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Chapter 2

Chapter 2 segmentationandtargeting.odt

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McGill University
Management Core
MGCR 352
Sameer Mathur

Capturing value form customers in return in exchange of MONEY The marketing Process • Understand Consumer needs and wants • Built a consumer driven market strategy • Construct a marketing program • Built relationships • Capturing value form customers in return in exchange of MONEY Chapter 2 Segmentation and Targeting Why do we use segmentation ? Because people are different and people who are different are likely to have different needs and wants. We need to segment markets so that they can respond more effectively to the specific needs and wants of groups of potential buyers and thus increase its sales and profits. Segmentation : grouping people or organizations in a market according to the similarity of their needs and the benefits they are looking for in making a purchase. 1) Single product directed to multiple segment market. Example : Books Although a separate covers ,advertisements for books are expensive, they are minor compared with the costs of producing an entirely new book for another market segment. 2) Multiple products and multiple market segments ex .shoes retailer. Different style of shoes aimed at different market. Forever 21 --> different sections two- tier marketing strategies— or “ Tiffany/ Wal- Mart strategies.” This means that firms offer different varia-tions of the same basic product or service to both high- end and low- end segments. 3) Segment of one : Mass customization every customer is unique, has unique wants and needs, mass customization is possible, that is, tailoring goods or services to the tastes of individual customers. Example : ''Customizing Your Own Designer Shoes,” Step 1 Group Potential Buyers into segments It is not always a good idea to segment a market. Grouping potential buyers into meaningful segments involves meeting some specific criteria that answer the ques-tions: would segmentation be worth doing, and is it possible? ''The Fast Path to Corporate Growth, argues that most marketers create segmentation schemes that are simply too complicated. He suggests that we should keep it simple''. poor seg-mentation leads to poor targeting and poor positioning. understanding customer needs is the first step in market segmentation. Too many marketers, he suggests, start with demographics, lifestyle, and usage behaviours. But this is the wrong approach. Criteria to Use in Forming the Segments • Potential for increased profit :The best segmentation approach is the one that maximizes the opportunity for future profit and return on investment ( ROI). If this potential is maximized without segmentation, do not segment. For not- for-profit organizations, the criterion is the potential for serving client users more effectively. • Similarity of needs of potential buyers within a segment. Potential buyers within a segment should be similar in terms of a marketing action, such as product features sought or advertising media used. • Difference of needs of buyers among segments. If the needs of the various segments are not very different, combine them into fewer segments.Adifferent segment usually requires a different marketing action, which, in turn, means greater costs. • Potential of a marketing action to reach a segment. Reaching a segment requires a simple but effective marketing action. If no such action exists, do not segment. • Simplicity and cost of assigning potential buyers to segments.Amarketing manager must be able to put a market segmentation plan into effect. This means being able to recognize the characteristics of potential buyers and then assigning them to a segment without encountering excessive costs. Ways to Segment Consumer Markets usage rate : quantity consumed or patronage during a specific period, which varies significantly among different customer groups. Usage rate is sometimes referred to in terms of the 80/ 20 rule, a concept that suggests that 80 percent of a firm’s sales are obtained from 20 percent of its customers. a small fraction of customers provide a large fraction of sales. For exam-ple,Air Canada pays special attention to the business travel segment that comprises only 20 percent of the airline seats but 40 percent of overall revenues. Variables to Use in Forming Segments It could be age, sexe, gender, year in school However those variable make it hard to reach the criteria stated earlier : Potential of a marketing action to reach a segment. Four student segments that do meet these criteria include the following: Example • Students living in dormitories ( residence halls, fraternity houses). • Students living near the univ
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