Market Segmentation Essay
6 Market Segmentation and Positioning Positioning is not what you do to a product; it is what you do to the mind of a prospect. Ries and Trout (1972) Learning outcomes After reading this chapter, you will be able to: ? Describe the principles of market segmentation and the STP process. ? Explain the characteristics and differences between market segmentation and product differentiation. ? Explain how market segmentation can be undertaken in both consumer and business-to-business markets. ? Describe different targeting strategies. ? Explain the concept of positioning. Illustrate how the use of perceptual maps can assist the positioning process. 214 Part 2 Principles of Marketing Management Stagecoach operates bus services across the UK. How does it know who its customers are and where they want to access its services? We speak to Elaine Rosscraig to ? nd out more. Elaine Rosscraig for Stagecoach Stagecoach UK Bus is one of the largest bus operators in the UK, operating both express and local bus services across the country. In addition the company operates a comprehensive network of intercity operations under the Megabus Brand.
We connect communities in over 100 towns and cities in the UK, operating a ? eet of around 7,000 buses. We carry over two million customers every day on our network which stretches from Devon to the north of Inverness. So how do we identify who our customers are and where they may wish to access our services? Well, that’s a very interesting and important question. At Stagecoach we have formulated our segmentation and positioning strategy using primary research. By using the results of the primary research we have identi? d our key market segments, which have been compiled into three groups, all of which are linked to bus use. These groups may be categorized as: user, lapsed user, and non-user. A major issue to consider is how public transport is currently perceived by these target segments. Public transport in general has a negative reputation in the UK. This is the result historically of limited ongoing customer communication, inadequate staff training, and poor customer relations within the industry. Customer perception of Stagecoach is linked directly to the journey experience and customer satisfaction.
In order of priority the following aspects of service contribute to customer satisfaction with the Stagecoach service: reliability/punctuality, staff attitude, comfort during the journey, cleanliness of the vehicle (interior and exterior), space for bags/pushchairs, and value for money. An important market to target is the non-user segment . . . [especially those with] a propensity to switch. An important target market for Stagecoach is the non-user segment. The customers contained within this segment demonstrate a propensity to switch the mode of transport to bus.
We estimate that about 30% of existing non-bus users in the UK have a propensity to switch the mode of transport they are regularly using, given the appropriate incentives. In addition it is essential that Stagecoach address the perceived barriers associated with bus travel amongst this group. Through geodemographic pro? ling we have further identi? ed microdemographic segments within each of the local areas which we serve, to whom speci? c barriers to bus use are an issue. This information has formed the basis of our segmentation strategy and how we subsequently tailor our communication with each of these prospect customer groups.
Given the primary research ? ndings to date and the market segments identi? ed, what would you recommend Stagecoach do to target and position their brand to the differing market segments to encourage switching in mode of transport and use of Stagecoach’s services? Customer perceptions seem to be entirely driven by the journey experience Stagecoach Introduction Ever wondered why marketers only target certain markets or how these markets are identi? ed? Think about universities for a moment: how do they identify which students to communicate with about degree schemes? What criteria do they use?
Do they base it on where you live, your age, your gender, or is it just about your entrance scores? Do they market to postgraduate and undergraduate audiences differently, what about international and domestic student groups—is this difference important for the effective marketing of higher education services to prospective students? In this chapter, we consider the way organizations determine the markets in which they need to concentrate their commercial efforts. This process is referred to as market segmentation and is an integral part of marketing strategy, discussed in Chapter 5. After de? ing the principles of market segmentation this chapter commences with an exploration of the differences between market segmentation and product differentiation, as this helps clarify the underlying principles of segmentation. Consideration is also given to the techniques and issues concerning market segmentation within consumer and business-to-business markets. The method by which whole markets are subdivided into different segments is referred to as the STP process. STP refers to the three activities that should be undertaken, usually sequentially, if segmentation is to be successful.
These are segmentation, targeting, and positioning, and this chapter is structured around these key elements. The STP Process The growing use of the STP process has occurred as a direct result of the prevalence of mature markets, the greater diversity in customer needs, and the ability to reach specialized or niche segments. As such marketers are increasingly segmenting markets and identifying attractive segments (i. e. who to focus on and why? ), in order to identify new product opportunities, develop suitable positioning and communications strategies (i. e. what essage to communicate), and effectively allocate resources to key marketing activities (i. e. how much should we spend and where? ). Organizations will often commission segmentation research when they want to re-scope their marketing strategy, investigate a declining brand, launch a new product, or restructure their pricing policy. Organizations operating in highly dynamic environments seek to conduct segmentation research at regular intervals, to keep in touch with changes in the marketplace. STP refers to the three activities segmentation, targeting, and positioning (Figure 6. 1). Key bene? s of the STP process include: • Enhancing a company’s competitive position by providing direction and focus for marketing strategies such as targeted advertising, new product development, and brand differentiation. For example, Coca-Cola identi? ed through market 216 Part 2 Principles of Marketing Management Market Information Market Segmentation (S) Target Market (T) Brand/Product Positioning (P) Marketing Decisions Market Information Identifying similar groups of customers Identifying which groups of customers to aim for Creating a concept to appeal to the target market Marketing Decisions
Market Research e. g. male/female business students aged 18? 25, 26? 35, 36? 45, 46+ e. g. female business students 26? 35 e. g. position HE as internally rewarding and personal development Creative Figure 6. 1 The STP process research that its Diet Coke brand (also marketed as Coca-Cola Lite) was regarded as ‘girly’ and ‘feminine’ by male consumers. As a direct result the company developed a new product, branded Coke Zero, which is targeted at the health-conscious male segment of the soft drinks market. • Examining and identifying growth opportunities in the market through the identi? ation of new customers, growth segments, or new product uses. For example Arm & Hammer was able to attract new customers when existing consumers identi? ed new uses for their baking soda (Christensen, Cook, and Hall, 2005). Lucozade also changed the positioning and targeting from its original marketing strategy positioned for sick children and rebranded to target athletes as an energy drink. • More effective and ef? cient matching of company resources to targeted market segments promises the greatest return on marketing investment (ROMI). For example, ? ancial institutions like HSBC and Barclays and large retailing multinationals such as Tesco and ASDA Wal-Mart are utilizing data-informed segmentation strategies to effectively target direct marketing messages and rewards to customers they have classi? ed as offering long-term value to the company, i. e. they are pro? table customers. The Concept of Market Segmentation Market segmentation is the division of a market into different groups of customers with distinctly similar needs and product/service requirements. Or to put it another way, market segmentation is the division of a mass market into identi? ble and distinct groups or segments, each of which have common characteristics and needs and display similar responses to marketing actions. Market segmentation was ? rst de? ned as ‘a condition of growth when core markets have already been developed on a generalised basis to the point where 6 Market Segmentation and Positioning 217 additional promotional expenditures are yielding diminishing returns’ (Smith, 1956). There is now widespread agreement that they form an important foundation for successful marketing strategies and activities (Wind, 1978; Hooley and Saunders, 1993).
The purpose of market segmentation is to leverage scarce resources; in other words, to ensure that the elements of the marketing mix, price, distribution, products and promotion, are designed to meet particular needs of different customer groups. Since companies have ? nite resources it is not possible to produce all possible products for all the people, all of the time. The best that can be aimed for is to provide selected offerings for selected groups of people, most of the time. This process allows organizations to focus on speci? c customers’ needs, in the most ef? ient and effective way. As Beane and Ennis (1987) eloquently commented, ‘a company with limited resources needs to pick only the best opportunities to pursue’. The market segmentation concept is related to product differentiation. If you aim at different market segments, you might adapt different variations of your offering to satisfy those segments, and equally if you adapt different versions of your offering, this may appeal to different market segments. Since there is less The M&S Per Una range: designed to attract the young female shopper Per Una 18 Part 2 Principles of Marketing Management competition, your approach is less likely to be copied and so either approach will do. An example in the area of fashion retailing might be if you adapt your clothing range so that your skirts are more colourful, use lighter fabrics, and a very short hemline, for instance, this styling is more likely to appeal more to younger women. If alternatively, you decide to target older women, then you might need to change the styling of your skirts to suit them by using darker, heavier fabrics, with a longer hemline.
This is exactly what Marks and Spencer (M&S) did to attract a younger female shopper into their M&S stores and compete more directly with Next and Debenhams for share of this market. The company launched a range of female clothing called Per Una, and three years on the fashion range has been a huge success reportedly generating annual sales of nearly ? 230 m—more than 10 per cent of the total womenswear sales at M&S. If you start by adapting new product variants, you are using a product differentiation approach.
If you start with the customer’s needs, you are using a market segmentation approach. This is illustrated more clearly in Figure 6. 2 using offering rather than product to indicate that the same concept may apply to a service. A relational marketing perspective would replace the marketing mix—the 4Ps —either with the 7Ps (see Chapter 15) or with a discussion of the need to design, develop, and deliver the customer experience (see Chapter 17). The concept of market segmentation was ? st proposed as an alternative market development technique in imperfectly competitive markets, that is, in markets where there are relatively few competitors selling an identical product. Where there are lots of competitors selling identical products, market segmentation and product differentiation produce similar results as competitors imitate your strategic approach more quickly and product differentiation approaches meet market segment needs more closely. With an increasing proliferation of tastes in modern society, consumers have increased disposable incomes.
As a result, marketers have sought to design product and service offerings around consumer demand (market segmentation) more than around their own production needs (product differentiation) and they use market research to inform this process (see Market Insight 6. 1 and Chapter 4). Promotion New Offering Offering Price A Product Differentiation Approach Place New Segment Promotion New Offering Offering Price A Market Segmentation Approach Place New Segment Figure 6. 2 The difference between market segmentation and product differentiation 6 Market Segmentation and Positioning 219 market insight 6. 1 A Tale of Two Approaches
Tale 1 is about Amway, a global company that manufactures and distributes over 450 different consumer products and invests heavily in research and development in order to remain competitive and meet customer needs. For example, after several years of research and development, Amway produced a new range of products called Satinique, which used the ‘Ceramide Infusion System’. The core attribute is that Satinique contains a moisturizing agent, which can restore the nutrients in hair. Once Amway had developed the product they then undertook market research to determine which group of consumers they should target.
Having identi? ed a segment made up of professional women, who always want to look their best and who want professional, salonquality products and who rely on recommendations from friends when making haircare purchase decisions, they then developed a marketing strategy and implemented a successful marketing plan. Tale 2 is about NIVEA Sun, the leading sun care brand owned by Beiersdorf. There are three main usage segments in the sun care market: protection (from harmful rays), after sun (for relief and moisturizing after being in the sun), and self-tan (for those who want an all year round ‘cosmetic’ tan).
Beiersdorf have developed their portfolio of NIVEA Sun brands around these usage segments, but unlike Amway have used innovation to develop products to meet customer needs identi? ed through market research and segmentation analysis. For example, market research has shown that awareness of the need for protection from the sun does not necessarily lead to product purchase and usage. It was also found that women enjoy the luxurious nature of sun care products, men prefer convenience, and children don’t enjoy the sun cream application process. As a result NIVEA Sun developed and introduced a spray application device, designed speci? ally to appeal to men and their preference for convenience. They also introduced a coloured formulation for children’s sun products in order to make the application process more fun. 1 2 3 Which of these two companies use a product differentiation approach and which uses a market segmentation approach? Justify your selection. Choose a beauty, fragrance, or grooming product that you like to use and determine likely segments. Do you believe Amway should change their approach? Justify your decision. research insight 6. 1 To take your learning further, you might wish to read this in? uential paper. Smith, W. R. 1956), ‘Product differentiation and market segmentation as alternative marketing strategies’, Journal of Marketing, July, 3–8. A seminal article on market segmentation which put forward the idea that because neither supply nor demand sides of marketing were homogeneous (i. e. different groups wanted to produce and consume different things), a product differentiation approach which was concerned with the bending of demand to the will of supply must also be accompanied by an alternative mechanism of the bending of supply to the will of demand. This alternative marketing strategy was termed market segmentation. 20 Part 2 Principles of Marketing Management The Process of Market Segmentation The intricacies involved in market segmentation are said to make it an exacting activity. Grif? th and Pol (1994) argue this point on the basis of multiple product applications, greater customer variability, and problems associated with the identi? cation of the key differences between groups of customers. However, there have been numerous attempts to de? ne and describe business segmentation, using a variety of variables and ranging from the severely product-based to customer needs-based orientation.
There are two main approaches to segmenting markets. The ? rst adopts the view that the market is considered to consist of customers which are essentially the same, so the task is to identify groups which share particular differences. This is referred to as the breakdown method. The second approach considers a market to consist of customers that are all different, so here the task is to ? nd similarities. This is known as the build-up method. The breakdown approach is perhaps the most established and well recognized and is the main method used for segmenting consumer markets.
The build-up approach seeks to move from the individual level where all customers are different, to a more general level of analysis based on the identi? cation of similarities (Freytag and Clarke, 2001). The build-up method is customer oriented as it seeks to determine common customer needs. The aim of both methods is to identify segments in the market where identi? able differences exist between segments (segment heterogeneity) and similarities exist between members within each segment (member homogeneity). This is displayed in Figure 6. 3.
Other segmentation researchers have distinguished between a priori or post hoc segmentation methods (Green, 1979). In the former, segments are predetermined using the judgement of the researchers beforehand (i. e. a priori). This approach typically progresses along seven stages encompassing the following steps (Wind, 1978) including: 1 Selection of the base (a priori) for segmentation (e. g. demographics, socio-economics). 2 Selection of segment descriptors (including hypotheses on the possible link between these descriptors and the basis for segmentation). Figure 6. 3 Segment heterogeneity and member homogeneity Market Segmentation and Positioning 221 3 Sample design—mostly using strati? ed sampling approaches and occasionally a quota sample (see Chapter 4). 4 Data collection. 5 Formation of the segments based on a sorting of respondents into categories. 6 Establishment of the pro? le of the segments using multivariate statistical methods (e. g. multiple discriminate analysis, multiple regression analysis). 7 Translation of the ? ndings about the segments’ estimated size and pro? le into speci? c marketing strategies, including the selection of target segments and the design or modi? cation of speci? marketing strategy. With the post hoc approach, the segments are deduced from the research and instead pursue the following process: 1 Sample design—mostly using quota or random sampling approaches (see Chapter 4). 2 Identi? cation of suitable statistical methods of analysis. 3 Data collection. 4 Data analysis—formation of distinct segments using multivariate statistical methods (e. g. cluster analysis, CHAID). 5 Establishment of the pro? le of the segments using multivariate statistical methods (e. g. factor analysis) and selection of segment descriptors (based on the key aspects of the pro? e for each segment). 6 Translation of the ? ndings about the segments’ estimated size and pro? le into speci? c marketing strategies, including the selection of target segments and the design or modi? cation of speci? c marketing strategy. Segmentation in business markets should re? ect the relationship needs of the parties involved and should not be based solely on the traditional consumer market approach, which is primarily the breakdown method. Through use of both the breakdown and the build-up approaches, a more accurate, in-depth, and potentially more pro? able view of industrial markets can be achieved (Crittenden, Crittenden, and Muzyka, 2002). However, problems remain concerning the practical application and implementation of B2B segmentation. Managers report that the analysis processes are reasonably clear, but it is not clear how they should ‘choose and evaluate between the market segments’ which have been determined (Naude and Cheng, 2003). Much segmentation theory has been developed during the period when transactional marketing was the principal approach to marketing, rather than the more relational approaches adopted in today’s service-dominated environment.
Under these circumstances, the allocation of resources to achieve the designated marketing mix goals was of key importance. Freytag and Clarke (2001) have quite rightly identi? ed that market segmentation is not a static concept. In other words, those customers who make up the various segments have needs which may change, and consequently, those customers may no longer remain members of the particular segment to which they originally belonged. Market segmentation programmes must therefore use customer data which are current. 222 Part 2 Principles of Marketing Management
The segmentation process will therefore vary according to the prevailing conditions in the marketplace and the changing needs of the parties involved, not simply the needs of the selling organization. Market Segmentation in Consumer Markets To segment consumer goods and service markets, we use market information we have collected based on certain key customer-, product-, or situation-related criteria (variables). These are classi? ed as segmentation bases and include pro? le (e. g. who are my market and where are they? ); behavioural (e. g. where, when, and how does my market behave? ; and psychological criteria (e. g. why does my market behave that way? ). These differing types of segmentation bases are depicted in Figure 6. 4. A fourth segmentation criterion that can be added is contact data, a customer’s name and full contact details beyond just their postcode (e. g. postal address, email, mobile and home telephone number). The data are useful for tactical-level marketing activities such as addressable direct marketing (see Chapter 12). Table 6. 1 illustrates the key characteristics associated with each of the main approaches to consumer market segmentation.
An important consideration when selecting the differing bases for segmentation is the trade-off between ease and cost of measurement or data acquisition and the degree to which the criteria for which data has been acquired can provide an accurate snapshot of current and future customer behaviour, especially its predictability of customer choice behaviour. As is depicted in Figure 6. 5 demographics and geodemographics are relatively easy to measure or the data to obtain; however, these bases suffer from low Consumer Criteria
Behavioural Psychological Lifestyle Profile Purchase/transaction Consumption/usage Media usage Technology usage Personality Perceptions Attitudes Motives Benefits sought Demographic Socio-economic Geographic WHO, HOW, WHERE, and WHEN WHY and WHO WHO and WHERE Figure 6. 4 Segmentation criteria for consumer markets 6 Market Segmentation and Positioning 223 Table 6. 1 Segmenting criteria for goods and services markets Base type Segmentation criteria Demographic Explanation Pro? le Lifestage Geographic Geodemographic
Key variables concern age, sex, occupation, level of education, religion, social class, and income characteristics, many of which determine a potential buyer’s ability to purchase a product or service. Lifestage analysis is based on the principle that people need different products and services at different stages in their lives (e. g. childhood, adulthood, young couples, retired). In many situations the needs of potential customers in one geographic area are different from those in another area. This may be due to climate, custom, or tradition.
This approach to segmentation presumes that there is a relationship between the type of housing and location that people live in and their purchasing behaviours. Analysing consumers’ activities, interests, and opinions, we can understand individual lifestyles and patterns of behaviour, which in turn affect their buying behaviour and decision-making processes. On this basis, we can also identify similar product and/or media usage patterns. By understanding the motivations customers derive from their purchases it is possible to have an insight into the bene? s they seek from product use. Data about customer purchases and transactions provides scope for analysing who buys what, when, how often, how much they spend, and through what transactional channel they purchase. This provides very rich data for identifying ‘pro? table’ customer segments. Segments are derived from analysing markets on the basis of their usage of the product offering, brand, or product category. This may be in the form of usage frequency, time of usage, and usage situations.
Data on what media channels are used, by whom, when, where, and for how long provides useful insight into the reach potential for certain market segments through differing media channels, and also insight into their media lifestyle. Psychological Psychographic (lifestyles) Bene? ts sought Behavioural Purchase/ transaction Product usage Media usage levels of accurate predictability of a customer’s future behaviour. In contrast, behavioural data, what a customer does, their product usage, purchase history, and media usage, although more dif? ult and costly to acquire (although with changes in technology this cost/accessibility is changing), provides a more accurate predictability of future behaviour. This is founded on the notion that humans are creatures of habit and behavioural trends. Therefore the brand of toothpaste you purchased on the last three occasions is more than likely going to be the brand of toothpaste you purchase next time. However, this is also in? uenced by a 224 Part 2 Principles of Marketing Management Difficult and high Ease and cost of measurement Behaviour Psychological Figure 6. Considerations for segmentation criteria accessibility and use Source: Integrated Marketing Communications in Advertising and Promotion (AISE; 7th edn. by SHIMP , 2007). Reprinted with permission of South-Western, a division of Thomson Learning. Geodemographics Demographics Easy and low Low Predictability of consumer choice behaviour High customer’s susceptibility to marketing communications such as sales promotions (media usage and response behaviour) and market environment. Pro? le Criteria A core customer-related method of segmenting consumer goods and service markets is using criteria to pro? e who the market is and where they are. This is called pro? le segmentation criteria and includes using demographic methods (e. g. age, gender, race), socio-economics (e. g. determined by social class, or income levels) and geographic location (often using sophisticated postal or zip code systems). For example, a utility company might segment households based on geographical area to assess brand penetration in certain regions; or a ? nancial investment fund might segment the market based on age, employment, income, and asset net worth to identify attractive market segments for a new investment portfolio.
All these are examples of segmentation based on pro? le criteria. Demographic Demographic variables relate to age, gender, family size and lifecycle, generation (such as baby boomers, Generation X, etc. ), income, occupation, education, ethnicity, nationality, religion, and social class. These relate to the pro? le of a consumer and are particularly useful in assisting marketing communications and media planning, simply because media selection criteria have been developed around these variables. Age is a common way of segmenting markets and is the ? st way in which a market is delineated. Children are targeted with confectionery, clothes, music, toys, and food simply because their needs and tastes are radically different from older people. For example, Yoplait Dairy Crest (YDC) has launched Petits Filous Plus probiotic yogurt drinks to extend the brand and increase its appeal among 4 to 9 year olds and inform parents that ‘one Petits Filous Plus yogurt drink 6 Market Segmentation and Positioning 225 consumed every day as part of a balanced diet can help maintain kids’ wellbeing’.
In the drinks market we often see the use of age. For example, the popular chocolate drink Milo is targeted to children and teenagers as an after school chocolate energy drink. In contrast Red Bull is positioned as an energy drink for young adults. In the travel industry we see organized tours and holidays for the 18–35s, with the differing needs of senior citizens met by brands such as Saga Holidays which are exclusively targeted at the over 50s. Stena Stair Lifts provide products to meet the needs of physically disadvantaged older consumers.
Gender differences have also spawned a raft of products targeted at women such as beauty products and fragrances (e. g. Clinique, Bobby Brown, Chanel); magazines (e. g. New Woman, Cleo, Cosmopolitan); hairdressing (e. g. Pantene, Clairol); and clothes (e. g. New Look, Sussan, Zara). Products targeted at men include magazines (e. g. Ralph, Nuts); grooming products (e. g. hair gel and styling mousse); and beverages (e. g. beers like Heineken, Carlsberg). Some brands develop products targeted at both men and women, for example fragrances (e. g. Calvin Klein) and watches (e. g. Tag). Increasingly marketers are also recognizing he importance of segments that have not traditionally been targeted by certain product categories, such as insurance products designed for women (e. g. First For Women Insurance—FFW in South Africa and Sheila’s Wheels in the UK) and beauty products for men (e. g. Clinique men’s range). An example of a product designed according to the combination of age and gender is Dove’s new Dove ProAge product range. These products re? ect the unique needs of women in their later years, continuing Dove’s campaign for Real Beauty by launching a new series of products with television and print advertisements targeted to women in their ? ties. Income or socio-economic status is another important demographic variable because it determines whether a consumer will be able to afford a product. As discussed in Chapter 3, this comprises information about consumer personal income, household income, employment status, disposable income, and asset net worth. Many companies target af? uent consumers (e. g. Chanel, DKNY, Bentley, The Dove ProAge product range aimed at women in their ? fties Dove ProAge 226 Part 2 Principles of Marketing Management and Ferrari) offering high-end exclusive product offerings. Targeting low-income earners can also be pro? able. Discount stores such as Dollar Dazzlers, Crazy Clarks, and Pound Stretcher make a considerable impact on the retail market by developing an offer for low-income market segments. The socio-economic distinction in marketing strategies is also increasingly apparent in the development of differing retail brand labels of large multinational retailers like Tesco, ASDA Wal-Mart, and Coles Myer. For example, Tesco Finest is developed for markets with more disposable income in contrast to Tesco Value, which is marketed to the more price-conscious and low-income market segment.
Lifecycle The lifestage approach to segmenting markets is based on the premise that people at different stages in the lifecycle need different products and services. Adolescents need different products from a single 26-year-old person, who in turn needs different products from a 26 year old who is married with young children. For example, Tesco, ASDA Wal-Mart, and Sainsbury’s have all invested in the development of product lines targeted at singles with high disposable incomes and busy lifestyles with their ‘meal for one’ ranges.
This is in contrast with the ‘family value’ and ‘multi-packs’ targeted at families. However, as families grow and children leave home so the needs of the parents change and their disposable income increases. Holidays (e. g. Butlins and Disneyland) and automobiles (e. g. people carriers) are key product categories that are in? uenced by the lifestage of the market. Historically the family lifecycle consisted of ? ve categories through which individuals and households would progress: single bachelor, newly married, married with children, empty nester, and solitary survivor.
However, since this classi? cation was developed, society has changed and continues to change in values, beliefs, and family lifecycle. A more modern lifecycle classi? cation was developed with support from the British Market Research Bureau (BMRB) called the Target Group Index (TGI) or BMRB-TGI Lifestage Segmentation Product which classi? es 12–13 lifestage groups based on age, marital status, household composition, and children (e. g. if they have children and the child’s age). These groups are presented in Table 6. 2. (See Market Insight 6. 2. )
Geographics This approach is useful when there are clear locational differences in tastes, consumption, and preferences. For example, what do you put on your toast in the morning: Vegemite, Marmite, jam, or jelly? Or perhaps you don’t east toast at all and prefer cold meats or noodles for your morning meal. These consumption patterns provide an indication of preferences according to differing geographic regions. Markets can be considered by country or region, by size of city or town, postcode, or by population density such as urban, suburban, or rural.
For example, it is often said that American beer drinkers prefer lighter beers, compared with their UK counterparts and particularly compared with German beer drinkers, who prefer a much stronger drink. In contrast Australians prefer colder more carbonated beer than the UK or the USA. In the UK there are generalizations which state that Scottish beer drinkers prefer heavy bitters, northerners in 6 Market Segmentation and Positioning 227 Table 6. 2 BMRB-TGI lifestage segmentation groups Lifestage group Fledglings Demographic description 5–34, not married and have no son or daughter; living with own parents 15–34, not married, do not live with relations 15–34, married, do not live with son/daughter 35–54, not married, do not live with relations 35–54, married, do not live with son/daughter Live with son/daughter and youngest child 0–4 Live with son/daughter and youngest child 5–9 Live with son/daughter and youngest child 10–15 Live with son/daughter and have no child 0–15 55+ not married and live alone 55+, married, and do not live with son/daughter Not married, live with relations, do not live with son/daughter, and do not live with parents if 15–34 Not in any group
Flown the nest Nest builders Mid-life independents Unconstrained couples Playschool parents Primary school parents Secondary school parents Hotel parents Senior sole decision makers Empty nesters Non-standard families Unclassi? ed Source: Developed from http://www. bmrb-tgi. co. uk/main. asp? p=516. Reproduced with the kind permission of BMRB. England prefer mild bitter, drinkers in the west prefer cider, and in the south, lager is the preferred drink. Further information about international market differences can be found in Chapter 7.
In addition to product selection and consumption, geographic segmentation is important with regard to retail location, advertising with regard for media selection, and recruitment. For example, to the armed forces recruits from differing geographic areas have certain demographic attributes. Furthermore, low-cost retail formats might be used for retail outlets in low-income regions. Direct sales operations (e. g. catalogue sales) can use census information to develop better customer segmentation and predictive models. Geodemographics Geodemographics is a natural outcome when combining demographic and geographic variables.
The ‘marriage’ of geographics and demographics has become 228 Part 2 Principles of Marketing Management market insight 6. 2 Political Failure to Segment The Conservative Party emerged from the British general election in June 2005 some considerable way behind the Labour Party. By 2005 they had made substantial improvements in many areas. After the two landslide elections of 1997 and 2001, by 2005, the Conservative Party had still only managed to gain 198 seats in the election against Labour’s 356 seats, giving Labour a comfortable working majority in government of 66 seats.
Part of the reason for the failure of the Conservative Party to increase its national vote by a substantial amount was that the Conservatives’ campaign in the 2005 British general election failed to excite the parent voter segment—an important segment comprising 1 in 3 people (34%) in the electorate. In this segment, voting intention for the Conservatives was only 18%, the same as that for the third party in British politics, the Liberal Democrats, and nearly half that of Labour (35%)—a much lower level of support than the Conservatives enjoyed generally in the electorate at around 33%. The parent segment egarded Labour as best by far on health and education (? rst/second most important issues) with Conservatives seen as marginally better on law and order (the third most important issue). Source: Adapted from Baines et al. (2005). 1 2 Why do you think the Conservative Party failed to fully consider the importance of parents when designing their political policies and their marketing communication strategies? Do you think that market segmentation is an appropriate strategy in marketing political parties and candidates, given that political parties are supposed to represent the whole electorate in a representative democracy?
What other market segmentation failures can you think of? What were the products or services in question? 3 There are clear locational differences in tastes: do you like cold meats for breakfast? Photodisc 6 Market Segmentation and Positioning 229 an indispensable tool for market analysis. Fusing census data with demographic information, especially socio-economic data, can lead to a rich mixture of ‘who lives where’ and ‘what they are like’. Consumers can be classi? ed by where they live, which is often dependent on their stage in life and their lifestyle (see Chapter 3). Two of the best known UK geodemographic systems are ACORN and MOSAIC.
ACORN One system of measurement of consumer lifestyles, developed by the British market research group CACI, is known as ACORN—A Classi? cation of Residential Neighbourhoods—shown in Table 6. 3, which demonstrates how these postcode areas are broken down into 5 lifestyle categories, 17 groups, and 56 types. ACORN is a geodemographic tool used to identify and understand the UK population and the demand for products and services. Marketers use this information to improve their understanding of customers and target markets, and determine where to locate operations, ? eld sales forces, retail outlets, and so on.
ACORN can also be used to determine where to send direct marketing material and host billboard and other advertising campaigns. In total, ACORN categorizes all of Britain’s 1. 9 million UK postcodes, using over 125 demographic statistics within England, Scotland, Wales, and Northern Ireland, and 287 lifestyle variables. The classi? cation technique operates on the principle that people living in similar areas have the same needs and lifestyles, that is ‘birds of a feather ? ock together’. MOSAIC In contrast, MOSAIC is a geodemographic segmentation system developed by Experian and marketed in over twenty countries worldwide.
MOSAIC was originally constructed using the 1990 census, and is now based on the 2000 census data and updated on an annual basis. The resulting segmentation system consists of sixty segments which are presented as twelve separate groups. MOSAIC is based on the premise of assigning lifestyle groups to differing geographic catchment areas. For example, using MOSAIC, Figures 6. 6 and 6. 7 show the area catchment pro? les by income and household composition around Bristol, UK. 200 Index (100 = National Average) 180 160 140 120 100 80 60 40 20 0 MOSAIC Group High-income families Suburban semis Blue-collar owners Low-rise council Council ? ts Victorian low status Town houses and ? ats Stylish singles Independent elders Mortgaged families Country dwellers Institutional areas Figure 6. 6 Thirty-minute off-peak drivetime by MOSAIC group Source: Experian © 2007. 230 Part 2 Principles of Marketing Management Category Wealthy achievers Group Wealthy executives Type 01—Af? uent mature professionals, large houses 02—Af? uent working families with mortgages 03—Villages with wealthy commuters 04—Well-off managers, larger houses 05—Older af? ent professionals 06—Farming communities 07—Old people, detached houses 08—Mature couples, smaller detached houses 09—Larger families, prosperous suburbs 10—Well-off working families with mortgages 11—Well-off managers, detached houses 12—Large families and houses in rural areas 13—Well-off professionals, larger houses and converted ? ats 14—Older professionals in detached houses and apartments 15—Af? uent urban professionals, ? ats 16—Prosperous young professionals, ? ats 17—Young educated workers, ? ats 18—Multi-ethnic young, converted ? ats 19—Suburban privately renting professionals 20—Student ? ts and cosmopolitan sharers 21—Singles and sharers, multi-ethnic areas 22—Low-income singles, small rented ? ats 23—Student terraces 24—Young couples, ? ats and terraces 25—White-collar singles/sharers, terraces 26—Younger white-collar couples with mortgages 27—Middle-income, home-owning areas 28—Working families with mortgages 29—Mature families in suburban semis 30—Established home-owning workers 31—Home-owning Asian family areas 32—Retired home owners 33—Middle-income, older couples 34—Lower-income people, semis 35—Elderly singles, purpose-built ? ats 36—Older people, ? ts 37—Crowded Asian terraces 38—Low-income Asian families 39—Skilled older family terraces 40—Young family workers 41—Skilled workers, semis and terraces 42—Home-owning, terraces 43—Older rented terraces 44—Low-income larger families, semis 45—Older people, low income, small semis 46—Low income, routine jobs, unemployment 47—Low-rise terraced estates of poorly off workers 48—Low incomes, high unemployment, single parents 49—Large families, many children, poorly educated 50—Council ? ats, single elderly people 51—Council terraces, unemployment, many singles 52—Council ? ts, single parents, unemployment 53—Old people in high-rise ? ats 54—Singles and single parents, high-rise estates 55—Multi-ethnic purpose-built estates 56—Multi-ethnic, crowded ? ats Table 6. 3 ACORN geodemographic categories Af? uent greys Flourishing families Urban prosperity Prosperous professionals Educated urbanites Aspiring singles Comfortably off Starting out Secure families Settled suburbia Prudent pensioners Moderate means Asian communities Post-industrial families Blue-collar roots Hard pressed Struggling families Burdened singles High-rise hardship Inner city adversity
Source: Adapted from CACI Ltd. 6 Market Segmentation and Positioning 231 N 2 Kilometers Mosaic UK Group A Symbols of Success B Happy Families C Suburban Comfort D Ties of Community E Urban Intelligence F Welfare Borderline G Municipal Dependency H Blue Collar Enterprise I Twilight Subsistence J Grey Perspectives K Rural Isolation U Unclassi? ed Figure 6. 7 Area catchment pro? le Source: Experian copyright 2007. Psychological Criteria Psychological criteria used for segmenting consumer product and service markets include using attitudes and perceptions (e. . negative feelings about fast food); psychographics or the lifestyles of customers (e. g. extrovert, fashion conscious, high achiever), and the types of bene? ts sought by customers from products and brands and their consumption choices. Psychographics Psychographic approaches rely on the analysis of consumers’ activities, interests, and opinions, in order to understand consumers’ individual lifestyles and patterns of behaviour. Psychographic segmentation includes an understanding of the values that are important to different types of customers.
A traditional form of lifestyle segmentation is AIO, based on customer Activities, Interests, and Opinions. These provide useful insight into what makes people ‘tick’. Taylor Nelson Sofres (TNS) in 2003 developed a UK Lifestyle Typology based on lifestyles and classi? ed the following types of lifestyle categories: belonger, survivor, experimentalist, conspicuous consumer, social resistor, self-explorer, and the aimless. For example, the Accor hotel group used value-based segmentation to develop the brand. The Dorint-Novotel was repositioned to attract those who value 232 Part 2 Principles of Marketing Management ersonal ef? ciency. This involved changing the service offering by introducing ef? ciency-related facilities such as automated checkouts, car hire facility, 24-hour food, and wireless computing. The Dorint-So? tel brand was repositioned by introducing ? ne art for the walls, real ? res, ? ne wines, live piano in the reception, libraries, and more experienced concierge staff. This was designed to appeal to those who valued classical (styling), customization, and passion (Howaldt and Mitchell, 2007). (See Market Insight 6. 3 below for segmentation which uses a combination of demographic and psychographic data. market insight 6. 3 Slap it On, All Over Using a single base to segment a market is usually unproductive. Most successful companies use several bases and fuse the data to expose meaningful segments. In an earlier example, the NIVEA Sun brand was introduced. The brand owner, Beiersdorf, uses market research to understand its markets and to then develop viable segments. In the protection market, research was used to determine different types of people in the market, based on their demographic data that are combined with data about their attitudes towards the use of sun care products.
From this they have been able to identify different consumer segments. • Concerned consumers—sun protection is really important and the main reason to buy. • Sun avoiders—they prefer to stay out of the sun and they regard sun care as a hassle. • Sun lovers—this group worship sunshine and know how to use and value products that provide protection. They understand sun protection factors (SPF). • Careless tanners—these people like the sun but don’t bother to protect themselves. • Beauty conscious—this group like to tan themselves, know that rotection is important, but don’t really understand or worry about SPFs. Many organizations develop segments in this way and use the information to develop personality pro? les of each of their segments. These segments are then used to develop products and services that are of value to each segment. If suf? cient knowledge is collected about people’s media usage and preferences, the segment pro? le can then be used to develop suitable marketing communications. Sources: www. nivea. co. uk/; www. Times100/casestudy/; www. euromonitor. om/PDF/C&T-Beiersdorfag. pdf. 1 2 3 Which of the ? ve segments listed above would prefer easy-to-use sun care products and which group are most likely to want a brand they can trust? Using at least three different bases for each of the following, how might you segment the mobile phone, energy drinks, and fashion clothing markets? Think of a brand you like and buy regularly and consider what characteristics you favour and how the brand owner might classify and segment people like you. 6 Market Segmentation and Positioning 233 Bene? ts Sought
The root of this approach to market segmentation lies in the idea that we should provide customers with exactly what they want, not based on how we design products and services for them, but based on the bene? ts that they derive from the goods/services that they use. This may sound obvious but consider what the real bene? ts, both rational and irrational (see Chapter 3), are of different goods and services that people derive from purchasing mobile phones and sunglasses or of something you have bought recently. For example, a major airline might well segment the airline passenger market on the basis of the bene? s they seek from transport. Typically, the industry does this by differentiating between the ? rst-class passenger (who is given substantial extra luxury bene? ts in their travel experience), the business-class passenger (who gets some of the luxury of the ? rst-class passenger), and the economy-class passenger (who gets none of the luxury of the experience but still enjoys the same ? ight). This is also a useful segmentation base with respect to new and emerging technologies. Marketers are increasingly identifying the key bene? ts and motivations of electronic technology adoption and use.
For example the bene? ts of convenience, accessibility, and handset durability dominate mobile handset adoption for blue-collar trade workers; teenagers seek novelty through games and ringtones and innovation through the latest trends in handset design; and white-collar workers seek multifunctionality, with the device acting as a mobile, an organizer, and a storage device. Korgaonkar and Wolin (1999) explored web users’ motivations and concerns, identifying the presence of seven motivations and concerns regarding web use. The motivations described in Table 6. suggest that consumers use the web for many more reasons than to retrieve information or to communicate and that motivations play a more signi? cant role in determining actions with respect to usage than demographics alone. Behavioural Criteria Product-related methods of segmenting consumer goods and service markets include using behaviouristic methods (e. g. by product usage, purchase, and ownership) as bases for segmentation. Observing consumers as they utilize products and media can be an important source of new product ideas, and can lead to ideas for new product uses or product design and development.
Furthermore, new markets for existing products can be indicated, as well as appropriate communication themes for product promotion. Purchase, ownership, and usage of products and media are three very different behavioural constructs we can use to help pro? le and segment consumer markets. Product Usage A company may segment a market on the basis of how often a customer uses its products or services, categorizing these into high, medium, and low users, by usage rate. This can be used to develop service speci? cations or arketing mixes for each of these groups of users. For example heavy users of public transport 234 Part 2 Principles of Marketing Management Motivation Social escapism Description The bene? ts of the web as a pleasurable, fun, and enjoyable activity that allows one to escape Concerned about giving of personal and transactional-based information and thus privacy and security concerns The bene? ts of the web for self-education and information needs The interactive bene? ts of the self-directed and interactive control that users have with web usage The social bene? s of the web as a facilitator of interpersonal communication and activities Concerned about privacy in general rather than the security and privacy issues related to web transactions The economic bene? ts of collection of information for learning and information purposes as well as for shopping and buying motivations Table 6. 4 Bene? ts and concerns motivating web use Transactional security and privacy Information Interactive control Socialization Non-transactional privacy Economic Source: Adapted from Korgaonkar and Wolin (1999). research insight 6. 2
To take your learning further, you might wish to read this in? uential paper. Haley, R. I. (1968), ‘Bene? t segmentation: a decision-oriented research tool’, Journal of Marketing, 32, 30–5. In this seminal article, Haley segmented the market for toothpaste purchasers into segments based on what bene? ts users derived from its use including: those who bought toothpaste to produce and maintain the whiteness of their teeth (sociables), those who wished to prevent decay (worriers), those who liked the taste and refreshment properties (sensors), and those who bought on a price basis (independents).
Each of these groups had particular demographic, behaviouristic, and psychographic characteristics. This approach to de? ning market segments based on the bene? ts derived from the use of a particular offering is still much in use today. might be targeted differently from heavy users of private vehicles or car pooling activities. Consumer product use can be investigated from three perspectives: • Social interaction perspective examines the symbolic aspects of usage and the social meanings attached to the consumption of socially conspicuous 6
Market Segmentation and Positioning 235 products such as a car or house (Belk, Bahn, and Mayer, 1982; Solomon, 1983). For example, Greenpeace launched a television campaign targeting owners of four-wheel drive cars or ‘Gas Guzzlers’, highlighting the environmental social stigma of this car purchase. • Experiential consumption perspective investigates emotional and sensory experiences as a result of usage, especially consumer experience such as satisfaction, and ‘fantasies, feelings and fun’, the hedonic consumption of products (Holbrook and Hirschman, 1982).
For example, the Oxo gravy campaign concentrates on the usage of Oxo as bringing families together, emotionally appealing to consumers and expressing family values like love, sharing, time together. • Functional utilization perspective examines the functional usage of products and their attributes in different situations (McAlister and Pessemier, 1982; Srivastava, Shocker, and Day, 1978). For example, when the product is used, how often, and in what contexts. Service providers may segment the market on the basis of the purchase behaviour of their customers.
This might involve segmentation on the basis of loyalty to the service provider, or length of relationship, or some other mechanism. Usage of soft drinks can be considered in terms of purchase patterns (two bottles per week), usage situations (parties, picnics, or as an alcohol substitute), or purchase location (supermarket, convenience store, or wine merchant). Lifestage analysis is based on the principle that people have varying amounts of disposable income and different needs at different stages in their lives.
Their priorities for spending change at different trigger points and these points or lifestages do not occur at the same time. One method of segmenting service customers de? nes four segments based on propensity to switch suppliers: de? nitely will not switch, probably will not switch, might switch, and de? nitely will switch (Payne and Frow, 1999). The services literature points out that customers often stay with a service provider even when they are dissatis? d (Bitner, Booms, and Tetreault, 1990; Kelley, Hoffman, and Davis, 1993) and this is particularly true in retail banking for current accounts, for example, where customers seldom can see the point in shifting their funds from one account to another for very limited gains. Customers only shift suppliers when they perceive the service to be poorly priced, when inconvenienced by the service provider, when there is a core service failure (e. g. a hotel room is inadequately cleaned), when service encounters fail (e. g. arriving at a hotel with a pre-booked room and ? ding no room is available), when there is a poor response to service failures (e. g. in a hotel when complaining about the poor cleaning), competition (a rival hotel chain offers better rates), ethical problems, and when they have to (for example, the hotel customer is forced to move to another city and a Marriot Hotel is not available, for example, but a Hilton is). Transaction and Purchase The development of electronic technologies has facilitated the rapid growth in the collection of consumer purchase and transactional data, providing an additional consumer characteristic upon which to base market segmentation.
The collection 236 Part 2 Principles of Marketing Management of purchase data has been enabled through the installation of electronic-pointof-sale (EPOS) computing systems, coupled with standardized universal product codes (UPC) in the USA or European article numbers (EAN) in Europe and the growth of integrated purchasing systems (e. g. web, in-store, telephone). These have enabled retailers to track more accurately who buys what, when, for how much, in what quantities, and with what incentives (e. g. sales promotions).
This provides companies with the ability to monitor purchase patterns in differing geographic regions, times, or seasons of the year, for differing product lines, and increasingly for differing market segments. Transactional and purchase information is very useful for marketers to assess who their most pro? table customers are. This is through an analytical formula called the RFM analysis. RFM analysis is based on the principle postulated in 1897 by an Italian economist, Vilfredo Pareto. Pareto’s Principle ascertains that ‘80% of a company’s pro? s are usually delivered by just 20% of their customers’. As such there is a signi? cant need to segment markets and create precisely targeted marketing programmes for those most pro? table to the company. RFM analysis is a method by which marketers can identify market segments comprising customers that are most pro? table. RFM stands for recency, frequency, and monetary value. Thus, those customers who purchased from you most recently, purchase from you frequently, and spend a high unit value per purchase (or the life of their relationship with you) would be classi? ed as pro? table customers.
The acquisition of purchase data per customer through electronic technologies either in-store or online provides increased effectiveness of pro? table segment identi? cation. However, one thing to note is that transactional data is just behaviour and although it might provide some insight into useful purchase trends, it will not be able to shed deeper insight into why those trends in purchase and consumption are occurring. With the rise in loyalty card schemes such as the famous Tesco Clubcard or customer reward programmes such as the many airline frequent ? yer clubs (e. g. Star Alliance, KLM Flying
Blue), and the precision of ACORN and MOSAIC geodemographic databases, we are seeing the merging of transactional and purchase data with customer pro? le and psychological data. This provides the bases for more effective targeting of marketing strategies to speci? c and de? ned market segments. Media Usage The understanding and pro? ling of audience media usage is central to the process of communications planning. From the 1950s television viewing information was collected by organizations such as Arbitron in the USA and AGB Ltd in the UK, providing a basis for classic studies of television viewing.
Similar developments occurred with radio and print, which made possible formal studies of listening and readership. In more recent years, web usage data has been collected by market researchers such as Media Metrix, A. C. Nielsen, and NetRatings, to help pro? le web users. See Table 6. 5 for an example of web user segmentation based on usage characteristics. The logic of segmenting on the basis of frequency of readership, viewership, or patronage of media vehicles can be found in media research conducted in 6
Market Segmentation and Positioning 237 Table 6. 5 Segmenting the web user User segment ‘Quickies’ 8% Usage characteristics • • • • • • • • • • • • • • • • • • • • • • • Usage occasions are short (1 min) Visit two or few familiar sites 15 seconds per page acquiring speci? c information or sending email Usage occasions are the longest, averaging 70 minutes Hit 45 sites in a typical session on the web 1 minute or more per page Shopping, online communities, and news sites grab their attention Usage occasions involve looking for speci? information from known sites 9 minutes usage occasion duration Rapid page views like quickies (30 seconds per page) Visit transaction and time-consuming sites Not interested in visiting for entertainment Usage occasions average 37 minutes and are used to build in-depth knowledge of a topic Gathering broad information from a range of sites Jump among linked sites without using a search engine Users who want to complete a task or gather speci? c information Average session is 10 minutes with a 1. minute page view Venture to unfamiliar sites with email sites rarely visited Leisurely visits to familiar sticky sites such as news, gaming, telecommunications Average 33 minutes in duration with 2 minute page views Usage occasions are 14 minutes long and 2 minute pages views Strong focus in session on familiar places with users spending 95% of session at site previously visited Visit favourite sites for auctions, games, and investments ‘Sur? ng’ 23% ‘Just for facts’ 15% ‘Information, please’ 17% ‘Single mission’ 7% ‘Loitering’ 16% ‘Do it again’ 14% Source: Adapted from A.
C. Nielsen and Booz Allen Hamilton (2000). the 1970s. For example, Urban (1976) suggested that heavy and light magazine readership might respond differently to ads with different creative appeals. Potter et al. (1988) attempted to identify the pro? les of ? ve usage segments for VCRs. As further discussed by Chatterjee, Hoffman, and Novak (1998), segmenting users on the basis of their usage frequency of the media and its vehicles yields insights on whether the publisher attracts and retains consumers that are more or less responsive to an advertiser’s communication.
This information provides an important input when evaluating the ef? ciency and effectiveness of media. Furthermore, Chatterjee et al. (1998) identify that differences in frequency may lead to differences in response to repeated passive ad exposures, competing ads of other sponsors, and prior ad exposure. Frequency of media usage has been the predominant measure of media usage experience. However, Olney, Holbrook, and Batra (1991) also identi? ed viewing 238 Part 2 Principles of Marketing Management Usage type Usage frequency De? ition How often the medium is used within a certain timeframe. The different motivations for use (motivational variety) and different situations (situational variety) in which the medium is used. The number of different types of media vehicles purchased or used in a category within a given timeframe. Example How many times a week television is watched or the web is accessed. The number of different motivations for using a VCR (e. g. recording, playing movies); the number of locations from where the web is accessed (e. g. home, work).
The number of different brands of magazines read by the consumer within a 3-month period; the number of different types of television programmes viewed in a week. The total number of magazines purchased or subscribed to or the total number of websites visited. Table 6. 6 Types of media usage Usage variety Breadth of use Depth of use The total number of media channels within a category used within a certain timeframe. Length of time for which the media device is used. The time when the media device is used or accessed. Duration of use The number of hours the web is used in a typical web session.
The differing times of day the radio or television is watched. Usage time Source: Page (2003: 9). time as an important dependent variable in a model of advertising effects. This is consistent with Holbrook and Gardner’s (1993) argument that duration time is a critical outcome measure of consumption experiences and may be a useful behavioural indicator of experiential versus goal-directed orientations. The differing types of media usage are depicted in Table 6. 6. Segmentation in Business Markets Wind and Cardozo (1974) ref
Market Segmentation Essay
The vision of the company is to walk at the pace of society, dressing ideas, trends and tastes that society itself has matured. (Essays, 2013) On the other hand the mission statement is to be an CEO-friendly shop which is environmentally aware team which save energy, produces less waste and recycles and committed to all the staffs they own. ( Ezra, 2013) Government and political parties In a country are responsible for developing political environment. Government Is the major and silent factor in a business; In form of policies they may support an industry.
Ezra has been in Spain till now and only one more major distribution centre for Europe. Ezra has options to expand its business in European countries because of their safe and predicable economic circumstances. (Academicwritingsamples, 2012) Ezra has also advantages about labors, plants and export taxes. They do not have to pay anything when they are exporting their products in European Union Free Trade Area. That is an important fact a company like Ezra because they produce over 10,000 models in a year and they have stores In every European country. Furthermore, they can build plants with out a payment In any European country.
For ample Ezra has plants in every European entries but they do not pay specific taxes for each country. Also because of the labor laws In European union labor can Immigrate to anywhere In Europe with out an extra permission and that’s life changing factor for big Europe manufacturing companies like Ezra. Ezra has been dealing in a single currency since it was founded. The financial conditions all over the world have been in change since 2007 because of the recession but Ezra has not been affected by the recession and comfortable about getting in new markets because they have been dealing with a safe currency.
When entering new markets the economical conditions can be unpredictable and currency rates can be fluctuated but Spain had a stable market and predictable demands before the crisis in Spain. ( Academicwritingsamples, 2013) So these reasons helped the improvement of Ezra. Also Ezra has an survival structure for the recessions. Moreover, recessions can be better for them because In recession people stops to buy luxury products and totally starts to buy cheap products. And Ezra has one of the best bottom line quality In the world.
In other words recessions would be harmful for their rival brands but could improve bigger and bigger by numbers nowadays. Their sales before the big world crisis in 2008 were 6. 633 billion euros but last year in 2012 their sales were 20. 6 billion dollars. ( Inedited, 2007) For example the same thing happened to Tests in I-J after the big world crisis in 2008. Ezra founded the formula of success: Company gives to people what it wants basically, at the lowest possible price, in the shortest time. In the last few years market has shaped by two different categories one of them producers of luxury products at the most expensive level.
The other one is the much cheaper producers, often foreign international operating chains like the Swedish Hahn H (Hennas & Mauritius), the Dutch chain C (Clemens and August ), the Spanish chains Mango and Ezra or the American chain Gap. Inedited describes Ezra in this way: “Ezra is a high fashion concept offering apparel, footwear and accessories for women men and children, from newborns to adults aged 45. Ezra stores offer a compelling blend of fashion, quality and price offered in attractive stores in prime locations on premier commercial streets and in upscale shopping centers.
The in- house design and production capabilities enable us to offer fresh designs at out Ezra tortes twice a week throughout the year. “( Trips, 2007). In other words, Ezra has more profits than their competitors because of they are flexibility. They design clothes for nearly every age group. They are much cheaper than the other companies and also they are the fastest fashion company in the world. They created a new concept which is fast-fashion. They became the McDonald’s of the fashion sector in a way. They are cheap, fast and suitable.
They have also a perfect combination with technology. They have online stores in every country. Furthermore, they have even apple applications for online shopping. Today technology has a big role to reach all over the world and today Ezra has reached all over the world nearly with their technology. Technology has an important role in cloth manufacturing too especially for the cheap companies because if you produce cheap you can not keep your quality high but Ezra also keeps the quality high by using the technology in the fabrics of clothes.
In the web page of the company it says that they have a clear to wear policy and they are careful about the chemicals which can threat human life like remolded, Airlines, Phenols (PC and Tech), Cadmium, Lead, Mercury, Chromium, Chromium VI), Nickel, Phthalate, Polycarbonate Flame Retardants, Pesticides, Short Chain Chlorinated Paraffin’s, Protuberance Sultanates (POSS.), Timely Fumigate, Irrigation Compounds and Allergenic Dyes. (limited, 2013) With these regulations they also keep their customers loyalty moreover they earn more customers.
As suggested above, also they care the Corporate Social Responsibility. In 2011 the one of the biggest environmental organizations, Greenback accused Ezra to produce harmful products for human life. In November 2012, Greenback published the “Toxic threads: the big fashion stitch-up” report, in which identified Ezra as the worst letter. (Greenback, 2012) After this accusation with the intensity of public pressure Ezra changed their policy in manufacturing and became a totally toxic-free manufacturer.
They created the policies of clear to wear and safe to wear which are explaining the importance of producing products from %OHIO healthy fabrics and being careful about the chemicals in the clothes which can threat human life. In addition they also do some charity Jobs like global water management strategy they resources protection is also related with their activities directly and indirectly. ( Inedited, 2012) The company has some codes which they are devoted. These are the Code of Conduct and Responsible Practices ,and Code of Conduct for Manufacturers and Suppliers.
These codes explains the position of the company in every tiny detailed CARS issues like no forced labor, no child labor, safe and hygienic working conditions for employees, wages are paid, working hours are not excessive, health and safety of products, relationship with customers, relationship with companies and etc. ( Inedited, 2013) Although Ezra has all these codes and they are careful about all these issues like healthy products and safety of employees, it can still has some problems in legal areas. For example a television show called A Alga accused Ezra of using suppliers who were running sweatshops for their productions.
On August 17, 2011 the Regional Superintendent of Labor and Employment of SAA Paulo, Brazil closed a plant of Ezra by showing the poor labor conditions they reported that there are some illegal Bolivian labors that works for over 12 hour a day, for a dollar per cloth, not given food and water and not permitted to leave their job places with out a permission from a supervisor. After the event Sara’s representatives made an announcement and commented these event as “a serious reach in accordance with the Code of Conduct for External Manufacturers and Workshop of Inedited. ( Natures, 2011) Penthouse they fixed the problem and promised not to occur again, the company lost the trust of the people a bit and it became a bad mark on their images. After the big event in Bangladesh, Saver building collapse, global brands come together and signed the Accord on Factory and Building Safety in Bangladesh. There were big brands such as Firebombed and Fitch, John Lewis and Benton. Also Ezra is included that list. ( Grinner and Elliot, 2013) In conclusion, Ezra is a well ruled company by good strategies. It has advantages costly in every area of Pestle.
It has political advantages about labor immigration free trade area and building plants because of being a Spanish company. It has advantages in economical ways also because of their using a safe currency and having the best quality of bottom line. Furthermore, since they are cheap, fast and suitable to nearly everybody they have a good position in Social and Cultural way too. They also reached all over the world with their aggressiveness in technology. Unlike the most retailer company they invest big moneys in technology in both ways online stores and the chemical fabrics in their clothes.
Moreover, their caution about the healthy production for human life helped to fix their image and also with their charity works they became strong in CARS too. Unlike these areas penthouse Ezra tries to fix their image they lost the trust of people a bit because of their legal issues. It is a hard thing to control all the suppliers and the manufacturers when you are a such a big company like Ezra but also it has big results when you have problems in legal issues about manufacturing and the human rights. Ezra should increase the number of their officers which controls the standards of the suppliers and manufacturers.
Market Segmentation Essay
Market segmentation is an essential part in today’s business world. It is because not all customers have the same requirement and a market strategy which does not recognize this fact will result business failure. Market segmentation is the process of splitting customers, or potential customers within a market into different groups, or segments, within which customers have the same or similar requirements satisfied by a distinct marketing mix.
Nike has been successful in market segmentation for selling their soccer boots, which resulted in a significant market share in that particular product category in recent years. Professional soccer players include all the players playing football as their career. This segment is ranging from the players in the top of the world to those who are hardly recognized by people. Their needs for soccer boots is high, most probably the highest in the market. They need soccer boots which can enhance their performance: comfortable when running on the field and playing football and provide them with good ball control.
Price is not a major factor for them when choosing a pair of soccer boots, because they are either having a high salary or they are sponsored by their clubs or even the manufacturers of soccer boots. What they need is a pair of high quality soccer boots which is a combination of well design and good materials. The price of the boots showed that Nike’s major target customer groups are those on a high income level, or those who are willing to spend on expensive items.
So the ranking of the professional and amateur soccer players are high on the KCV table. The need of a pair of good quality soccer boots in the two groups is high and price is not their major considerations. Young people is also a main target customer group for Nike because the brand has been developed into a famous one and it is well-known for it high price and style. Nike’s footwear is said to be an expensive goods today. Consumers like the young people, who emphasis much on brand and identity is more likely to choose Nike…