Appunti Strategy & Marketing - prof. Josip Kotlar

Segmentation and Marketing Approaches

For everyone, one plan for each customer

Customers are diverse, but I can detect undifferentiated homogeneous groups with similar needs, ways of using the product, and expectations

Approach: Mass Marketing (or One-to-One Marketing)

Ad hoc product and approach for segments of customers (groups of homogeneous customers)

Segment marketing approach

Segmentation Definition

Segmentation is a marketing process through which the company divides the market into various sub-groups with different demand profiles but internally homogenous. Based on these sub-groups, management develops specific marketing plans to best satisfy their requirements.

Market Segments

Market segments have two main characteristics:

• Internal similarity
• External diversity

Intersim n Inallyilar ternsim allilar yIn t er nalsim lyila rSegmentation's aim is to give insights to markets in order to define the best possible marketing program for every specific group of customers.

Strategy & Marketing - a.y. 2020/21 - Ing. Federico Della Bella

Characteristics of a "good" market segment DEFINITION

• Measurability: it must be possible to measure the size and buying power of the segments
• Accessibility: real possibility of obtaining the segment using marketing actions
• Homogeneity: within the segment as regards one or more characteristics (describers); heterogeneity compared with other segments
• Importance: a segment large enough to justify a targeted marketing action
• Duration: possibility of exploiting the segment for a particular period of time

Strategy & Marketing - a.y. 2020/21 - Ing. Federico Della Bella

Advantages and disadvantages of segmentation DEFINITION

• Advantages of segmentation
• Reduction in

characteristics

• Advantages and disadvantages of segmenting
• The segmentation process
• Segmentation types and variables:
• by product
• by customer (B2B v B2C)
• Methods of segmentation

17Strategy & Marketing - a.y. 2020/21 – Ing. Federico Della Bella

Segmentation process

Choice of the segmentation approach

• By product?
• By customer?

Choice of the segmentation method

• Mathematical?
• Heuristics?

Analyzing the segments obtained

• Segment validation
• Segment description
• Product/market matrix

18Strategy & Marketing - a.y. 2020/21 – Ing. Federico Della Bella

Segmentation approaches

• By PRODUCT characteristics
• By CUSTOMER characteristics

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Advantages and constraints of segmenting by product

DEFINITION

CONSTRAINTS

ADVANTAGES

• Does not consider the Simplicity variables related to the
• Immediacy customer’s

• Clarity and comprehensibility
• Little visibility of the competition amongst products
• Simplistic

Considering this, there are 3 main dimensions to consider:

• Segmentation by customer CHARACTERISTIC
• Segmentation by customer BEHAVIOUR
• Segmentation by customer NEED

These approaches are slightly different in the case we are dealing with:

• Consumer customer
• Industrial customer

Segmentation by customer - B2C markets DEFINITION

Approach Type of Characteristics Example of Variables

• Age, gender, family size, family role, income, occupation, socio-demographic social class, religion, etc.
• Continent, country, region, type of residence and/or work area Geographic (city, suburb, or rural), population concentration, etc.
• Psychographic Personality, lifestyle (VALS™ Test)
• User/non-user, brand-user/non-brand-user, intensity of usage, Product usage type of usage, time of usage, etc.
• Customer Behavior Frequency of purchase, point of sales used, duration of Buying process

Purchase process, participants in the purchase process, loyalty to brand or distributor, etc.

Price, quality, safety, variety, functionality, convenience, Customer Needs Benefits sought entertainment, indulgence, status, etc.

Strategy & Marketing - a.y. 2020/21 – Ing. Federico Della Bella

Segmentation by customer - B2C markets

Customer Characteristics

Knowing customer characteristics, behaviors, and needs is fundamental to design the marketing plan. Marketers collect information and then use them with specific objectives.

How to use customer characteristics

• Estimate the size of a segment
• Assist in product design and pricing decisions
• Provide implication for the content and channel of marketing communication
• Aware of ethically, politically, or religiously sensitive issues

Strategy & Marketing - a.y. 2020/21 – Ing. Federico Della Bella

Segmentation by customer - B2C markets

Customer Characteristics

Psychographic (VALS MODEL)

VALS segments US

even expand the usage of current users;

• Convince non-users with the product/brand benefits over the
• competing product/brand

High usage intensity indicate customers loyal to the brand, who

• purchase in multiple occasions and multiple POS

If customers are loyal to POS instead, being present in the right

• channel has higher priority

Purchase process: regular or impulsive, etc.

• Roles in purchase process
• ...
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Strategy & Marketing - a.y. 2020/21 – Ing. Federico Della Bella

Segmentation by customer - B2C markets

Customer Behavior and Marketing Funnel

Customer Behavior: Usage of product / service

Marketers have to move customers along the Marketing Funnel

Follow clients along the marketing channels and check the abandonment rate at any stage, in order to redesign the process. 27

Strategy & Marketing - a.y. 2020/21 – Ing. Federico Della Bella

Segmentation by customer - B2C markets

Customer Needs

Knowing customer characteristics, behaviors, and

needs is fundamental to design the marketing plan. Marketers collect information and then use them with specific objectives.

How to use customer need (benefit sought)

• Design the product addressing the needs
• Design the marketing communication addressing the motivation which customers are more likely to respond to

Segmentation by customer - B2B markets DEFINITION

Approach Type of Characteristics Example of Variables

• Company size, sector, type of activity, type of management, etc.
• Socio-demographic Customer Characteristics Continent, country, region, location (industrial/non-industrial area), etc.
• Geographic User/non-user, consumption volume, product application type, etc.
• Product usage Customer Behavior Purchase lot size, complexity of buying process, roles in buying process, distributor to purchase from, loyalty to distributors, etc.
• Punctuality of delivery, speed of delivery, supply continuity,