rediscovering ma

16
Rediscovering Market Segmentation Alexandros Kossivas Dimitra Votsari George Theodorou Venetia Koronidi Winter Session 2012 Marketing Strategy Professor: C. Koritos

Upload: alexko

Post on 28-Nov-2014

1.317 views

Category:

Business


4 download

DESCRIPTION

 

TRANSCRIPT

Page 1: Rediscovering Ma

Rediscovering Market

Segmentation

Alexandros KossivasDimitra VotsariGeorge TheodorouVenetia Koronidi

Winter Session 2012

Marketing Strategy

Professor: C. Koritos

Page 2: Rediscovering Ma

OUTLINE OF THE ARTICLE

A. Describe the elements of a smart segmentation strategy.

B. Present the several possible discriminations of a segmentation strategy & the importance of being very specific and precise when selecting this specific one according to your objectives, goals & needs.

i.e. strengthen brand image & associations VS identify which markets to target as attractive

C. Introduce a tool called “gravity of decision spectrum” which focuses on the relationship/connection between consumers’ behavior and a product or a product category, the most interesting aspect/point for any marketer.

Page 3: Rediscovering Ma

The beginning of Psychographics

In 1964, D. Yankelovich with his article “New Criteria for Market Segmentation” asserted that:

Traditional demographic traits (age, sex, education, income) were no longer enough to serve as a basis for marketing strategy.

Non-demographic traits (values, tastes, preferences) were more likely to influence consumers’ purchases

Marketing Strategy actually & essentially depends on identifying segments that were potentially receptive to a particular brand/product category.The idea was to broaden the use of

segmentation in order to inform about product innovation, pricing, choice of distribution channels…

Page 4: Rediscovering Ma

The beginning of Psychographics

By 1960s consumers were becoming less predictable in their buying habit

i.e. people without much education had become affluent & those with sophisticated tastes had become very price conscious

Tastes and purchasing patterns no longer aligned with age and income, thus demographic segmentations lost their ability to guide companies' decisions

The attraction & stimulation were starting to focus on things like status or lifestyles

i.e. segmentation & advertising in the fashion industry reflecting the segments’ personal inner characteristics & lifestyles.

Page 5: Rediscovering Ma

The Values & lifestyles program (vals)

VALS ("Values, Attitudes and Lifestyles") is the most accepted research method used for psychographic market segmentation.

VALS was developed in 1978 by social scientist Arnold Mitchell and his colleagues at Stanford Research Institute based heavily upon the work of Harvard sociologist David Riesman and psychologist Abraham Maslow.

VALS through both attitudinal & demographic questions, categorize adult consumers into 9 lifestyle types: • survivors (4%),

• sustainers (7%),

• belongers (35%),

• emulators (9%),

• achievers (22%),

• I-am-me (5%),

• experiential (7%),

• societally conscious (9%),

• & integrated (2%). Source: WikiPedia.org

The questions were weighted using data developed from a sample of 1,635 Americans and their partners, who

responded to an SRI International survey in 1980.

Page 6: Rediscovering Ma

The weaknesses of Psychographic segmentation

Psychographics may capture some truth about real people’s lifestyles, attitudes & aspirations BUT such segmentation is very weak at predicting what & how these people are likely to purchase or give any idea of how to keep existing customers or gain new ones.

Research shows that even though psychographic segmentation can be a good basis for advertising (can generate stimulation), it usually does not enlighten companies with significant and precise information (who, which, what & how…)

Thus, the authors of this article suggest the following example of discrimination of psychographic segmentation, according to what a company wants: generate advertising or new products.

Page 7: Rediscovering Ma

Different segmentations for different purposes

Segmentations to develop advertising

Segmentations to develop new products

Populations studied

Users of the product to be advertised

Users of related products that already meet similar needs, partners such as distributors + retailers

Data sources Attitude surveys Purchase and usage data on consumers, supplemented by surveys; analyses of consumers’ finances and channel preferences

Analytical tools Statistical analysis of survey results

Analysis of customers who remain loyal and those who switch to competing offerings

Outputs Segments that differ in their responses to a given message

Segments that differ in their purchasing power, goals, aspirations, and behavior

Page 8: Rediscovering Ma

A meaningful segmentation

A meaningful segmentation depends on finding patterns in your customers’ actual buying behavior through relevant data

Depending on the question you seek to answer, you would need to:

① Gather info about which benefits & features matter to your customers

② Know which customers are willing to pay higher prices or demand lower ones

③ Learn about the advantages/disadvantages customers identify in your offerings

④ Gather data on emerging social, economic & technological trends

⑤ Use qualitative research to explore customers underlying motives & needs

⑥ Use quantitative research to understand completive strengths & opportunities

⑦ Reexamine the sales data you already have in order to reveal the hidden patterns in customers behavior

A meaningful segmentation depends on finding patterns in your customers’ actual buying behavior through relevant data

Depending on the question you seek to answer, you would need to:

① Gather info about which benefits & features matter to your customers

② Know which customers are willing to pay higher prices or demand lower ones

③ Learn about the advantages/disadvantages customers identify in your offerings

④ Gather data on emerging social, economic & technological trends

⑤ Use qualitative research to explore customers underlying motives & needs

⑥ Use quantitative research to understand completive strengths & opportunities

⑦ Reexamine the sales data you already have in order to reveal the hidden patterns in customers behavior

Page 9: Rediscovering Ma

The outputs of a meaningful segmentation

Armed with such data, you can fashion segments that are bot revealing and applicable

Such segments will:

Reflect the company’s strategy;

Indicate where sources of revenue or profit may lie;

Identify consumers’ values, attitudes, and beliefs as they relate specifically to product or service offerings;

Focus on actual customer behavior;

Make sense to top executives;

Accommodate or anticipate changes in markets or consumer behavior

Armed with such data, you can fashion segments that are both revealing and applicable

Such segments will:1. Reflect the company’s strategy2. Indicate where sources of revenue or profit may

lie3. Identify consumers’ values, attitudes, and

beliefs as they relate specifically to product or service offerings

4. Focus on actual customer behavior5. Make sense to top executives6. Accommodate or anticipate changes in markets

or consumer behavior

Page 10: Rediscovering Ma

6 Approaches of a meaningful segmentation

1. What are trying to do:• The goals of CMOs change as they change (leave the company)

• CMOs don’t understand how segmentation would benefit their companies strategic decisions:

• Identify groups large enough and lucrative to justify pursuit

2. Which customers drive profits:• Companies can rank their existing customers based on

profitability

• Find new potential customers who have common attributes with their existing profitable customers (Research is important based on types of data such as: Demographic, Behavioral, Attitudinal)

3. Which attitudes matter to the buying decision:• Psychographics -Personality traits are not enough (stable) for

the buying decision

• Lifestyle attitudes, self-image , aspirations, customers values and environment crucial because they are constantly changing

Page 11: Rediscovering Ma

6 Steps for a meaningful segmentation

4.What are my customers actually doing:• Further research is advised on Customers heaviness of use, brand

switching, retail format and channel selection

• Before a product launch use of laboratory simulations e.x. conjoint analysis. It involves presenting the customers with combinations and features and try to find out how “interesting” those features are, how willing are the customers to pay and at what price

5.Will the segmentation make sense to senior management:

• Only if it simply disseminated, and justified

6.Can our segmentation register change?• Yes, but when is it part of an ongoing process and not a one-time

effort, because:

• Consumers’ needs, attitudes and behavior can easily change

• Markets are changing (new technologies, emerging consumers niches, fluctuating economics)

Page 12: Rediscovering Ma

The Spectrum

Is a tool that can facilitate identifying which specific expectations, motives or concerns lie behind a consumer’s particular behavior or transaction.

We can perceive it as a continuum, where any product, purchase activity, attitude or incentive can be positioned upon the following axis:Low

End Middl

eHigh End

Low/Shallow End: consumers are seeking products/services with low perceived cost & risk, which they think will save them time, effort or money (i.e. toilet paper, credit card).

Middle: consumers are actively concerned, but for issues such as design, status, quality or complexity. (i.e. car, pc)

High/Deep End: consumers’ emotional investment is great & their core values are actively engaged. (i.e. health care issues)

Page 13: Rediscovering Ma

The gravity of decision Spectrum

1. Motives: small-daily decisions for items which are seen as non-investment purchases and give little but significant value as an extra touch (Razor example and its expansions-editions)

2. Concerns: thoughts which drive customer’s behavior and come from cultivation-own philosophy for life (Toyota hybrid cars and the environmental concern)

3. Emotions: totally personal factors which influence consumer’s behavior. Cannot be characterized as clever or nonsense purchases but as beneficial or harmful investments. Need of the highest value (CCRC’s- ‘to avoid being a burden on their loved ones’)

Page 14: Rediscovering Ma

The gravity of decision Spectrum

Shallowest

decisions

-Whether to make smallimprovements to existingProducts-How to select targets of a media campaign-Whether to change prices

-How relevant andbelievable new-productclaims are-How to evaluate a given product-Whether to switchproducts

-Buying and usage behavior-Willingness to pay a small premium for higher quality-Degree of brand loyalty

Middle-of-the

spectrum decisions

-How to position the brand-Which segments to pursue-Whether to change the product fundamentally-Whether to develop an entirely new product

-Whether to visit a clinic about a medical condition-Whether to switch one’s brand of car-Whether to replace anenterprise software system

-Whether the consumers being studied are do-it-yourself or do-it-for-me -Consumers’ needs -Their social status,self-image, and lifestyle

Deepest decisions

-Whether to revise the business model in response to powerful social forces changing how people live their lives

-Choosing a course ofmedical treatment-Deciding where to live

-Core values and beliefsrelated to the buyingdecision

Issues the businesswants to address

Consumers’ concerns

What the segmentation

should try to find out

Page 15: Rediscovering Ma

Implications for marketing strategy

• Different starting points means different applied segmentation.

objectives, goals, situation, conditions, overall strategy

• Effective segmentations focus on just one or two issues, and they need to be redrawn as soon as they have lost their relevance.

Be specific, definite & constantly revised/reviewed

• Only with the appropriate in each case, precise data, someone can invent or reach revealing, actionable & applicable segments.

• Combine demographic & psychographic analysis in a situation-specific, moderate & well-balanced way.

Consumer’s mindset vs Consumer’s behavior: not excessive interest or too little emphasis on any of each side

Page 16: Rediscovering Ma