Segmentation. Industrial

Transcription

1 Segmentation Industrial

2 Definition Market Segmentation: Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.

3 Steps in Market Segmentation, Targeting, and Positioning

4 Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographical segmentation Marketing mixes are customized geographically Demographic segmentation Psychographic segmentation Behavioral segmentation Using multiple segmentation variables

5 Market Segmentation Geographic Segmentation Variables World Region or Country Country Region City City or Metro Size Neighborhood Density Climate

6 Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographical segments Demographic segmentation Most popular type Demographics are closely related to needs, wants and usage rates Psychographic segmentation Behavioral segmentation Using multiple segmentation variables

7 Market Segmentation Demographic Segmentation Variables Age Gender Family size Family life cycle Income Ethnicity Occupation Education Religion Generation Nationality

8 Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographic segments Demographic segmentation Psychographic segmentation Lifestyle, social class, and personality-based segmentation Behavioral segmentation Using multiple segmentation variables

9 Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographic segments Demographic segmentation Psychographic segmentation Behavioral segmentation Typically done first Using multiple segmentation variables

10 Market Segmentation Behavioral Segmentation Variables Occasions Benefits User Status User Rates Loyalty Status Readiness Stage Attitude Toward the Product

11 Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographic segments Demographic segmentation Psychographic segmentation Behavioral segmentation Using multiple segmentation variables

12 Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Demographic segmentation Industry, company size, location Operating variables Technology, usage status, customer capabilities Purchasing approaches Situational factors Urgency, specific application, size of order Personal characteristics Buyer-seller similarity, attitudes toward risk, loyalty

13 Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographic segmentation Location or region Economic factors Population income or level of economic development Political and legal factors Type / stability of government, monetary regulations, amount of bureaucracy, etc. Cultural factors Language, religion, values, attitudes, customs, behavioral patterns

14 Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Measurable Size, purchasing power, and profile of segment Accessible Can be reached and served Substantial Large and profitable enough to serve Differentiable Respond differently Actionable Effective programs can be developed

15 Agenda What are the Unique Aspects of Business Market Segmentation? What are the Models of Industrial Market Segmentation? How Business Market Segmentation Should be Done? How to Select Market Segments to Serve?

16 What are the Unique Aspects of Business Market Segmentation? A business firm must define the market in which it wishes to operate. In defining the market, business market managers choose descriptors (bases) that characterize and define a market.

17 What are the Unique Aspects of Business Market Segmentation? The difference between consumer and industrial market segmentation is generally seen in the specific bases of segmentation. Consumer markets are typically segmented on the basis demographic or psychographic variables. As the industrial customer is not an individual but a number of interacting individuals in a decision making unit (DMU) of a formal organization, the bases of segmentation are different.

18 Bonoma And Shapiro Model Of Business Market Segmentation General, observable (Macro) (Intermediate) Specific, subtle (Micro) Organizational demographics: Industry/ Company size/ Location Operating variables: Technology/User status/customer capabilities (financial) Purchasing approaches Organization of DMU/Purchasing policies/purchasing criteria Situational factors Urgency/Applications/Order size Personal characteristics: Motivation/Buyer-seller / Risk perceptions Prof. A. K. Biswas 18

19 Bonoma And Shapiro Model Of Business Market Segmentation A marketer can begin at the outside nest and work inward because data are more available and definitions clearer in outer nests. On the other hand, situational and personal variables of the inner nests are often the most useful.

20 Bonoma And Shapiro Model Of Business Market Segmentation The outer-nest criteria are generally inadequate when used by themselves in all but simple or homogeneous markets because they ignore buying differences among customers. Over emphasis on the inner-nest factors, however, can be too expensive and timeconsuming for small markets. A balance is to be achieved between the two nests.

21 What is the Problem with these Market Segmentation Models? The models help us in profiling the business firms their details, and their behavioral characteristics. However, they do not answer the question what these customers want. The problem is that customers don t conform their requirements to match with those of the average customer in their behavioral segment.

22 How Market Segmentation Should be Done? The structure of a market, seen from the customers point of view, whether a individual or business firm, is very simple: They just need to get things done. When people find themselves needing to get a job done, they essentially buy products to do that job for them.

23 How Market Segmentation Should be Done? When choosing between competing offers, customers select the offer that meets their needs (to get things done) better than any other at the price they are willing to pay. Value or benefits (the ability of getting the job done) that people seek in products are the basic reasons for the heterogeneity in their choice behaviour, and benefits of the product are thus the most relevant bases for segmentation.

24 How Market Segmentation Should be Done? Earlier marketers used to succeed by providing superior products and other distinctive functional benefits. Today this is no longer enough, for such benefits can readily be imitated. The solution is to emphasize process benefits (which make transactions between buyers and sellers easier, quicker, cheaper, and more pleasant) and relationship benefits (which reward the willingness of consumers to identify themselves and to reveal their purchasing behavior).

25 How Market Segmentation Should be Done? However, it is no doubt more difficult for managers to implement the benefits-oriented approach of market segmentation. One possible solution to this problem is to provide opportunities to individual customers to design their own products and services by choosing from a menu of attributes, components, prices, and delivery options.

26 How Market Segmentation Should be Done? This facility can be provided through a choiceboard - an interactive on-line system. Cisco Marketplace is an on-line configurator that allows corporate customers to create the precise combination of data networking gear they need. Dell s choiceboard allows individual as well as corporate customers to exercise their options in the personal computer realm.

27 How Market Segmentation Should be Done? A choice board model of doing business with individual customers becomes possible in any industry when a system of accessible, integrateable components is available from which customers can select and combine options based on their own priorities. The choiceboard enables customer selfsegmentation, which is fast, cost-efficient, and far more precise than traditional manufacturerimposed segmentation.

28 How Market Segmentation Should be Done? Segmentation in business markets should, in fact, be increasingly thought of as a negotiable and bilateral fit-seeking process where suppliers frame tentative segments (based on initial research) subject to exploration with well-placed key managers in those customer firms.

29 How Market Segmentation Should be Done? This would encourage the development of evolutionary segmentation that focuses not only on customer needs, but also on supplier needs. The process would also help to develop the sort of long-term relationships between supplier and customer that help to ensure that suppler offerings are developed in line with customer expectations and needs.

30 How Market Segmentation Should be Done? There are also instances where customers select suppliers that meet particular criteria (e.g., quality, financial stability, delivery reputation, collaborative product development strategies, etc.). By implication, a supplier able to exhibit appropriate reverse segmentation criteria to a customer can become significantly more attractive.

31 How to Select Market Segments To Serve? Selection of market segment to serve has to be on the basis of the fit between: the attractiveness of the segment, the key success factors for operating in the segment, and the company s relative ability to compete in the segment. The company also needs to consider the competitive reactions it might face if it decides to compete for a segment.

32 How to Select Market Segments To Serve? Segment attractiveness depends on: Size and Growth of the segment Structural Characteristics of the segment such as competition, segment saturation, profitability, protectability, environmental risk etc.

33 How to Select Market Segments To Serve? Key Success Factors (KSF) for a segment could be Product Quality Brand Reputation Technology Requirement Cost Structure Distribution System Quality of Service Financial Capacity

34 How to Select Market Segments To Serve? Company Objectives Compatibility with company goals Relationships with other segments Profitability Resources and Capabilities of the Company and Competitors Ability to conceive and design R & D Capability Existing Patents and Copyrights Access to new technologies through third parties

35 How to Select Market Segments To Serve? Ability to Produce (Quality & Quantity) Production Technology Production Capacity Flexibility in Production Cost Competitiveness Ability to Market Brand Reputation Distribution Strength Service Strength

36 How to Select Market Segments To Serve? Ability to Finance Access to Capital from Operations Ability to Use Debt & Equity Finance Parent s Willingness to Finance Ability to Manage/Execute Quality of Management Quality of Decision Making Innovativeness Organization Culture

37 Consumer Behaviour Introduction

38 Consumer Behavior Consumer Buying Behavior refers to the buying behavior of final consumers (individuals & households) who buy goods and services for personal consumption.

39 Based on concepts from Psychology Sociology Anthropology Marketing Economics

40 Why do we need to study Consumer Behaviour? Because no longer can we take the customer/consumer for granted.

41 Failure rates of new products introduced Out of new products introduced by 77 companies, only 56% are present 5 years later. Only 8% of new product concepts offered by 112 leading companies reached the market. Out of that 83% failed to meet marketing objectives.

42 Can Marketing be standardised? No. Because cross - cultural styles, habits, tastes, prevents such standardisation.

43 Buyer Behaviour Consumer 4Ps Marketing Environment Buyer Characteristics Buyer Decision Process Buyer Decision

44 Marketing Stimuli 4 Ps Product Price Place Promotion

45 Other Stimuli Marketing Environment Economic Technological Political Cultural

46 Model of Consumer Behavior Product Price Place Promotion Marketing and Other Stimuli Economic Technologica Political Cultural Buyer s Decision Process Buyer s Black Box Characteristic Affecting Consumer Behavior Product Choice Brand Choice Dealer Choice Buyer s Response Purchase Timing Purchase Amount

47 Types of Buying Decisions Significant differences between brands Few differences between brands High Involvement Complex Buying Behavior Dissonance- Reducing Buying Behavior Low Involvement Variety- Seeking Behavior Habitual Buying Behavior

48 MASLOW S Hierarchy Of Needs Self- Actualization Esteem Needs Belongingness & Love Needs Safety Needs Physiological Needs

49 Hierarchy of Needs The hierarchy has five levels: Physiological Needs: oxygen, water, protein, salt, sugar, calcium and other minerals and vitamins, shelter and sleep etc. Safety Needs: security, stability, protection from physical and emotional harm Belongingness & Love Needs: affection, belonging, acceptance, friendship, community Esteem Needs: (Internal ones are need for self-respect, confidence, autonomy, and achievement. External ones are need for respect of others, status, fame, glory, recognition and attention.) Maslow feels these are the roots to many, if not most of our psychological problems. Self-actualization: (doing that which maximizes one s potential and fulfills one s innate aspirations)

50 Buyer characteristics Cultural Social Personal Psychological

51 Characteristics Affecting Consumer Behavior Culture Social Personal Psychological Buyer

52 Intentions

53 Buyer s Decision Process Problem Recognition Information Search Evaluation of Alternatives Purchase Decision Consumption Postpurchase behaviour

54 The Buyer Decision Process Need Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behavior

55 The Buyer Decision Process Step 1. Need Recognition Need Recognition Difference between an actual state and a desired state Internal Stimuli Hunger Thirst A person s normal needs External Stimuli TV advertising Magazine ad Radio slogan Stimuli in the environment

56 The Buyer Decision Process Step 2. Information Search Personal Sources Commercial Sources Public Sources Family, friends, neighbors Most influential source of information Advertising, salespeople Receives most information from these sources Mass Media Consumer-rating groups Experiential Sources Handling the product Examining the product Using the product

57 The Buyer Decision Process Step 3.Evaluation of Alternatives Product Attributes Evaluation of Quality, Price, & Features Degree of Importance Which attributes matter most to me? Brand Beliefs What do I believe about each available brand? Total Product Satisfaction Based on what I m looking for, how satisfied would I be with each product? Evaluation Procedures Choosing a product (and brand) based on one or more attributes.

58 The Buyer Decision Process Step 4. Purchase Decision Purchase Intention Desire to buy the most preferred brand Attitudes of others Unexpected situational factors Purchase Decision

59 Buyer s Decision Product Choice Brand Choice Dealer Choice Purchase Timing Purchase Amount

60 Stages in the Adoption Process Awareness Interest Evaluation Trial Adoption

61 Percentage of Adopters Innovators Adoption of Innovations Early Majority Late Majority Early Adopters 34% 34% Laggards 13.5% 16% 2.5% Early Time of Adoption Late

62 Influences on the Rate of Adoption of New Products Communicability Can results be easily observed or described to others? Relative Advantage Is the innovation superior to existing products? Divisibility Can the innovation be used on a trial basis? Product Characteristics Complexity Is the innovation difficult to understand or use? Compatibility Does the innovation fit the values and experience of the target market?

63 Cultural factors Culture Sub - culture Social Class

64 Factors Affecting Consumer Behavior: Culture Most basic cause of a person's wants and behavior. Values Perceptions Subculture Groups of people with shared value systems based on common life experiences. Hispanic Consumers African American Consumers Asian American Consumers Mature Consumers Social Class People within a social class tend to exhibit similar buying behavior. Occupation Income Education Wealth

65 Social factors Reference Groups Family Roles and Status

66 Factors Affecting Consumer Behavior: Social Groups Membership Reference Family Husband, wife, kids Influencer, buyer, user Social Factors Roles and Status

67 Personal Factors Family Life Cycle Occupation and Economic circumstances Lifestyle Personality and self - concept

68 Factors Affecting Consumer Behavior: Personal Personal Influences Age and Family Life Cycle Stage Occupation Economic Situation Personality & Self-Concept Lifestyle Identification Activities Opinions Interests

69 The Family Life Cycle

70 Psychological Factors Motivation Perception Learning Beliefs and Attitudes

71 Buying Roles Initiator Influencer Decider Buyer User

72 Buying Behaviour Complex Dissonance - Reducing Habitual Variety seeking

73 Buying Process Problem Recognition Information Search Evaluation Alternatives Purchase Decision

74 Post - Purchase Behaviour Satisfaction Actions Use and Disposal

75 The Buyer Decision Process Step 5. Postpurchase Behavior Consumer s Expectations of Product s Performance Product s Perceived Performance Satisfied Customer! Dissatisfied Customer Cognitive Dissonance

76 Consumer Behavior - II

77 The Buyer Decision Process Need Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behavior

78 B2B Defined The management process responsible for the facilitation of exchange between producers of goods and services and their organisational customers. B2B marketing and purchasing is a complex and risky business involving a number of different parties.

79 Flows within a B2B market

80 B2B customers Commercial enterprises - profit making organisations that produce and/or resell goods and services for a profit. Can be subdivided into users, original equipment manufacturers (OEMs), resellers. Government bodies. Institutions - largely non-profit making organisations, e.g. universities, churches, etc.

81 Characteristics of B2B markets Nature of demand - derived, joint, inelastic. Structure of demand - industrial and geographic concentration. Buying process complexity. Buyer-seller relationships.

82 Influences on a B2B purchasing chain

83 Roles in the buying process Purchasing - handle relationships with suppliers. Production/operations - meeting targets for the end product in both quantity and quality terms. Engineering - the specification and design. R&D. Finance - devolve budgets to appropriate managers. Marketing - outputs of the production process.

84 Consumer vs. Organizational buying behavior Decisions made by consumers are quite simple Organizational buying processes are more complicated, there are several phases and steps Different buying behavior for different products and target groups Simple consumer goods like food and beverages are bought very spontaneously influenced by advertising and product presentation For premium consumer goods (expensive clothes, computers) buying behavior is getting more rational comparison Private investment goods price bargaining 84

85 B2B products organizational procurement starts More than one person involved Buying process follows certain rules Price comparison, standardisation, tenders, qoutations etc)

86 B2B systems involve more capabilities and greater workloads From the buyer s and the supplier s side decision has more extensive consequences

87 B2B facilities Industrial plants Manufacturing installations Office buildings

88 Main types of buying situations in B2B Straigtht rebuy routine decision, repetitive process (energy, office supplies, raw materials, wood), component suppliers for the automotive industry little or no new information Modified rebuy more complicated but less sophisticated: cars, trucks, computers, consulting modified rebuys are often treated too uncautious New task calls for thorough research industrial plant highest level of uncertainty. Strategic new tasks are of extreme strategic and financial importance (aircrafts, military equipment, infrastructure) reevaluation of alternatives and search for new information and new alternatives

89 Buying phases Problem recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order routine specification Performance review

90 Stages of decision in B2B procurement Backhaus developed a widely usable model to distinguish between 5 phases of procurement Preliminary application (initiation phase) Tender proposal Negotiation Processing of order Warranty and services

91 Preliminary application Recognition of a problem (need) and a general solution Released by top management = operating department or external consultants Result request for an offer addressed to a number of potential suppliers

92 Tender preparation phase Determination of characteristics and quantity of needed items Search for and qualification of potential sources Supplier has to provide an offer Tries to be incomparable with his competitors Customer tries to make the offer best comparable

93 Negotiation phase = core selling process Comprises acquisition and analysis of proposals, evaluation of proposals and selection of suppliers

94 Processing phase/warranty/ service phase Contains selection of an order routine Realisation of the transaction along with the fixation of after sales service tasks

95 Roles in B2B procurement buying center concept Group of people involved in the buying process buying center This causes problem in identifying and targeting the right people within the decision process

96 Buying center Role keepers have different tasks not mandatory Buyer User Initiator Gatekeeper Influencer

97 Buyer Formal authority to sign contracts Member of purchasing department Influences the vendor selection Not in technical details Main criteria: price + terms and conditions of the contract

98 User Person working with the product Interested in benefits and unobstructed function of the product to buy Large knowhow and preconceived opinion

99 Influencer A person with high technical knowledge and practical experience definition of minimum requirements on technical or company standards

100 Gatekeeper Controls the flow of information within the buying center Assistant of decision maker Influence by preparing the decision and the relevant documents

101 Decider Right to say yes or no Mightiest person

102 Initiator Person who brings new ideas and solutions into the company

103 Specific marketing considerations in the industrial facilities business Long decision taking process High risk Complex buying center The specific competitive situation

104 Product policy Focuses on innovation Has to care for high flexibility in research and development And manufacturing and assembling

105 Price Strict bid and tender rules High transparency Add value with service offering to achieve a differentiating position Another aspect: financing and sourcing models

106 Distribution policy Focus on negotiation phase Provide excellent people in the selling center High technical knowledge

107 Communication Problem solver! Proving success with comparable tasks Reference projects!

108 Consumer Behavior in a Services Context

109 Consumer Decision Making: The Three-Stage Model Pre-purchase Stage Service Encounter Stage Post-purchase Stage

110 Pre-purchase Stage

111 Pre-purchase Stage - Overview Pre-purchase Stage Service Encounter Stage Post-purchase Stage Customers seek solutions to aroused needs Evaluating a service may be difficult Uncertainty about outcomes Increases perceived risk What risk reduction strategies can service suppliers develop? Understanding customers service expectations Components of customer expectations Making a service purchase decision

112 Pre-purchase Stage Overview Need awareness Information search Evaluation of alternatives Service attributes Perceived risk Service expectations Purchase decision

113 Pre-purchase Stage Need Awareness A service purchase is triggered by an underlying need Needs may be due to: People s unconscious minds (e.g., aspirations) Physical conditions (e.g., chronic back pain) External sources (e.g., marketing activities) When a need is recognized, people are likely take action to resolve it

114 Pre-purchase Stage Information Search When a need is recognized, people will search for solutions. Several alternatives may come to mind and these form the evoked set Evoked set set of possible services or brands that a customer may consider in the decision process When there is an evoked set, the different alternatives need to be evaluated before a final choice is made

115 Pre-purchase Stage Evaluation of Alternatives Search attributes help customers evaluate a product before purchase Style, color, texture, taste, sound Experience attributes cannot be evaluated before purchase must experience product to know it Vacations, sporting events, medical procedures Credence attributes are product characteristics that customers find impossible to evaluate confidently even after purchase and consumption Quality of repair and maintenance work

116 Pre-purchase Stage Evaluation of Alternatives Perceived Risks Functional unsatisfactory performance outcomes Financial monetary loss, unexpected extra costs Temporal wasted time, delays leading to problems Physical personal injury, damage to possessions Psychological fears and negative emotions Social how others may think and react Sensory unwanted impact on any of five senses

117 Pre-purchase Stage Evaluation of Alternatives Perceived Risks - How Do Consumers Handle Them? Seeking information from respected personal sources Using Internet to compare service offerings and search for independent reviews and ratings Relying on a firm that has a good reputation Looking for guarantees and warranties Visiting service facilities or trying aspects of service before purchasing Asking knowledgeable employees about competing services

118 Pre-purchase Stage Evaluation of Alternatives Perceived Risks Strategies for Firms to Manage Consume Perceptions of Risk Free trial (for services with high experience attributes) Advertise (helps to visualize) Display credentials Use evidence management (e.g., furnishing, equipment etc.) Offer guarantees Encourage visit to service facilities Give customers online access to information about order status

119 Pre-purchase Stage Evaluation of Alternatives Service Expectations Customers evaluate service quality by comparing what they expect against what they perceive Situational and personal factors also considered Expectations of good service vary from one business to another, and differently positioned service providers in same industry Expectations change over time Example Parents wish to participate in decisions relating to their children s education medium and method Media coverage, education, Internet has made this possible

120 Pre-purchase Stage Evaluation of Alternatives Factors Influencing Consumer Expectations of Service Source:Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A. Parasuraman, The Nature and Determinants of Customer Expectations of Service, Journal of the Academy of Marketing Science 21, no. 1 (1993): 1-12

121 Pre-purchase Stage Evaluation of Alternatives Service Expectations Components of Custom Expectation Desired Service Level: Wished-for level of service quality that customer believes can and should be delivered Adequate Service Level: Minimum acceptable level of service Predicted Service Level: Service level that customer believes firm will actually deliver Zone of Tolerance: Range within which customers are willing to accept variations in service delivery

122 Pre-purchase Stage Purchase Decision When possible alternatives have been compared and evaluated, the best option is selected Can be quite simple if perceived risks are low and alternatives are clear Very often, trade-offs are involved. The more complex the decision, the more trade-offs need to be made Price is often a key factor in the purchase decision

123 Service Encounter Stage

124 Service Encounter Stage - Overview Pre-purchase Stage Service encounters range from high- to low-contact Service Encounter Stage Post-purchase Stage Understanding the servuction system Theater as a metaphor for service delivery: An integrative perspective Service facilities Personnel Role and script theories

125 Service Encounters Range from High-contact to Low-contact (Fig 2.20)

126 Distinctions between High-contact and Low-contact Services High-contact Services Customers visit service facility and remain throughout service delivery Active contact between customers and service personnel Includes most people-processing services Low-contact Services Little or no physical contact with service personnel Contact usually at arm s length through electronic or physical distribution channels New technologies (e.g. Web) help reduce contact levels Medium-contact Services Lie in between These Two

127 Post-purchase Stage

128 Post-encounter Stage - Overview Pre-purchase Stage Service Encounter Stage Evaluation of service performance Future intentions Post-purchase Stage

129 Customer Satisfaction Is Central to the Marketing Concept Satisfaction defined as attitude-like judgment following a service purchase or series of service interactions Customers have expectations prior to consumption, observe service performance, compare it to expectations Satisfaction judgments are based on this comparison Positive disconfirmation if better than expected Confirmation if same as expected Negative disconfirmation if worse than expected

130 Customer Delight: Going Beyond Satisfaction Research shows that delight is a function of 3 components Unexpectedly high levels of performance Arousal (e.g., surprise, excitement) Positive affect (e.g., pleasure, joy, or happiness) Once customers are delighted, their expectations are raised If service levels return to previous levels, this may lead to dissatisfaction and it will be more difficult to delight customers in future Progressive Insurance seeks to delight customers through exceptional customer service