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Market Segmentation

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C. VIGNESH

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Agenda What is market segmentation?

Why is segmentation necessary?

How to segment the market?

Developing market-product grids.

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Segmentation examples How does DELL computers segment the market for

PCs?

http://www.dell.com

How does T-Mobile segment the market to meet various consumer needs?

http://tmobile.com

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Where does segmentation fit in?

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What is Market Segmentation? Market segmentation involves aggregating

prospective buyers into groups that have two key characteristics.

o have common needs and o respond similarly to a marketing

action.

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Why Segment Markets?

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One Product and Multiple Market Segments

Multiple Product and Multiple Market Segments

Segments of One: Mass Customization

• Build-to-Order (BTO)

• Synergy

Satisfy diverse needs by developing different products to suit various consumer needs.

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5 Step Segmentation Process

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Step 1: Grouping Potential Buyers into Segments

Criteria to Use in Forming the Segments

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• Potential for Increased Profit

• Similarity of Needs of Buyers within a Segment

• Simplicity and Cost of Assigning Buyers to Segments

• Difference of Needs of Buyers Among Segments

• Potential of a Marketing Action to Reach a Segment

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Two Ways to Segment markets

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• Customer Characteristics Geographic: Region

Demographic: Household

Psychographic: Lifestyle

• Buying Situations

• Frequency Marketing

• 80/20 Rule

Benefits Sought: Product Features

Patronage: Usage Rate

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SEGMENTATION

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VARIABLES

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Procedures for Segmentation Cross-Tabulations

o usage x age, income x age

Statistical Methodso Cluster Analysis

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Step 2: Group Products to be Sold into Categories

Step 3: Develop a Market-Product Grid and Estimate Size of Markets

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Market-Product Grid

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E.g. Apple Computers

Marketing Synergies

Produ ct S

y nerg ies

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Step 4: Select Target Markets

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Criteria to Use in Picking the Target Segments

• Market Size

• Expected Growth

• Cost of Reaching Segment

• Compatibility with theOrganization’s Objectivesand Resources• Competitive Position

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Step 5: Marketing Action Take Marketing Action to reach Target Markets

effectivelyo Price Strategyo Advertising Strategyo Promotional Strategy.

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Questions / Comments?

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