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Cost Management-final                                                                                                       20


Use type- Appliance buyer-home builder, remodeler, homeowner

Usage- The heavy potato user - the fast-food outlets

Benefits sought- Dessert caters - those who are calorie-conscious versus those who

Are More concerned with convenience

Price sensitivity- Price-sensitive Honda Civic buyer versus the luxury Mercedes-Benz


Competitor- Those computer users now committed to IBM

Application- Professional users of chain saws versus the homeowner

Brand loyalty- Those committed to IBM versus others


The first set of variables describes segments in terms of general characteristics unrelated to the product involved. Thus, a bakery might be concerned with geographic segments, focus­ing on one or more regions or even neighborhoods. It might also divide its market into organisational types such as at-home customers, restaurants, dining operations in sell hospitals and so on. Demographics can define segments representing strategic opportunities such as single parents, professional women and elderly people.

The second category of segment variables includes those that are related to the product One of the most frequently employed is usage. A bakery may employ a very different strategy in serving restaurants that are heavy users of bakery products than restaurants that use fewer bakery products. Zenith made a niche for itself in the very competitive personal computer industry by focusing on government, which is the largest computer user.

Segmenting by competitor is useful because it frequently leads to a well-defined strategy and a strong positioning statement. Thus, a target customer group for the Toyota Cressida consists of buyers of high-performance European cars such as the BMW. The Cressida is positioned against the BMW as offering comparable performance for a substantially lower cost.

2. Construct a segmentation matrix : After customer and product related variables have been selected for identifying different segments, a segmentation matrix can be developed. Two or more dimensions may be used to partition an industry.

For example, restaurants could be divided into four dimensions; types of cuisine, price range, type of service (e.g., sit-down, buffet, cafeteria, take-out, fast food) and location.

A segmentation matrix for the British frozen foods industry is presented in Exhibit 8. Five types of product and five channels of distribution are used to construct the two-dimensional segmentation matrix consisting of 25 potential segments. However, not every cell in the matrix may be relevant. Empty cells may represent future opportunities for products 01 services.

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