segment–1 market segmentation market segmentation is the subdividing of a market into distinct...
TRANSCRIPT
![Page 1: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/1.jpg)
Segment–1
Market Segmentation
Market segmentation is the subdividing of a market into distinct subsets of customers.
Segments
Members are different between segments but similar within.
![Page 2: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/2.jpg)
Segment–2
Segmentation Marketing
Definition
Differentiating your product and
marketing efforts to meet the
needs of different segments, that
is, applying the marketing
concept to market segmentation.
![Page 3: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/3.jpg)
Segment–3
Primary Characteristicsof Segments
Bases—characteristics that tell us why segments differ (eg, needs, preferences, decision processes).
Descriptors—characteristics that help us find and reach segments.
(Business markets) (Consumer markets)
Industry Age/IncomeSize EducationLocation ProfessionOrganizational Life styles structure Media habits
![Page 4: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/4.jpg)
Segment–4
A Two-Stage Approachin Business Markets
Macro-Segments:
First stage/rough cut Industry/application Firm size
Micro-Segments:
Second-stage/fine cut Different customer needs,
wants, values within macro-segment
![Page 5: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/5.jpg)
Segment–5
Relevant Segmentation Descriptor
Variable A: Climatic Region 1.Snow Belt
2.Moderate Belt 3.Sun Belt
Fraction of Customers
Likelihood of Purchasing Solar Water Heater (a)
0 100%
Segment 1Segment 2
Segment 3
![Page 6: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/6.jpg)
Segment–6
Likelihood of Purchasing Solar Water Heater (b)
Irrelevant Segmentation Descriptor
Fraction of Customers
0 100%
Variable B: Education 1.Low Education 2.Moderate Education 3.High Education
Segment 1Segment 2
Segment 3
![Page 7: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/7.jpg)
Segment–7
Variables to Segmentand Describe Markets
Consumer Industrial
Segmentation Needs, wants benefits, Needs, wants benefits, solutions to Bases solutions to problems, problems, usage situation, usage rate,
usage situation, usage rate. size*, industrial*.
Descriptors Age, income, marital status, Industry, size, location, current Demographics family type & size, supplier(s), technology utilization,
gender, social class, etc. etc. Psychographics Lifestyle, values, & Personality characteristics of
personality characteristics. decision makers. Behavior Use occasions, usage level, Use occasions, usage level,
complementary & complementary & substitutesubstitute products used, products used, brand loyalty, orderbrand loyalty, etc. size, applications, etc.
Decision Making Individual or group Formalization of purchasing(family) choice, low or high procedures, size & characteristicsinvolvement purchase, of decision making group, use ofattitudes and knowledge outside consultants, purchasingabout product class, price criteria, (de)centralizing buying,sensitivity, etc. price sensitivity, switching costs, etc.
Media Patterns Level of use, types of Level of use, types of media used,media used, times of use, time of use, patronage at trade shows,etc. receptivity of sales people, etc.
![Page 8: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/8.jpg)
Segment–8
Segmentation in Action
A Marriott Hotel used to be a Marriott Hotel: An
upscale hotel catering to business people, pleasure
seekers and international and group travelers.
Today, besides the Marriott Hotels (the company’s
major business), there are Marriott Suites,
Residence Inns, Courtyards by Marriott and
Fairfield Inns—each serving a smaller, targeted
segment of the market.
—Lenneman and Stanton, “Mining for
Niches,” Business Horizons.
![Page 9: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/9.jpg)
Segment–9
Segmentation in Action
We segment our customers by letter volume, by postage
volume, by the type of equipment they use. Then we
segment on whether they buy or lease equipment.
Based on this knowledge, we target our marketing
messages, fine tune our sales tactics, learn which
benefits appeal to which customers and zero in on key
decision makers at a company.
—Kathleen Synnot, VP, Worldwide Marketing Mailing Systems Division, Pitney Bowes, Inc.[quoted in Marketing Masters (Walden and Lawler)]
![Page 10: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/10.jpg)
Segment–10
Customers’ Diverse Needs Require Diverse Channels
Kodak increases customer contact and support with a three tiered distribution system.
. . . Business Imaging Division created three avenues for marketing microfilm, supplies and imaging systems and software:
direct sales reps (for more complex systems);
brokers and distributors (for film sales and delivery);
Components Marketing Division (to sell to system integrators and VARs).
—Business Marketing
![Page 11: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/11.jpg)
Segment–11
Ad in London Newspapers, 1900
Men wanted for hazardous journey.
Small wages, bitter cold, long months of
complete darkness, constant danger, safe
return doubtful. Honor and recognition
in case of success.
—Ernest Shackleton, Arctic Explorer
Did it work?
![Page 12: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/12.jpg)
Segment–12
Segmentation
If you’re not thinking segments, you’re not
thinking. To think segments means you
have to think about what drives customers,
customer groups, and the choices that are
or might be available to them.
—Levitt, Marketing Imagination
![Page 13: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/13.jpg)
Segment–13
Segmentation Marketing Implies a “Market”
A market consists of all the potential
customers sharing a particular need or
want who might be willing and able to
engage in exchange to satisfy that need
or want.
—Kotler, Marketing Management
![Page 14: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/14.jpg)
Segment–14
Market Definition
Common customer needs define a market not a product.
Product 1
Technology A
Technology B
Customer-NeedSet 1 (Market 1)
Customer-NeedSet 2 (Market 2)
![Page 15: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/15.jpg)
Segment–15
Implications
1.Segmentation defines common customer needs.
2.Those common needs may be satisfied by similar or dissimilar technologies or have different solutions.
Ex:Customer dissatisfaction at long delays at supermarket checkout.
Solution 1:Faster UPC scanner systems.
Solution 2:Entertainment/Sales systems on checkout lines.
Note:Total solution defines (competitive) market, not product or technology.
![Page 16: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/16.jpg)
Segment–16
Market Definition Approaches
Customer-Behavior:
Demand cross elasticity
Brand/product switching
Perception/Judgment:
Engineering/technological substitution
Customer judgments/perceptual mapping
![Page 17: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/17.jpg)
Segment–17
Why is Market Definition Important?
Strategy(What to focus on).
Resource allocation(How much/where/when?).
Feedback/performance measurement(How well are we doing? How can we learn from our actions?).
![Page 18: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/18.jpg)
Segment–18
Electric Typewriter Market
1980 1981 1982 1983 1984 1985
Shipments
A (Us) 403,027 495,192 548,905 550,351 541,388 515,000
B 369,916 388,520 349,396 323,005 342,197 297,000
Other 367,057 324,010 343,885 370,374 202,495 129,070
Total 1,140,000 1,207,722 1,242,186 1,243,730 1,086,080 941,070
Market Shares (%)
A (Us) 35.4 41.0 44.2 44.2 49.8 54.7
B 32.4 32.2 28.1 26.0 31.5 31.6
Other 32.2 26.8 27.7 29.8 18.6 13.7
![Page 19: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/19.jpg)
Segment–19
1980 1981 1982 1983 1984 1985
Shipments
A (Us) 403,027 495,192 548,905 550,351 541,388 515,000
B 369,916 388,520 349,396 323,005 342,197 297,000
Other Electric 367,057 324,010 343,885 370,374 202,495 129,070Electronic Word
Processors 60,040 112,220 209,800 392,352 733,699 1,372,016
Total 1,200,040 1,319,942 1,451,986 1,636,082 1,819,778 2,313,086
Market Shares (%)
A (Us) 33.6 37.5 37.8 33.6 29.8 22.3
B 30.8 29.4 24.1 19.7 18.8 12.8
Other Electric 30.6 24.5 23.7 22.6 11.1 5.6Electronic Word
Processors 5.0 8.5 14.4 24.0 40.3 59.3
Word Processor Market
![Page 20: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/20.jpg)
Segment–20
Market Definitionby Switching Behavior
Current Purchase Occasion
Diet Diet Diet Coke Coke Pepsi Pepsi Sprite Sprite Total
Coke 53% 9% 27% 4% 5% 2% 100%
Last Diet Coke 12% 61% 4% 15% 2% 5% 100%
Purchase Pepsi 24% 3% 58% 9% 5% 1% 100%
Occasion Diet Pepsi 4% 14% 11% 63% 2% 6% 100%
Sprite 21% 2% 17% 3% 52% 6% 100%
Diet Sprite 2% 15% 2% 12% 7% 61% 100%
![Page 21: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/21.jpg)
Segment–21
STP as Business Strategy
Segmentation Identify segmentation bases and segment the market.
Develop profiles of resulting segments.
Targeting Evaluate attractiveness of each segment.
Select target segments.
Positioning Identify possible positioning concepts for each target segment.
Select, develop, and communicate the chosen concept.
… to create and claim value
![Page 22: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/22.jpg)
Segment–22
SegmentationIdentify segments
TargetingSelect segments
PositioningCreate competitive advantage
Marketing resources are focused to better meet customers needs and deliver more value to them
Customers develop preference for brands that better meet their needs and deliver more value
Customers become brand/supplier loyal, repeat purchase, communicate favorable experiences
Brand/supplier loyalty leads to increased market share and creates a barrier to competition
Fewer marketing resources needed over time to maintain share due to brand or supplier loyalty
Profitability (value to the firm) increases
How STP Adds Value to a FirmHow STP Adds Value to a Firm
![Page 23: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/23.jpg)
Segment–23
STPing the Market for Eggs
Segments: Disinterested consumersCasual Egg Users
Health conscious consumersEnthusiastic users
Profiles: BeliefsAttitudesLifestylesHealth/Nutrition consciousnessMedia habitsConsumption habits
Demographics
—Frank and Phillips,Agribusiness, July 1990
![Page 24: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/24.jpg)
Segment–24
Targeting and Positioning
Health Conscious Strategy Casual Users Consumers Enthusiastic Users
Positioning Convenient and Ideal and natural Traditional food withuseful in many food, good for the many applications.situations. family. Very convenient, good
for the family.
Copy Informal Health-oriented Larger family setting.Visuals settings. personality or Major meal, possibly
situation. with guests.
Copy Easy pace, Fresh, clean Reinforcing, emphasisTonality relaxed setting, very on benefits and wide
atmospher. natural. use.
Promotions Reminders at Matter-of-fact Simple reminders tocheckout, egg information on the buy eggs.display, or nutritional valuedairy. and health
attributes of eggs inrecipes and leaflets.
![Page 25: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/25.jpg)
Segment–25
Overview of Marketing Engineering Methods for STP
Clustering and discriminantanalysis (PDA2001 exercise)
Choice-based segmentation(ABB Electric)
Perceptual mapping(G20 exercise)
![Page 26: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/26.jpg)
Segment–26
. ..D
......
Segmentation (for Carpet Fibers)
A,B,C,D: Location of segment centers.
Typical members:
A: schools B: light commercial C: indoor/outdoor
carpeting D: health clubs
Distance betweensegments C and D
.... ..
Strength(Importance)
Water Resistance(Importance)
....... .A
....... .. ...
....... .. ...
...
.... CB
Perceptions/Ratings for one respondent:Customer Values
.
![Page 27: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/27.jpg)
Segment–27
....... .. ...
....... .... .
Water Resistance(Importance)
Targeting
Segment(s) to serve
....... .
..
....... .. ...
Strength(Importance)
![Page 28: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/28.jpg)
Segment–28
Product Positioning
.Comp 1
Comp 2
Us
Water Resistance(Importance)
Positioning
. .Strength
(Importance)
....... .. ...
....... .... .
....... .. ...
![Page 29: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/29.jpg)
Segment–29
A Note on Positioning
Positioning involves designing an offering so that the target segment members perceive it in a distinct and valued way relative to competitors.
Three ways to position an offering:
1. Unique (“Only product/service with XXX”)
2. Difference (“More than twice the [feature] vs.[competitor]”)
3. Similarities (“Same functionality as [competitor]; lower price”)
What are you telling your targeted segments?
![Page 30: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/30.jpg)
Segment–30
Steps in a Segmentation Study
Articulate a strategic rationale for segmentation (ie, why are we segmenting this market?).
Select a set of needs-based segmentation variables most useful for achieving the strategic goals.
Select a cluster analysis procedure for aggregating (or disaggregating customers) into segments.
Group customers into a defined number of different segments.
Choose the segments that will best serve the firm’s strategy, given its capabilities and the likely reactions of competitors.
![Page 31: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/31.jpg)
Segment–31
Total Customer Value =
Functional Value
(What does this product do for me?)
+
Supplier/Service Value
What does the product mean to me?
(What is the insurance? service? psychological? value of the product or supplier?)
Price/Performance
AdvertisingSelling
Service Efforts
![Page 32: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/32.jpg)
Customer Needs and Customer Value Measurement
PresentState
Behaviors
Ignore
Postpone
Engage inPurchase Process
DesiredState
Functionaland
EconomicNeeds
Perceivedand
PsychologicalNeeds
•Search for options•Evaluate options•Choose option•Purchase Option•Use Option
CustomerValueMeasurementApproaches
ObjectiveMeasuresof Value
PerceptualMeasuresof Value
BehavioralMeasuresof Value
Customer Needs and Buying Process
Motivation
![Page 33: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/33.jpg)
Segment–33
Customer Value Assessment Procedures
Attitude-Based Behavior-Based Inferential/Value Based • Choice models • Internal engineering assessment • Neural networks • Indirect survey questions • Discriminant analysis • Field value-in-use assessment
Indirect/(Decompositional Methods)Direct Questions • Conjoint analysis
• Preference Regression
Unconstrainted Constrained/Compositional Methods • Focus groups • Multiattribute value analysis • Direct survey questions • Benchmarking • Importance and attitude ratings • Rule-based system/AI/expert systems
CustomerValue
![Page 34: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/34.jpg)
Segment–34
Segmentation: Methods Overview
Factor analysis (to reduce data before cluster analysis).
Cluster analysis to form segments.
Discriminant analysis to describe segments.
![Page 35: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/35.jpg)
Segment–35
Cluster Analysis forSegmenting Markets
Define a measure to assess the similarity of customers on the basis of their needs.
Group customers with similar needs. The software uses the “Ward’s minimum variance criterion” and, as an option, the K-Means algorithm for doing this.
Select the number of segments using numeric and strategic criteria, and your judgment.
Profile the needs of the selected segments (e.g., using cluster means).
![Page 36: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/36.jpg)
Segment–36
Cluster Analysis Issues
Defining a measure of similarity (or distance) between segments.
Identifying “outliers.”
Selecting a clustering procedure Hierarchical clustering (e.g., Single linkage, average
linkage, and minimum variance methods)
Partitioning methods (e.g., K-Means)
Cluster profiling Univariate analysis
Multiple discriminant analysis
![Page 37: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/37.jpg)
Segment–37
Doing Cluster Analysis
Dimension 2
Dimension 1
•
••
••
••
••
•• •
Perceptions or ratings datafrom one respondent
III
aI II
b
a =distance from member to cluster center
b =distance from I to III
![Page 38: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/38.jpg)
Segment–38
Single Linkage Cluster Example
Distance Matrix
Co#1 Co#2 Co#3 Co#4 Co#5
Company #1 0.00Company #2 1.49 0.00Company #3 3.42 2.29 0.00Company #4 1.81 1.99 1.48 0.00Company #5 5.05 4.82 4.94 4.83 0.00 Resulting
Dendogram
1
2
3
4
5
1 2 3 4 5
Company
Distance
![Page 39: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/39.jpg)
Segment–39
Ward’s Minimum Variance Agglomerative Clustering Procedure
First Stage: A = 2 B = 5 C = 9 D = 10 E = 15
Second Stage: AB = 4.5 BD = 12.5
AC = 24.5 BE = 50.0
AD = 32.0 CD = 0.5
AE = 84.5 CE = 18.0
BC = 8.0 DE = 12.5
Third Stage: CDA = 38.0 CDB = 14.0 CDE = 20.66 AB = 5.0
AE = 85.0 BE = 50.5
Fourth Stage: ABCD = 41.0 ABE= 93.17 CDE = 25.18
Fifth Stage: ABCDE = 98.8
![Page 40: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/40.jpg)
Segment–40
A
98.80
Ward’s Minimum Variance Agglomerative Clustering Procedure
B C D E
25.18
5.00
0.50
![Page 41: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/41.jpg)
Segment–41
Interpreting Cluster Analysis Results
Select the appropriate number of clusters:
Are the bases variables highly correlated? (Should we reduce the data through factor analysis before clustering?)
Are the clusters separated well from each other?
Should we combine or separate the clusters?
Can you come up with descriptive names for each cluster (eg, professionals, techno-savvy, etc.)?
Segment the market independently of your ability to reach the segments (ie, separately evaluate segmentation and discriminant analysis results).
![Page 42: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/42.jpg)
Segment–42
Profiling Clusters
Two Cluster Solution for PC Data: Need-Based Variables
size power officeuse
LAN storageneeds
color periph.wideconnect.
budget
–1
1
0
Business
Design
Means of Variables
![Page 43: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/43.jpg)
Segment–43
Which Segments to Serve?—Segment Attractiveness Criteria
Criterion Examples of Considerations
I. Size and Growth1. Size • Market potential, current market penetration2. Growth • Past growth forecasts of technology change
II. Structural Characteristics
3. Competition • Barriers to entry, barriers to exit, position ofcompetitors, ability to retaliate
4. Segment saturation • Gaps in the market5. Protectability • Patentability of products, barriers to entry6. Environmental risk • Economic, political, and technological change
III. Product-Market Fit7. Fit • Coherence with company’s strengths and image8. Relationships with • Synergy, cost interactions, image transfers, segments cannibalization9. Profitability • Entry costs, margin levels, return on investment
![Page 44: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/44.jpg)
Segment–44
Selecting Segments to Serve
Low Average High
Weak
Strong
Medium
Segment Attractiveness
Firm’s Competitiv
e Position
A
E
D
C
B
![Page 45: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/45.jpg)
Segment–45
Discriminant Analysis forDescribing Market Segments
Identify a set of “observable” variables that helps you to understand how to reach and serve the needs of selected clusters.
Use discriminant analysis to identify underlying dimensions (axes) that maximally differentiate between the selected clusters.
![Page 46: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/46.jpg)
Segment–46
Two-Group Discriminant Analysis
Need for Data Storage
PriceSensitivity
XXOXOOO XXXOXXOOOO XXXXOOOXOOO XXOXXOXOOOO XXOXOOOOOOO
X-segment
O-segmentx = high propensity to buyo = low propensity to buy
![Page 47: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/47.jpg)
Segment–47
Interpreting Discriminant Analysis Results
What proportion of the total variance in the descriptor data is explained by the statistically significant discriminant axes?
Does the model have good predictability (“hit rate”) in each cluster?
Can you identify good descriptors to find differences between clusters? (Examine correlations between discriminant axes and each descriptor variable).
![Page 48: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/48.jpg)
Segment–48
Behavior-Based Segmentation
Traditional segmentation
(eg, demographic,psychographic)
Needs-based segmentation
Behavior-based segmentation
(choice models)
![Page 49: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/49.jpg)
Segment–49
Choice Models
1. Observe choice:
(Buy/not buy => direct marketersBrand bought packaged goods, ABB)
2. Capture related data: demographics
attitudes/perceptions
market conditions (price, promotion, etc.)
3. Link
1 to 2 via “choice model” model revealsimportance weights of characteristics
![Page 50: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/50.jpg)
Segment–50
Choice Models vs Surveys
With standard survey methods . . .
preference/ importancechoice weightsperceptions
predict observe/ask observe/ask
But with choice models . . .
importance choice weights perceptions
observe infer observe/ask
![Page 51: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/51.jpg)
Segment–51
(ABB) Behavior-Based Segmentation Model
Stage 1: Screen products using key attributes to identify the “consideration set of suppliers” for each type of customer.
Stage 2: Assume that customers (of each type) will choose suppliers to maximize their utility via a random utility model.
Uij = Vij + ij
where:
Uij =Utility that customer i has for supplier j’s product.
Vij =Deterministic component of utility that is a function of product and supplier attributes.
ij =An error term that reflects the non-deterministic component of utility.
![Page 52: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/52.jpg)
Segment–52
Attributes in ABB’sChoice-Segmentation Model
Invoice price
Energy losses
Overall product quality
Availability of spare parts
Clarity of bid document
Knowledgeable salespeople
Maintenance requirement
Ease of installation
Warranty
![Page 53: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/53.jpg)
Segment–53
Specification of the Deterministic Component of Utility
Vij = Wk bijk
k
where:
i =an index to represent customers, j is an index to represent suppliers, and k is an index to represent attributes.
bijk =i’s perception of attribute k for supplier j.
wk =estimated coefficient to represent the impact of bijk on the utility realized for attribute k of supplier j for customer i.
![Page 54: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/54.jpg)
Segment–54
A Key Result from this Specification:The Multinomial Logit (MNL) Model
If customer’s past choices are assumed to reflect the principleof utility maximization and the error (ij) has a specific formcalled double exponential, then:
eVij
pij = –––––– eVik
k
where:
pij =probability that customer i chooses supplier j.
Vij =estimated value of utility (ie, based on estimates of bijk) obtained from maximum likelihood estimation.
^
^
^
![Page 55: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/55.jpg)
Segment–55
What Does This Result Imply?
Interval-level utility measurements are good enough. That is:
eVij eVij + a
pij = –––––– = –––––– eVik eVik + a
k k
The marginal impact of an attribute is highest when the probability of choosing an option j is 0.5.
^
^
^
^
![Page 56: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/56.jpg)
Segment–56
What Does This Result Imply? (cont’d)
dP
dbw P Pil
ijkk il il * *( )1
Marginal Impactof an Attribute on the Probability of
Choosing an Option
Probability of Choosing the Option
0.5
![Page 57: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/57.jpg)
Segment–57
Key idea: Segment on the basis of probability of choice—
1.Loyal to us
2.Loyal to competitor
3.Switchables: loseable/winnable customers
Applying the MNL Model in Segmentation Studies
![Page 58: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/58.jpg)
Segment–58
Switchability Segmentation
Current Product-Market by Switchability(ABB Procedure)
Questions: Where should your marketing efforts be focused?How can you segment the market this way?
Loyal to Us Losable
Winnable Customers
(business to gain)
Loyal toCompetitor
![Page 59: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/59.jpg)
Segment–59
Using Choice-Based Segmentation for Database Marketing
A B C DAverage Customer
Purchase Purchase ProfitabilityCustomer Probability Volume Margin = A B C
1 30% $31.00 0.70 $6.51
2 2% $143.00 0.60 $1.72
3 10% $54.00 0.67 $3.62
4 5% $88.00 0.62 $2.73
5 60% $20.00 0.58 $6.96
6 22% $60.00 0.47 $6.20
7 11% $77.00 0.38 $3.22
8 13% $39.00 0.66 $3.35
9 1% $184.00 0.56 $1.03
10 4% $72.00 0.65 $1.87
![Page 60: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/60.jpg)
Segment–60
Managerial Uses of Segmentation Analysis
Select attractive segments for focused effort (Can use models such as Analytic Hierarchy Process or GE Planning Matrix).
Develop a marketing plan (4P’s and positioning) to target selected segments.
In consumer markets, we typically rely on advertising and channel members to selectively reach targeted segments.
In business markets, we use sales force and direct marketing. You can use the results from the discriminant analysis to assign new customers to one of the segments.
![Page 61: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/61.jpg)
Segment–61
Checklist for Segmentation Studies
Is it values, needs, or choice-based? Whose values and needs?
Is it a projectable sample?
Is the study valid? (Does it use multiple methods and multiple measures)
Are the segments stable?
Does the study answer important marketing questions (product design, positioning, channel selection, sales force strategy, sales forecasting)
Are segmentation results linked to databases?
Is this a one-time study or is it a part of a long-term program?
![Page 62: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/62.jpg)
Segment–62
Concluding Remarks
In summary,
Use needs variables to segment markets.
Select segments taking into account both the attractiveness of segments and the strengths of the firm.
Use descriptor variables to develop a marketing plan to reach and serve chosen segments.
Develop mechanisms to implement the segmentation strategy on a routine basis (one way to do this is through information technology).
![Page 63: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/63.jpg)
Segment–63
Choosing aValue Assessment Method
MethodCriterion Value Behavior Compositional or Unconstrained
Based Based Decompositional
Amount of customer High Low Medium Low information needed
Number of customers Low High Medium+ Any
Good in dynamic/ Yes No Partly* Partly* changing markets?
Past purchase data Not Needed Not Not available? necessary necessary necessary
Analysis time frame Long Medium Long/Medium Short
Cost Very high/ Medium High Lowrespondent
Insight Very high Medium High Low
Appropriate for lead users? Yes No Yes No
Predictive of behavior? High Moderate Moderate Low
* If customers can reliably report how they will behave after change.
![Page 64: Segment–1 Market Segmentation Market segmentation is the subdividing of a market into distinct subsets of customers. Segments Members are different](https://reader030.vdocuments.site/reader030/viewer/2022032803/56649e2d5503460f94b1dcf4/html5/thumbnails/64.jpg)
Segment–64
Related Models Described in the Marketing Engineering Book
To develop “needs” variables Conjoint Analysis (Chapter 7)
Other segmentation methods Preference-based segmentation (PREFMAP
in Chapter 4)
To help evaluate and select segments Analytic Hierarchy Process (Chapter 6)
GE Planning Matrix (Chapter 6)