Class Recap 11/16/18

This week we learned a lot about how to further segment a market. On Tuesday we looked at the 4 P's of segmentation, RFM, and other strategies to segment a market. When a business student thinks of the 4 P's they immediately divert their brain the marketing mix; product, price, place, and promotion. With segmentation these 4 P's hold different value; partition, probe, prioritize, and position. Partition is the actual segmentation itself. This part focuses on the fact that one size does not fit all because there are many different intricate aspects of each consumer that makes them different from or similar to one another. This entails the behavioral aspect and how each segment requires different treatment in order to maximize revenue/profits as well as satisfaction/loyalty. The probe aspect is grossly overlooked in its importance. This is where you do the digging into what the consumer's attitudes about the brand are and what their shopping behavior is. This may seem simple but it is vital to understanding the consumers inner beliefs. In the prioritizing section there is more of a focus on a financial analysis so that you can find out who to de-market. In marketing you want to be as cost efficient as you can so the prioritizing section is where you find out who is pointless to market to because they give no return to the company. The end result of this is actually finding your specific target market. The final is position which is how the company finds the correct look, feel, and style for the appropriate message that will directly reach their specific group of consumers.  A good market segment is identifiable, accessible, stable, responsive, and a good size.The process of segmentation should be an analytical process not an analytical exercise. It is a strategic exercise but needs analytics.

RFM is separating a database into deciles based on three metrics of how recently a customer purchased, how frequently a customer purchases, and how much money the consumer spends. It can be split into five categories of the top, second, third, fourth, and bottom. The top is where the best customers are; these are the ones that are recent, frequent, and spend a good amount of money. The bottom is where the worst customers are; these are people who try to scam their way through the purchase journey and cause problems for the company rather then benefit them. Although RFM is commonly used, it can be problematic because it is from a financial perspective rather then a customer point of view. It can begin to cloud the judgement on whether the customers or shareholders best interest is at hand. Other then RFM to segment a market you can use CHAID or clustering. We spent more time talking about clustering which can be either hierarchal or K means. Clustering is a way of looking at an interrelationship of variables and seeing which ones are similar. This goes into what we did on Thursday. We went though many combinations of variables to see which ones would give us the most in group similarity and between group difference. Clustering outlines a huge part of the segmentation definition; homogeneous within meaning that all members within the segment are very similar to each other and heterogenous between meaning there is dissimilarity to all members of all other segments.

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