactical perspective in that they address immediate short-term decisions; such as describing the current “market served” and are concerned with informing marketing mix decisions.
However, with the advent of digital communications and mass data storage, it has been possible for marketers to conceive of segmenting at the level of the individual consumer. Extensive data is now available to support segmentation at very narrow groups or even for the single customer, allowing marketers to devise a customised offer with an individual price which can be disseminated via real-time communications. Some scholars have argued that the fragmentation of markets has rendered traditional approaches to market segmentation less useful. Criticisms The limitations of conventional segmentation have been well documented in the literature. Even simple products like salt, which might be considered as commodities, are highly differentiated in practice.In consumer marketing, it is difficult to find examples of undifferentiated approaches.
Even goods such as and, which were once treated as commodities, are now highly differentiated. Consumers can purchase a variety of salt products; cooking salt, table salt, sea salt, rock salt, kosher salt, mineral salt, herbal or vegetable salts, iodised salt, salt substitutes and many more. Sugar also comes in many different types - cane sugar, beet sugar, raw sugar, white refined sugar, brown sugar, caster sugar, sugar lumps, icing sugar (also known as milled sugar), sugar syrup, invert sugar and a plethora of sugar substitutes including smart sugar which is essentially a blend of pure sugar and a sugar substitute. Each of these product types is designed to meet the needs of specific market segments. Invert sugar and sugar syrups, for example, are marketed to food manufacturers where they are used in the production of conserves, chocolate, and baked goods. Sugars marketed to consumers appeal to different usage segments – refined sugar is primarily for use on the table, while caster sugar and icing sugar are primarily designed for use in home-baked goods.
See also:The market for a given product or service known as the market potential or the (TAM). Given that this is the market to be segmented, the market analyst should begin by identifying the size of the potential market. For existing products and services, estimating the size and value of the market potential is relatively straightforward. However, estimating the market potential can be very challenging when a product or service is totally new to the market and no historical data on which to base forecasts exists.A basic approach is to first assess the size of the broad population, then estimate the percentage likely to use the product or service and finally to estimate the revenue potential.
Market Segmentation Definition
To estimate market size, a marketer might evaluate the adoption and growth rates of comparable technologies (historical analogy method).Another approach is to use historical analogy. For example, the manufacturer of HDTV might assume that the number of consumers willing to adopt high definition TV will be similar to the adoption rate for Color TV. To support this type of analysis, data for household penetration of TV, Radio, PCs, and other communications technologies is readily available from government statistics departments. Finding useful analogies can be challenging because every market is unique. Major bases used for segmenting a marketA major step in the segmentation process is the selection of a suitable base. In this step, marketers are looking for a means of achieving internal homogeneity (similarity within the segments), and external heterogeneity (differences between segments).
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In other words, they are searching for a process that minimises differences between members of a segment and maximises differences between each segment. In addition, the segmentation approach must yield segments that are meaningful for the specific marketing problem or situation. For example, a person's hair color may be a relevant base for a shampoo manufacturer, but it would not be relevant for a seller of financial services. Selecting the right base requires a good deal of thought and a basic understanding of the market to be segmented.In reality, marketers can segment the market using any base or variable provided that it is identifiable, substantial, responsive, actionable and stable. Identifiability refers to the extent to which managers can identify or recognise distinct groups within the marketplace.
Substantiality refers to the extent to which a segment or group of customers represents a sufficient size to be profitable. Further information:Segmentation according to demography is based on consumer- demographic variables such as age, income, family size, socio-economic status, etc.Demographic segmentation assumes that consumers with similar demographic profiles will exhibit similar purchasing patterns, motivations, interests and lifestyles and that these characteristics will translate into similar product/brand preferences. In practice, demographic segmentation can potentially employ any variable that is used by the nation's census collectors.
Typical demographic variables and their descriptors are as follows:. Age: e.g. Visualisation of two approaches to demographic segmentation using one and two variables. On the left, a single variable (age) is used.
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On the right, two variables (income and occupation) are used to form the segments.The use of multiple segmentation variables normally requires analysis of databases using sophisticated statistical techniques such as cluster analysis or principal components analysis. These types of analysis require very large sample sizes. However, data-collection is expensive for individual firms. For this reason, many companies purchase data from commercial market research firms, many of whom develop proprietary software to interrogate the data.The labels applied to some of the more popular demographic segments began to enter the popular lexicon in the 1980s. These include the following:: Double (or dual) Income, No Kids, describes one member of a couple with above-average household income and no dependent children, tend to exhibit discretionary expenditure on luxury goods and entertainment and dining out GLAM: Greying, Leisured and Moneyed.
Retired older persons, asset rich and high income. Tend to exhibit higher spending on recreation, travel, and entertainment GUPPY: (aka GUPPIE) Gay, Upwardly Mobile, Prosperous, Professional; blend of gay and YUPPY (can also refer to the London-based equivalent of YUPPY) MUPPY: (aka MUPPIE) Mid-aged, Upwardly Mobile, Prosperous, Professional: (American) Well educated, well-off, upper-class young persons; a graduate of an expensive school. Often distinguished by a style of dress. SITKOM: Single Income, Two Kids, Oppressive Mortgage.
Tend to have very little discretionary income, struggle to make ends meet: Young person who is approaching puberty, aged approximately 9–12 years; too old to be considered a child, but too young to be a teenager; they are 'in between'.: (American) White, Anglo-Saxon Protestant. Tend to be high-status and influential white Americans of English Protestant ancestry.
YUPPY: (aka ) Young, Urban/ Upwardly-mobile, Prosperous, Professional. Tend to be well-educated, career-minded, ambitious, affluent and free spenders. Psychographic segmentation. Main article:segmentation, which is sometimes called psychometric or segmentation, is measured by studying the activities, interests, and opinions (AIOs) of customers. It considers how people spend their leisure, and which external influences they are most responsive to and influenced. Psychographics is a very widely used basis for segmentation, because it enables marketers to identify tightly defined market segments and better understand consumer motivations for product or brand choice.While many of these proprietary psychographic segmentation analyses are well-known, the majority of studies based on psychographics are custom designed. That is, the segments are developed for individual products at a specific time.
One common thread among psychographic segmentation studies is that they use quirky names to describe the segments. Behavioural segmentation Behavioural segmentation divides consumers into groups according to their observed behaviours. Many marketers believe that behavioural variables are superior to demographics and geographics for building market segments and some analysts have suggested that behavioural segmentation is killing off demographics. Typical behavioural variables and their descriptors include:.
Purchase/Usage Occasion: e.g. Regular occasion, special occasion, festive occasion, gift-giving. Benefit-Sought: e.g. Economy, quality, service level, convenience, access. User Status: e.g.
First-time user, Regular user, Non-user. Usage Rate/Purchase Frequency: e.g. Light user, heavy user, moderate user. Loyalty Status: e.g. Loyal, switcher, non-loyal, lapsed. Buyer Readiness: e.g.
Unaware, aware, intention to buy. Attitude to Product or Service: e.g.
Enthusiast, Indifferent, Hostile; Price Conscious, Quality Conscious. Adopter Status: e.g. Early adopter, late adopter, laggard. Scanner data from super market or credit cart information dataNote that these descriptors are merely commonly used examples. Marketers customise the variable and descriptors for both local conditions and for specific applications.
For example, in the health industry, planners often segment broad markets according to 'health consciousness' and identify low, moderate and highly health conscious segments. This is an applied example of behavioural segmentation, using attitude to product or service as a key descriptor or variable which has been customised for the specific application.Purchase/usage occasion Purchase or usage occasion segmentation focuses on analyzing occasions when consumers might purchase or consume a product.
This approach customer-level and occasion-level segmentation models and provides an understanding of the individual customers’ needs, behaviour and value under different occasions of usage and time. Unlike traditional segmentation models, this approach assigns more than one segment to each unique customer, depending on the current circumstances they are under.Benefit-sought Benefit segmentation (sometimes called needs-based segmentation) was developed by Grey Advertising in the late 1960s.
The benefits-sought by purchasers enables the market to be divided into segments with distinct needs, perceived value, benefits sought or advantage that accrues from the purchase of a product or service. Marketers using benefit segmentation might develop products with different quality levels, performance, customer service, special features or any other meaningful benefit and pitch different products at each of the segments identified. Benefit segmentation is one of the more commonly used approaches to segmentation and is widely used in many consumer markets including motor vehicles, fashion and clothing, furniture, consumer electronics, and holiday-makers.Loker and Purdue, for example, used benefit segmentation to segment the pleasure holiday travel market. The segments identified in this study were the naturalists, pure excitement seekers, escapists. Attitudinal segments Attitudinal segmentation provides insight into the mindset of customers, especially the attitudes and beliefs that drive consumer decision-making and behaviour. In targeting, a group of consumers is selected to become the focus of the marketing programAnother major decision in developing the segmentation strategy is the selection of market segments that will become the focus of special attention (known as ).
The marketer faces a number of important decisions:. What criteria should be used to evaluate markets?. How many markets to enter (one, two or more)?. Which market segments are the most valuable?When a marketer enters more than one market, the segments are often labeled the primary target market, secondary target market.
The primary market is the target market selected as the main focus of marketing activities. The secondary target market is likely to be a segment that is not as large as the primary market, but has growth potential. Alternatively, the secondary target group might consist of a small number of purchasers that account for a relatively high proportion of sales volume perhaps due to purchase value or purchase frequency.In terms of evaluating markets, three core considerations are essential:. Segment size and growth. Segment structural attractiveness. Company objectives and resources.Criteria for evaluating segment attractiveness There are no formulas for evaluating the attractiveness of market segments and a good deal of judgment must be exercised. Nevertheless, a number of considerations can be used to assist in evaluating market segments for overall attractiveness.
The following lists a series of questions that can be asked.Segment size and growth. How large is the market?. Is the market segment substantial enough to be profitable? (Segment size can be measured in number of customers, but superior measures are likely to include sales value or volume). Is the market segment growing or contracting?. What are the indications that growth will be sustained in the long term?
Is any observed growth sustainable?. Is the segment stable over time? (Segment must have sufficient time to reach desired performance level)Segment structural attractiveness. To what extent are competitors targeting this market segment?. Do buyers have bargaining power in the market?.
Are substitute products available?. Can we carve out a viable position to differentiate from any competitors?.
How responsive are members of the market segment to the marketing program?. Is this market segment reachable and accessible? (i.e., with respect to distribution and promotion)Company objectives and resources.
Is this market segment aligned with our company's operating philosophy?. Do we have the resources necessary to enter this market segment?.
Do we have prior experience with this market segment or similar market segments?. Do we have the skills and/or know-how to enter this market segment successfully?Developing the marketing program and positioning strategy. The marketing program is designed with the needs of the target market in mindWhen the segments have been determined and separate offers developed for each of the core segments, the marketer's next task is to design a marketing program (also known as the marketing mix) that will resonate with the target market or markets. Developing the marketing program requires a deep knowledge of key market segment's purchasing habits, their preferred retail outlet, their media habits and their price sensitivity.
The marketing program for each brand or product should be based on the understanding of the target market (or target markets) revealed in the market profile.Positioning is the final step in the S-T-P planning approach; Segmentation → Targeting → Positioning; a core framework for developing marketing plans and setting objectives. Positioning refers to decisions about how to present the offer in a way that resonates with the target market. During the research and analysis that forms the central part of segmentation and targeting, the marketer will have gained insights into what motivates consumers to purchase a product or brand. These insights will form part of the positioning strategy.According to advertising guru, David Ogilvy, 'Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the minds of the target market. The goal is to locate the brand in the minds of consumers to maximise the potential benefit to the firm. A good brand positioning helps guide marketing strategy by clarifying the brand’s essence, what goals it helps the consumer achieve, and how it does so in a unique way.' Signpost maths 10 download.
Perceptual map of the U.S. Motor vehicle categoryThe technique known as perceptual mapping is often used to understand consumers' mental representations of brands within a given category.
Traditionally two variables (often, but not necessarily, price and quality) are used to construct the map. A sample of people in the target market are asked to explain where they would place various brands in terms of the selected variables.
![Market Market](/uploads/1/2/4/2/124238803/658289746.jpg)
Results are averaged across all respondents, and results are plotted on a graph, as illustrated in the figure. The final map indicates how the average member of the population views the brand that makes up a category and how each of the brands relates to other brands within the same category. While perceptual maps with two dimensions are common, multi-dimensional maps are also used.There are a number of different approaches to positioning:. Against a competitor. Within a category. According to product benefit.
According to product attribute. For usage occasion. Along price lines e.g. A luxury brand or premium brand. For a user. Cultural symbols e.g.
Australia's Easter Bilby (as a culturally appropriate alternative to the Easter Bunny).Basis for segmenting business markets. See also:Segmenting business markets is more straightforward than segmenting consumer markets. Businesses may be segmented according to industry, business size, business location, turnover, number of employees, company technology, purchasing approach or any other relevant variables. The most widely used segmentation bases used in business to business markets are geographics, and firmographics.The most-widely used bases for segmenting business markets are:Geographic segmentation occurs when a firm seeks to identify the most promising geographic markets to enter. Business can tap into business census type products published by Government departments to identify geographic regions that meet certain predefined criteria. (also known as emporographics or feature based segmentation) is the business community's answer to demographic segmentation. It is commonly used in markets (an estimated 81% of marketers use this technique).
Under this approach the target market is segmented based on features such as company size, industry sector or location usage rate, purchase frequency, number of years in business, ownership factors and buying situation. Key firmographic variables: standard industry classification (SIC); company size (either in terms of revenue or number of employees), industry sector or location (country and/or region), usage rate, purchase frequency, number of years in business, ownership factors and buying situation Use in customer retention. See also:The basic approach to retention-based segmentation is that a company tags each of its active customers on four axes:Risk of customer cancellation of company service One of the most common indicators of high-risk customers is a drop off in usage of the company's service. For example, in the credit card industry, this could be signaled through a customer's decline in spending on his or her card. Risk of customer switching to a competitor Many times customers move purchase preferences to a competitor brand. This may happen for many reasons those of which can be more difficult to measure.
It is many times beneficial for the former company to gain meaningful insights, through data analysis, as to why this change of preference has occurred. Such insights can lead to effective strategies for winning back the customer or on how not to lose the target customer in the first place. Customer retention worthiness This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer, and includes evaluation of.This analysis of customer lifecycles is usually included in the of a business to determine which tactics to implement to retain or let go of customers. Tactics commonly used range from providing special customer discounts to sending customers communications that reinforce the value proposition of the given service.Segmentation: algorithms and approaches The choice of an appropriate statistical method for the segmentation depends on a number of factors including, the broad approach ( or ), the availability of data, time constraints, the marketer's skill level and resources. A-priori segmentation A priori research occurs when 'a theoretical framework is developed before the research is conducted'.
In other words, the marketer has an idea about whether to segment the market geographically, demographically, psychographically or behaviourally before undertaking any research. For example, a marketer might want to learn more about the motivations and demographics of light and moderate users in an effort to understand what tactics could be used to increase usage rates.
In this case, the target variable is known – the marketer has already segmented using a behavioural variable – user status. The next step would be to collect and analyze attitudinal data for light and moderate users. The typical analysis includes simple cross-tabulations, frequency distributions and occasionally logistic regression or one of a number of proprietary methods.The main disadvantage of a-priori segmentation is that it does not explore other opportunities to identify market segments that could be more meaningful.Post-hoc segmentation In contrast, post-hoc segmentation makes no assumptions about the optimal theoretical framework. Instead, the analyst's role is to determine the segments that are the most meaningful for a given marketing problem or situation. In this approach, the empirical data drives the segmentation selection. Analysts typically employ some type of clustering analysis or structural equation modeling to identify segments within the data.
Post-hoc segmentation relies on access to rich datasets, usually with a very large number of cases and uses sophisticated algorithms to identify segments.The figure alongside illustrates how segments might be formed using clustering; however, note that this diagram only uses two variables, while in practice clustering employs a large number of variables. Statistical techniques used in segmentation Marketers often engage commercial research firms or consultancies to carry out segmentation analysis, especially if they lack the statistical skills to undertake the analysis. Some segmentation, especially post-hoc analysis, relies on sophisticated statistical analysis. Visualisation of market segments formed using clustering methodsCommon statistical approaches and techniques used in segmentation analysis include:. Clustering algorithms – overlapping, non-overlapping and fuzzy methods; e.g.
Or other. Ensemble approaches – such as. – a type of decision-tree. or. Artrage 4 free download with crack. – a generic term for a class of methods that attempt to detect underlying clusters based on observed patterns of association.
and. – e.g., EM estimation algorithm, finite-mixture models. Model-based segmentation using simultaneous and e.g. Other algorithms such as.Data sources used for segmentation Marketers use a variety of data sources for segmentation studies and market profiling. Typical sources of information include: Internal sources. Customer transaction records e.g.
Sale value per transaction, purchase frequency. Patron membership records e.g. Active members, lapsed members, length of membership. Customer relationship management (CRM) databases. In-house surveys.
Customer self-completed questionnaires or feedback formsExternal sources. Commissioned research (where the business commissions a research study and maintains exclusive rights to the data; typically the most expensive means of data collection). Data-mining techniques.
Census data (population and business census). Observed purchase behaviours. Government agencies and departments. Government statistics and surveys (e.g.