1.Segmentation:

-> DEF: process through which the company divides the market into various sub-groups – with different demand profiles but internally homogenous – on the basis of which management developes specific marketing plans to best satisfy their requirements.

-> OBJ: give insights to markets in order to define the best possible marketing program for every specific group of customers.

-> Market is very big => We segment it!

-> It’s a trade-off between two extremes:

Index:

The objectives of segmentation;
The approaches and the process of segmentation;
The methods of segmentation;

A.Objectives of Segmentation:

Segmentation and their characteristics;
Advantages and disadvantages of segmenting;

Segmentation and their characteristics:

-> Segmentation make markets more manageable as:

Markets are too broad (ampi);
- What is the food that you eat most often?
- What is your favorite activity for leisure?
- What is the product that you are most willing to spend more money for?
Too much diversity in the market:
- desires/preferences
- available resources
- geographic locations
- attitudes and buying habits

Characteristics:

Internal Similarity / External Diversity:

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;

✔ Advantage …

Reduction in diversity
More focus of resources & professionals
Possible creation of entry barriers
Improvement in customer satisfaction
Market share defense during maturity
Higher control on marketing actions
Risk hedging

…& ❌ Disadvantages of Segmentation:

Different products for different segments (R&D, engineering)
Incrgeased production costs
Increased stocks
Fragmentation of advertising/promotion costs
Increased market research costs
Higher distribution costs
Inefficient resource exploitation (e.g. duplication)

-> That’s why company try to:

B.Approaches and Process of Segmentation:

-> Steps of the segmentation process:

Choice of the Segmentation approach: by product or by customer?
Choice of the segmentation method: mathematical or heuristics?
Analyzig the segments obtained:
- Segment validation;
- Segment Description;
- Product/market matrix..

📌Ryanair, Easyjet, Trenitalia are using segmentation

-> The approaches:

By PRODUCT;
By CUSTOMER (B2B v B2C);

B.1) Segmentation by Product:

-> Was meaningful in the past: the main problem of companies was product or production in market with a low level of competition.

ADVANTAGES	CONSTRAINTS
Semplicity Immediacy Clarity and comprehensibility	Does not consider the variables related to the customer’s characteristics; Little visibility of the competition amongst products; Simplistic.

B.2) Segmentation by CUSTOMER:

-> MARKETERS: must know customers and get insights about their needs and desires.

-> THREE MAIN DIMENSION: segmentation by customer…

…CHARACTERISTIC;
…BEHAVIOUR;
…NEED;

-> Theser approach slightly different in we’re daling with:

B2C: Customer customer;
B2B: Industrial customer;

B2C markets

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

B2C > Customer CHARACTERISTICS:

-> How use them:

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

Values, Attitude and Lifestyle framework.

-> DEF: is a psychographic segmentation tool used in marketing to categorize people based on their psycological traits, value and behavour.

-> OBJ: Identify different consumer segments to help businesses tailor their marketing strategy more effectively.

Overview of the working generaton:

B2C > Customer BEHAVIOUR:

-> How use them:

Sustain and 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 (Point of Sales/ Serivices).
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

-> Marketers have to move customers along the marketing funnel: follow clients along the market channels and check abandonment rate at any stage in order to redesign the process.

B2C > Customer NEEDs:

-> How use them (benefit sought):

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

Ryanair example:

B2B markets

Segmentation by CUSTOMER > COMMENTS:

Insightful and actionable approach does not mean to choose the best one but rather combining them in sensible way;
We need to understand who are the segment (demographic/ geographic characteristics), what they do (behavior) and why are they doing that (needs)
Differen dimension provide rich understanding of a segment.

C.Method of Segmentation:

-> Companies should define and qualify every segment:

-> We have two methods:

Mathematical:
- Using statistical–mathematical techniques and algorithms.
- Require data (a representative sample) on which to make an analysis.
Heuristic: Empirical (generally qualitative) methods based on the experience of the marketer.

Statistical-Mathematical Methods:

-> Digitalizatoin of business have strongly improved these activities (reducing their cost).

Survey resgerasch: information gethering about possible segmentation variables:
- Focus group;
- Questionanaires;
Data Analysis:
- Elimination of correlated variables;
- Definition of clusters;
Segment Profiling:
- Description of the segments obtained;
- Listing of the key characteristics;

Heuristic Segmentation Methods:

Successive Elimination approac (Porter 1987);
Two-phase approach (Wind and Cardozo 1974);
Multi-Phase approach, “Nested approach” (Bonoma and Shapiro 1982);

1.Successive Elimination Approach:

Steps:

Check-list of possible segmentation variables.
Variables identified as relevant are compared in pairs using a matrix.
Unimportant “crossovers” and contradictions are eliminated.
Variables are gradually combined to reduce the number of combinations.
Products are entered according also to the different use functions.
The final product-market (segments) matrix is built

2.Two Phase approac:

-> Hierarchical selection bases:

MACRO SEGMENTATION: external characteristics and purchase situations;
MICRO SEGMENTATION: characteristics of the individuals:

3.Multi Phase approach:

-> There are 5 steps.

-> The more we move towards the center, the harder is to find information.

2.Target:

-> DEF TARGET MARKET: group of customers within a business’s serviceable available market at which a business aims its marketing efforts and resources:

Is a subset of the total market for a product or service;

-> In process of segmentation target is/are the segment(s) that the company decide to “focus”.

Approaches:

-> Five possible approaches in targeting strategies:

Choice target segments

3.Buyer’s Persona and Buyer’s Journey:

Buyer Persona:

-> DEF BUYER PERSONA: representation of your target customer.

Pictures painted in based on research and interviews with actual customers.
Include intanbigle elements that make a person tick.

PERSONA DEVELOPMENT: paramount for the success of an inbound marketing program (no metter the size or scope of the business)

Buyer’s Journey:

-> DEF: sequence of interactions between an individual and a brand occurring throughout a series of touchpoints, encountered along the Customer Journey.

These interactions generate cognitive, emotional, behavioral and sensorial impacts and reactions.

-> Generic customer journey can be divided into 3 stages:

-> The CJ maps has different levels of experience:

Activities that the user has to accomplish at every stage;
What does she think and how she feels at every stage;
What are the touchpoints involved in each phase;

EXAMPLE:

Service Blueprint:

-> DEF: tools to connects customers’ journey and companies’ processes.

Represent visually the set activities to be accomplished to meet customer expectations at every single touchpoint.
Identifies which are the processes with a direct inpact on customer experience and which are the supporting ones.

EXAMPLE:

Marketing Segmentation