Market segmentation in Consumer Behavior

Market Segmentation:
Introduction, categories, variables.
2015 - CONSUMER BEHAVIOR DR. AHMAD FARAZ – CBA - UOD
Lecture
2

Marketing
We argued that marketing is about creating mutually
beneficial exchange
QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
QuickTime™ and a
QuickTime™ and a
Exchange is the process where you
willingly give something of value to
another, in return for getting
something of value to you QuickTime™ and a

How Market Segmentation evolved?
A strategy that believes there is one
undifferentiated market and that one
product will appeal to all consumers
in that market.
Mass Marketing
Advantages
 Lower cost
 One ad campaign
 One marketing strategy
 Usually, one product
Disadvantages
 Only works if all
consumers have the
same needs, wants,
desires, back ground,
education and
experience.

Now markets are becoming more fragmented
• In the developed economies at least the idea of mass
marketing is essentially dead
• One product for a large market does not work anymore
• Consumers are becoming more sophisticated and choosy
- They have better access to information. Why?
- They have more choice.
- They are overloaded with marketing messages. Why?
- They are more suspicious.

Market Segmentation
Today, Mass Marketing is largely replaced by a 3 step strategy
Market Matching Strategy SEGMENTATION
TARGETING
POSITIONING
Dividing the marketplace into
submarkets that require
different marketing mixes.
Process of reviewing market
segments and deciding which
one(s) to pursue
Placement of the products by
creating a differentiation in the
eyes of customers and competitors

Market Segmentation (definitions)
A process used to divide large heterogeneous
markets into small markets that can be reached
more efficiently and effectively with products and
services that match their unique needs.
The process of dividing a market into distinct
subsets (segments) of consumers with common needs or
characteristics and selecting one or more to target
with a distinct marketing mix.
Group consumers according to their similarity
related to a particular product category.

Why market segmentation?
 Better market segmentation creates profitable
customers
 Market segmentation allows you to;
Target the right segment to approach
Which means you can position your offer more effectively
Which leads to better marketing mixes
Which leads to your customers choosing your offer
Word of mouth (and telling their friends).

Any colour you like, as long as it’s Black
The Model T Ford is
regarded as the first car to
be built in 1908, using a
production line.
Henry Ford wanted to produce
quickly. So Black paint was
used, that dries more quickly so
the only colour one could have
was Black. Soon Ford lost share
to companies that offered other
colours.

No cup holders please, we are German
 In the 1990’s cup holders
became popular in the USA
 German companies such as
BMW and Mercedes didn’t
see them as necessary (cars
were about engineering not
cup holders!)
 Their market share fell in the
USA

The Mobile phone is just a device
• Early mobile phones were
seen as just devices to
make calls.
• The idea of a mobile
phone as a fashion
accessory was at first not
accepted by many
companies.
• Nokia did understand this
and were the first
company to offer different
designs and colours
• Nokia gained huge market
shares

Why kitchen appliances must be in White?
KitchenAid is an American home appliance
brand. Company started in 1919, faced stiff
competition.
In the late '80s with a promotional campaign
double the business in three years.
No other company in the world is offering so diverse
color and design range in kitchen aids.

What we learn from these stories?
1. The customer really is king
2. One offer never appeals to everyone
3. Offers to everyone will be beaten by offers
to targeted groups
4. Marketing is becoming more complex
(and more exciting - no honestly
it is…)

Segmentation variables
If you’re not segmenting, then
you’re not marketing

How segmentation is applied at McDonalds

Segmentation variables

more Segmentation variables

more Segmentation variable

An innovative segmentation
Latest addition to the family – Coca Cola‑
Life. – Company’s first lower-calorie cola
sweetened from natural sources (stevia
leaf) and contains a third less sugar and a
third fewer calories than Coca Cola2.‑
We're constantly innovating and creating
products that we think people will love. The
introduction of Coca Cola Life is part of our‑
commitment to offer a variety of drinks, so
there’s something to suit every lifestyle
and occasion.
Coca Cola‑ = 42 calories/ 100ml
Coca Cola Life‑ = 27 calories/ 100ml
Coca Cola Zero‑ = Less than 1 calorie/ 100ml
Diet Coke = Less than 1 calorie/ 100ml

How does Airlines position their offerings for
different market segments?
Economy ClassBusiness Class
First ClassPrivate Cabins
Economy ClassBusiness ClassFirst ClassPrivate Cabins
First Class Business Class Guest Class

Market Segmentation leading to success
(Saudi FMCG Market)
Abdulla Aujan & Brothers was established in 1905
Businesses include Tobacco, Rice, Beverages.
In 1928, the company obtained Vimto, (UK 1908).
By 1970s, Aujan Industries established itself
throughout the Saudi Arabian & GCC markets.
1n 1973, company innovates and launched Vimto
Carbonated; the first fruit flavored carbonated soft
drink.
In Dec 2011, Aujan Industries and The Coca-Cola
Company announce signing of $980 M Agreement
http://www.coca-colacompany.com/press-center/press-releases/aujan-industries-
and-the-coca-cola-company-announce-signing-of-980-million-agreement
In 1982, Aujan Industries’ first homegrown brand:
Rani (Orange Float) by 1999, sales of Rani had
passed the 10 million case mark.
Also in the early 1980s, the company introduced to
the region the malt beverage drink, Barbican.
Launched to great acclaim, Barbican personified the
future of beverages amongst the GCC’s growing

Presently over 3,000 employees. ACCBC’s production
capacity has crossed 100 million physical cases in 2014.
The company present in Saudi Arabia, UAE, Qatar, Kuwait,
Bahrain, Oman, Yemen, Jordan, Iraq, Lebanon, Egypt, Libya
and Algeria.
3 manufacturing facilities located in Dammam (KSA), Dubai
(UAE) & and Beirut (Lebanon).
In addition, ACCBC continues to supply more than 70 markets
Market Segmentation leading to success
(Saudi FMCG Market)

Which . . . . . . . segment is targeted?
Identify variables?
Age: ?
Gender: ?
Population: ?
Psychographic: ?
Social Class: ?
Life Style: ?
Personality: ?
Life stage: ?
Income: ?
Education: ?
Religion: ?
Culture: ?
Country: ?

Multivariable segmentation
• For most products one variable is not enough, it will
tell you little about the target group
• So organizations tend use multivariable segmentation
In general multivariable segmentation leads to better customer
insights
This is simply combining segmentation basis:
Simple multivariable segmentation uses two or more bases from one category
E.g. Age and gender from demographic variables
Advanced multivariable segmentation uses two or more bases from two or more
categories
E.g. Lifestyle, age, family life cycle and attitude to the product
Multistage segmentation uses different variables at different times
E.g. Region, then lifestyle and age

Criteria for effective market segmentation?
A good market segmentation is one that is:
Identifiable – able to identify relevant characteristics.
Measurable - you know how many members it has and you can track
their purchases
Accessible - you can contact them and make your offer
Sustainable - you can make a profit by serving them
Actionable - you are able to develop offers those can be attractive to
the segment
In addition a good segmentation allows you to understand the
customer from their point of view so that you can make offers that will
meet their needs better than your competitors.

Which . . . . . . . segment is targeted?

Segmentation by seven life development stages

VALS Segmentation
VALS "Values, Attitudes And Lifestyles" is a research methodology used for
psychographic market segmentation. Market segmentation is designed to guide
companies in tailoring their products and services in order to appeal to the people most
likely to purchase them.
VALS was developed in 1978 by social scientists (Arnold Mitchell and his colleagues).
It was immediately embraced by advertising agencies. VALS draws heavily on the work
of Harvard sociologist David Riesman and psychologist Abraham Maslow.
Arnold Mitchell used statistics to identify attitudinal and demographic questions that
helped categorize adult American consumers into one of nine (9) lifestyle types:
survivors (4%), sustainers (7%), belongers (35%), emulators (9%), achievers (22%),
I-am-me (5%), experiential (7%), societally conscious (9%), and integrated (2%).
The survey done among 1,635 Americans and their partners, who responded to an SRI
International survey in 1980.

VALS Segmentation

Thank you and Good Bye, till next class.

Market segmentation in Consumer Behavior

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Market segmentation in Consumer Behavior