SEGMENTATION AND ZONE OF TOLERANCE

What is a service?

The activities or benefits one party offers that is essentially intangible. It does not result in ownership of anything. It may or may not be attached with a physical product.

SEGMENTATION

A process of grouping the potential and actual customers who have similar needs, wants, preferences or buying behavior.

The Classic Segmentation Variables for Consumer Markets

Demographic Variables

the most widely used and most widely available variable. Marketers segment the market on basis of age, gender, occupation, income, race and social class. Eg.: Recently employed and married couples would be the target market segment.

Psychographics Variables
l

Personality characteristics

Marketers appeal to positive/favorable personal characteristics to influence the purchase decision.

l

Motives

Marketers use individuals differing purchase motives to segment a product market.

l

Lifestyles

Marketers segment markets according to how individuals choose to spend their time in various activities, their income, their interest and opinions, and their education.

Behavioral

Behaviorist often called usage Eg.: Insurance companies and telephone network companies use this segmentation strategy to retain their customer and gain loyalty by offering more services.

Geographic

Unlike products, customers have to be present in or around the point of delivery of most services. eg: Primary schools, health clubs, physicians, maternity hospital, etc. must be at a reasonable distance to provide prompt service to the target market segment.

Customer Service Expectations

Desired service -- the level of service the customer hopes to receive Adequate service -- the level of service the customer must receive.

Dual Customer Expectation Levels

Desired Service

Zone of Tolerance
Adequate Service

Zones of Tolerance

The range of expectations between desired and adequate can be wide or narrow can change over time can vary among individuals may vary with the type of product/service

Factors that Influence Desired Service

Enduring Service Intensifiers Desired Service Personal Needs

Zone of

Tolerance
Adequate Service

Factors that Influence Desired Service

Personal Needs --states or conditions essential to the physical or psychological well being --- physical, social, psychological, and functional

Factors that Influence Desired Service

Enduring Service intensifiers --individual stable factors that lead the customer to a heightened sensitivity

derived service expectations personal service philosophy

Factors that Influence Adequate Service

Transitory Service Intensifiers
Desired Service

Perceived Service Alternatives

Self-Perceived Service Role

Zone of Tolerance
Adequate Service

Situational Factors

Factors That Influence Adequate Service Expectations

Transitory service intensifiers --- shortterm, individual factors that make a consumer more aware of the need for service

Factors That Influence Adequate Service Expectations

Perceived Service Alternatives---As the number of alternatives increases, the level of adequate service increases and the zone of tolerance narrows

Factors That Influence Adequate Service Expectations

Situational Factors

Temporary changes in the normal state of things ---- tends to lower the level of adequate service expected and widen the zone of tolerance

Situational Factors

Reason for purchase Consumer mood Weather Time constraints Emergency

Factors That Influence Adequate Service Expectations

Self Perceived Service Role --- how well the customer perceives they are performing their own role in service delivery

SEGMENTATION is important for.. Establishing the zone of tolerance across different customer decision criteria like price, performance and service quality.

Customer segmentation based on price sensitivity Low Moderate High price segment Different segments have different expectations of desires and adequate service and perception of service product.