1

Segmentation and Targeting IAA School | Dec. 2011

Market Segmentation
and Targeting

IAA School Module II
16 December 2011

Razvan Eftimiu
2
Segmentation and Targeting IAA School | Dec. 2011
Outcomes
What is a segmentation?
Why is it important?
What is a successful/ useful market
segmentation
Types of segmentation and when to use each
How segmentation leads into targeting and
positioning
What is a target and how to define it
3
Segmentation and Targeting IAA School | Dec. 2011
What is a market?

needs or wants, and with

the ability and

the willingness to buy.



A group of people that lacks any one of these
characteristics is not a market.
PEOPLE
4
Segmentation and Targeting IAA School | Dec. 2011
Is targeting everyone a good idea?

People have needs
and wants THAT
ARE DIFFERENT!

Should I market the
same product to all?
5
Segmentation and Targeting IAA School | Dec. 2011
Whos buying?

I dont need to
know what market
wants my
product will sell
itself
6
Segmentation and Targeting IAA School | Dec. 2011
Sniper's rifle vs. shotgun

One product fits all
(low cost airline)


Multiple products designed for
and targeted at multiple segments
(financial services, toothpaste)


One product for one segment
(niche products, luxury products)
7
Segmentation and Targeting IAA School | Dec. 2011
And now on with the segmentation...
1. Identify Bases
for Segmenting the Market
2. Develop Profiles
of Resulting Segments
3. Develop Measures
of Segment Attractiveness
4. Select Target Segment(s)
5. Develop Positioning
for Each Target Segment
6. Develop Marketing
Mix for Each Target Segment
Market
Positioning
Market Targeting
Market Segmentation
8
Segmentation and Targeting IAA School | Dec. 2011
Its time for some definitions...
Market
People with needs or wants and
the ability and willingness to buy.
Market
Segment
A subgroup of people or
organizations sharing one or more
characteristics that cause them
to have similar product needs.
Market
Segmentation
The process of dividing a market
into meaningful, relatively similar,
identifiable segments or groups.
9
Segmentation and Targeting IAA School | Dec. 2011
Before segmenting...

...we need to define
the market...

and understand
what is relevant
for that market


B
e
e
r

L
o
w

a
l
c
o
h
o
l

A
l
c
o
h
o
l

B
e
v
e
r
a
g
e
s

10
Segmentation and Targeting IAA School | Dec. 2011
Segmentation is about people...
Copiright 2008, Thomas Learning
11
Segmentation and Targeting IAA School | Dec. 2011
So, what is a market segment?
A subgroup of people (or organizations) with
one or more common characteristics that
cause them to have similar product needs
it is distinct from other segments
(heterogeneity across segments)
it is homogeneous within the segment
(exhibits common attributes)
it responds similarly to a market stimuli
it can be reached
12
Segmentation and Targeting IAA School | Dec. 2011
Size, purchasing power, profiles
of segments can be measured.
Segments must be effectively
reached and served.
Segments must be large or profitable
enough to serve.
Measurable
Accessible
Substantial
Differential
Actionable
Segments must respond differently to
different marketing mix elements &
actions.
Must be able to attract and serve
the segments.
How a segment should be?
13
Segmentation and Targeting IAA School | Dec. 2011
Is this a good segmentation?
Can we see different product, promotion,
communication, distribution or profit opportunities
with this segmentation model?
14
Segmentation and Targeting IAA School | Dec. 2011
Is this a good segmentation?
Can we measure the segments? Can we obtain
realistic data to consider segment potential?
15
Segmentation and Targeting IAA School | Dec. 2011
Is this a good segmentation?
Can we differentiate competitor offerings with this
segmentation model?
16
Segmentation and Targeting IAA School | Dec. 2011
Is this a good segmentation?
Can we differentiate competitor offerings with this
segmentation model?
17
Segmentation and Targeting IAA School | Dec. 2011
There is more than what we can see...
Needs based
segmentation
Profile based
segmentation
18
Segmentation and Targeting IAA School | Dec. 2011
Profile based segmentation
Geographic
Demographic
Age, gender, family size
and life cycle, or income
Psychographic
Social class, lifestyle, or
personality
Behavioral
Occasions, benefits,
uses
Nations, states,
regions or cities

19
Segmentation and Targeting IAA School | Dec. 2011
Geographic segmentation
20
Segmentation and Targeting IAA School | Dec. 2011
Demographic segmentation
age
gender
family size
family life cycle
income
occupation
education
socioeconomic
status
religion
nationality/race
language
21
Segmentation and Targeting IAA School | Dec. 2011
Psychographic segmentation
personality
life style
value
attitude
Ms. Smart
Care
32%
Ms. Natural
Me
10%
Ms. Sensual
Care
5%
Ms.
Minimalistic
11%
Ms. Status
Beauty
25%
Ms. Young
Beauty
Seeker
17%
22
Segmentation and Targeting IAA School | Dec. 2011
Behavioral segmentation
Internet usage
23
Segmentation and Targeting IAA School | Dec. 2011
Needs based segmentation model
Social dimension
I
n
d
i
v
i
d
u
a
l

d
i
m
e
n
s
i
o
n

Need for control
(regulate regain control,
calm)
Need to release
(feel free, stimulated,
energized, escape)
N
e
e
d

t
o

b
e
l
o
n
g


(
f
i
t

i
n
,

b
e
l
o
n
g
,

c
o
n
n
e
c
t

w
i
t
h

o
t
h
e
r
,

s
a
f
e
t
y
)


N
e
e
d

t
o

s
t
a
n
d

o
u
t

(
e
x
p
r
e
s
s

s
e
l
f
,

p
o
w
e
r
,

b
e

r
e
c
o
g
n
i
s
e
d
)


24
Segmentation and Targeting IAA School | Dec. 2011
Segmenting drinking market (an example)
25
Segmentation and Targeting IAA School | Dec. 2011
Hedonistic Drinkers (an example)
Across all ages, genders & SEG
Different to all other segments, they frequently drink to get
drunk, (up to 3-4 times a week)
Tolerance levels are very high & binging is habitual &
everyday
Tend to drink in single sex groups, buying in rounds &
drinking at a fast pace dictated by the leader (or
host/hostess in home)
Highly influenced by promotions (on & off trade) they
choose drinks that will get them drunk quickly
For women wine, spirits, shooters, & cocktails (incl. own
inventions)
For men premium lager, snakebites, and spirits
Drink in environments that will accommodate the noise &
energy of the group!
26
Segmentation and Targeting IAA School | Dec. 2011
Lets recap...


Why is a segmentation
useful?
27
Segmentation and Targeting IAA School | Dec. 2011
Remember...
1. Identify Bases
for Segmenting the Market
2. Develop Profiles
of Resulting Segments
3. Develop Measures
of Segment Attractiveness
4. Select Target Segment(s)
5. Develop Positioning
for Each Target Segment
6. Develop Marketing
Mix for Each Target Segment
Market
Positioning
Market Targeting
Market Segmentation
28
Segmentation and Targeting IAA School | Dec. 2011
What is a target consumer group?
A group of consumers who
share a homogenous set of
value drivers
Members of a group are
similar to each other
There are clear
differences between
groups
29
Segmentation and Targeting IAA School | Dec. 2011
Concentrated
Strategy
Undifferentiated
Strategy
Multisegment
Strategy
Are all strategies the same?
30
Segmentation and Targeting IAA School | Dec. 2011
Undifferentiated targeting strategy
one big market
no individual segments
single marketing mix
Advantage:
Effective production and marketing costs
Disadvantages:
Company more susceptible to competition
31
Segmentation and Targeting IAA School | Dec. 2011
Concentrated targeting strategy
niche market
target only one segment
single marketing mix
Advantage:
Concentration of resources
Small firms can compete/ strong positioning
Disadvantages:
Segments too small, or changing
Large competitors may market to niche segment
32
Segmentation and Targeting IAA School | Dec. 2011
Differentiated targeting strategy
two or more market segments
distinct strategy/ marketing mix
for each
Advantage:
Greater financial success
Economies of scale
Disadvantages:
Costs
Risk of canibalisation
33
Segmentation and Targeting IAA School | Dec. 2011
Same product, different target
34
Segmentation and Targeting IAA School | Dec. 2011
Why do you need to define
the target consumers?
It is very difficult to target everybody
Different people have different needs and wants -
develop appropriate strategies to satisfy these better
Helps to prioritize and choose the group/s you should
target for your brand
35
Segmentation and Targeting IAA School | Dec. 2011
Whats in it for me?
Increase marketing efficiency
by focusing marketing efforts
to a particular group

Maximize effectiveness of
marketing resources use

Find a market with limited
competition/ that I can face

Select the most profitable
segment

36
Segmentation and Targeting IAA School | Dec. 2011
So, who is my consumer?
WHO
Demographics
Lifestage / Lifestyle
WHAT, WHEN WHERE
Consumption
Shopping behaviour
TARGET UNDESTANDING
Needs
Motivations
Attitudes
Preferences
WHY
37
Segmentation and Targeting IAA School | Dec. 2011
Airline industry
38
Segmentation and Targeting IAA School | Dec. 2011
Low cost airlines
3
8
A large consumer
segment
39
Segmentation and Targeting IAA School | Dec. 2011
1995: low cost flying in Europe
40
Segmentation and Targeting IAA School | Dec. 2011
And communicated this...
41
Segmentation and Targeting IAA School | Dec. 2011
The results
42
Segmentation and Targeting IAA School | Dec. 2011
What is the target here?
43
Segmentation and Targeting IAA School | Dec. 2011
44
Segmentation and Targeting IAA School | Dec. 2011
How can we choose the right target?
Segment size and growth

Profitability for the company

Company objectives and resources
45
Segmentation and Targeting IAA School | Dec. 2011
A hypotetical ice cream market
Family
Sharing
Home /
Family
Goodness
Everyday
Meals
Social Refreshment
Family
Sharing
My Time Out
Gapfill
Break
Sweet
Uplift
Special Moments
Summer Impulsive
Ice Cream Enthusiasm
Occasional
Temptation
Health /
Body
Conscious
Home /
Family
Goodness
For Us
For Me
For
Them
Feeding
Treating
Innocence /
Goodness
Occasion
Enhancement
Body & Mood
Enhancement
Sinfulness
Social
Sharing
Pragmatic
Solutions
Family Nurture &
Nourish
Everyday family
treats
My Treat
Boost
(Mental & physical )
Gutfill
Social Bonding
Celebrations
Discovery /
parlour style
Uplift &/or
Wind down
Refresh
/ Quench
/
Premium / for
Connoisseurs
Excess &
Intensity
Big Fun
Gatherings
Adventure /
parlour style
Close
Connections /
Bonds
Discovery /
exoticism
Pride /
Show
46
Segmentation and Targeting IAA School | Dec. 2011
Ice Cream market
Everyday
family
treat
Social
bonding
Celebration My treat Boost
Size
2005
2006

7.2 m
13.9 m

18.1 m
16.3 m

6.3 m
9.2 m

22.4 m
26.2 m

24.8 m
29.3 m

Growth

93%

-10%

46%

17%

18%

Profitability

0.4%

5.8%

2.2%

4.4%

0.3%


47
Segmentation and Targeting IAA School | Dec. 2011
Determine segment attractiveness
Everyday
family
treat
Social
bonding
Celebration My treat Boost
Size
2005
2006

7.2 m
13.9 m

18.1 m
16.3 m

6.3 m
9.2 m

22.4 m
26.2 m

24.8 m
29.3 m

Growth

93%

-10%

46%

17%

18%

Profitability

0.4%

5.8%

2.2%

4.4%

0.3%

SEGMENT
ATTRACTINEVESS

HIGH MEDIUM
LOW HIGH
HIGH
HIGH
HIGH
HIGH
HIGH
MEDIUM
MEDIUM LOW
LOW LOW
LOW
MEDIUM
MEDIUM LOW MEDIUM MEDIUM
48
Segmentation and Targeting IAA School | Dec. 2011
Lets meet our target
... a totally ME time where the
consumer disconnects and offers
himself/herself an indulgent time, a
treat for him/herself.

The time is thus centered on his/her
feelings and around the product. It can
happen both out of home as well as at
home.
My treat consumer
49
Segmentation and Targeting IAA School | Dec. 2011


Build target portrait



Break in 5 teams

Use the description of My treat consumer

If you need, use the questions handed to guide you to
create the portret of My treat consumer

Report back to the group in 20 min.


- BE CREATIVE -
50
Segmentation and Targeting IAA School | Dec. 2011
The questions...



You can create a full portret of My Treat consumer (who is he/
she? what are they wearing?)
Show hobbies, leisure activities, travel destinations etc. which
the "My Treat consumer might like
Discuss and describe a day in the life of a My Treat Consumer
Discuss and list products and brands from food and non-food
categories that this consumer might prefer
Where can I find this consumer? Which are the most efficient
contact points to the different activities during the day in the life
of the My Treat Consumer
51
Segmentation and Targeting IAA School | Dec. 2011
Before we go home...remember!
Select
a market
Choose
bases
for
segmen-
tation
Profile
and
analyze
segments
Select
target
markets
Design,
implement,
maintain
marketing
mix
52
Segmentation and Targeting IAA School | Dec. 2011
the end
Razvan Eftimiu
Merlin Research
razvan.eftimiu@merlinresearch.ro