MKT Module 5
3 dimensions of customer segmentation:
1. Customer Focus and Positioning
• How you focus your efforts to attract and retain customers, and which
customers you focus on with such efforts. How you focus your efforts to
serve customers is also called targeting or product/service positioning.
• Focus on profitable customers, superior analysis of their needs and fitting
your offering to their needs and benefits sought are key elements of
competitive thinking and positioning.
• Changing customer preferences changes demand, which changes seller
supply, that in turn changes consumer preferences and demand.
Segmentation Variables for Consumer Markets
• Geographic: world region, climate zone, local weather, trading block, country,
country region, state, province, county, city, suburb, town, village
• Demographic: Genetics, body type, physical handicaps, height, weight, age, life
stage, cohort generation, family size, education, intelligence, language, income,
wealth, occupation, ethnicity, nationality, tribal identity, family identity, heritage
• Psychographic: Lifestyle, interests, hobbies, personality, sociability, social class,
• Behavioral: Product consumption, channel usage, channel loyalty, features used,
product benefits sought, brand loyalty, early adapter, usage occasion
Focus on customer profitability
• The three determinants of customer profitability are:
Customer purchases of high margin products and services.
The sheer quantity of purchases made per year (size of customer)
Low selling costs to the customer, low delivery costs and low aftersales service
• Positioning: The firms deploys or invests its resources in what it believes to be
key drivers of customer profitability. Example: analyzing the database of
customers by identifying least profitable custumers and most profitable customers
and focus on satisfying the needs of the most profitable customers.
• Segmentation: Segmenting the market by customer profitability requires a
database analysis that produces metrics.
2. Benefit Feature Segmentation
• Our behavior is motivated by a desire (a need or a want) • Sometimes a product surprises us with the benefits it delivers. That is
when a product or service more than satisfies us, it delights us.
st • Abraham Maslow developed a priority of needs theory,
1 with physical needs our first priority.
2 priority is love and affection
3 is self actualization (a sort of Zen state)
• The utlility or quality of a product or service is the sum of all the benefits
it delivers in moving us along the paths of our physical, emotional,
intellectual and spiritual goals.
• Innovation in supply directed towards attracting new customers and
creates new market segments. It is the practice of what is marketings
theory of dynamic competition.
• The idea of finding out what different customers want and designing
products with the features that caters to these desires.
• Market segments are based on the structure of such variance and as the
structure of this variance changes, so markets segments change,
morphing around new product features, services and channels of
distribution. The MP3 player market has grown from a single product
market into new segments served by different models with different
3. Positioning: Fitting Features to Benefits Desired
• Designers and engineers need to develop features and deploy quality that
deliver the most desired functions/benefits.
• If the connections/correlations between a segment’s most important
benefits and the producers features are not there, then the product is poorly
positioned to serve the needs of the customer segment.
• The quality function deployment process involves the following activities.
1. Identifies the benefits desired by the target market segment and
measure their importance.
2. Obtain segment perceptions of each of the alternatives performance of
3. Weight each segment’s average perception rating of each benefit
delivered by its importance rating.
4. List of product specifications/features and alternatives engineering
ratings on each specification feature.
5. Connect productengineering specifications/features to benefits in the
benefits specification matrix.
6. Develop and design new products with new specifications and features
that have a strong correlation with the most important with the most
important benefits that you can most profitably add.
7. Measure and compare the new product quality/utility score.
• Visually connecting in your mind engineering and product
specifications to the consumers most valued benefits. 4. Channel/Contact Segmentation
• Example: If WalMart is ever aloud to develop a package of
financial services desired by WalMart’s customers, then another
new “Walmart customer” channel segment ( a new banking
channel segment) will be created that will send shock waves
through the retail banking industry.
• The old ways of reaching customers and doing business with
customers are being destroyed by the new ways of doing business
with customers, using new global supply chains that deliver niche
products to every corner of the world. That is what contact
segmentation and modern channel management is about: catering
to a much greater range of customer preferences and demand.
5. 3D Customer Focus
• Contact segmentation: how the customer prefers to interact with the
company, such as via the internet or telephone etc. Contact segmentation
is curtail to the implementation of campaign