Download Market Targeting : Selecting Target Market Segments

Ashesi University
COURSE TITLE : MARKETING
SEMESTER : FIRST, 2010/2011
MODULE 5: Segmentation and Positioning
Lecturer: Ebow Spio
Marketing Management Framework
Opportunities
Impediments
& Solutions
Target
Segment
Corporate/
Business
Objectives
Marketing
Objectives
Sources
of
Volume/
Business
Position
Product
Price
Place
Promotion
Physical Ev.
Process
People
Execute
Evaluate
Lesson Outcomes
1. Define the three steps of target marketing:
market segmentation, target marketing, and
market positioning
2. List and discuss the major bases for
segmenting consumer and business markets
3. Explain how companies identify attractive
consumer and business markets
4. Discuss how companies position their
products for maximum competitive
advantage in the marketplace
Steps in Segmentation, targeting
and positioning
Select Customers to Serve
Segmentation
Divide the total market into
Smaller segments
Targeting
Selecting the segment or
segments to enter
Decide on value
proposition
Create value for
target customers
Differentiation
Differentiate the market
offering to create superior
customer value
Positioning
Position the market offering
in the minds of the target
customers
Definition of Key Concepts
Market Segmentation
Dividing a market into smaller groups with distinct needs, characteristics, or
behaviours who might require separate products or marketing mixes
Market Targeting
The process of evaluating each segment’s attractiveness and selecting one or more
segments to enter
Differentiation
Actually differentiating the market offering to create superior customer value
Positioning
Arranging for a product to occupy a clear, distinctive and desirable place relative to
competing products in the minds of target consumers
Market Segmentation
Market segmentation is the process that companies
use to divide large heterogeneous markets into
small markets that can be reached more efficiently
and effectively with products and services that
match their unique needs
7-5
Market Segmentation
SEGMENTATION is grouping
consumers with similar
needs
Dividing a market into distinct groups
of buyers with different needs,
characteristics or behaviour, who might
require separate product or marketing
mixes
What is the importance/benefits of
Segmentation
1. Help identify opportunities while throwing out
company weaknesses and strengths
2. Matching what company does best with the
most lucrative segments.
3. Tailor the offering and position the brand
 Higher Perceived Quality/Value
 Greater Loyalty
 More Profit
What is the importance/benefits of
Segmentation
4. Helps us manage our portfolio
5. Identifies unmet needs (GAPS) which:> may provide entry to the market
> may need to be covered to keep
competition out
6. Focusing budgeting expenditures and
business segments more precisely
Bases of Segmenting Markets : Consumer
Markets
Variables for Segmenting Consumer markets
1. Geographic
2. Demographic
3. Psychographic
4. Behavioural
5. Geodemographics
Bases of Segmenting Markets : Consumer
Markets
Geographic Segmentation is dividing a market into
Different geographical units such as nations, states,
regions, counties, cities or neighbourhood
Variables
Region : e.g. in bouillon market in broadly Nigeria
Northern, South East and South West
City Size : 5000-20000, 20,000-50,000 etc
Density : Urban, suburban, rural
Climate :Tropical, temperate, artic
Bases of Segmenting Markets : Consumer
Markets
Demographic Segmentation is dividing the market into groups based on
demographic variables such as age, sex, family, size, family life cycle,
income, occupation, education, religion, race and nationality
Most popular bases for segmenting customer groups
Age
: Under 6, 6-11, 12-19, 20-34, 35-45, 46-54, 55-64, 65+
Gender : Male, Female
Family Size : 1-2,3-4, 5+
Family Life Cycle:
Income
Occupation
Education
Religion
Race
Nationality
Bases of Segmenting Markets :
Psychographic
Psychographic Segmentation: diving a market into different groups
based on social class, lifestyle and personality characteristics
• Social Class : Upper Class, Middle class, Low class
• Lifestyle: Aspirers, Succeeders, Mainstreamers, reformers
• Personality : Compulsive, gregarious, authoritarian, ambitious
Bases of Segmenting Markets : Behavioural
Behavioural Segmentation: dividing a market into groups
based on the consumer knowledge, attitude, use or
response to a product
• Purchase Occasion: Regular occasion, special occasion
• Benefits sought: Quality, service, economy
• User status: non-user, potential user, first time user, regular
user
• Usage rate: Light user, medium user, heavy user
• Loyalty status: none, medium, strong, absolute
• Readiness status: unaware, aware, informed, interested,
desirous, intending to buy
• Attitude towards product: Enthusiastic, positive, indifferent,
negative, hostile
Bases of Segmenting Markets : Multiple
Segmentation
Multiple segmentation is used to identify smaller,
better-defined target groups
Geodemographic segmentation is an example of
multivariable segmentation that divides groups
into consumer lifestyle patterns
Segmenting Business Markets
In addition to the same segmentation variables as
consumers, business can also be segmented by:
• Customer-operating characteristics
• Purchasing approaches
• Situational factors
• Personal characteristics
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Bases of Segmenting Markets : Business
Markets
Demographics
Industry
Company size
Location
Operating
Technology
User/non-user status
Customer capabilities
Personal Characteristics
Buyer-seller similarity
Attitudes towards risk
Loyalty
Bases of Segmenting Markets : Business
Markets
Purchasing Approaches
Purchasing function organizations
Power structure
Nature of existing relationships
General purchase policies
Purchase Criteria
Situational Factors
Urgency
Specific application
Size of the order
Bases of Segmenting Markets : Business
Markets
Segmenting international markets
• Geographic location
• Economic factors
• Political and legal factors
• Cultural factors
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Bases of Segmenting Markets : Business Markets
Intermarket segmentation divides consumers
into groups with similar needs and buying
behaviors even though they are located in
different countries
7-23
Requirements for Effective Segmentation
To be useful, market segments must have the following
characteristics:
1. Homogeneous (similar) within- the customers in a market
segment should be as similar as possible with respect to
their responses to marketing mix variables and the segment
variables/dimensions
2. Heterogeneous (Differentiable ) refers to the fact that the
markets are conceptually distinguishable and respond
differently to marketing mix elements and programmes.
3. Measurability/Operational: The degree to which variables
such as the size, purchasing power, profile of segment and
profits of the market can be measured and appropriate
marketing mix developed to satisfy the market
Requirements for Effective Segmentation
4. Substantial : The market segments are large
or profitable enough to serve
5. Accessibility: Can the markets be effectively
reached and served
6. Actionability: Effective programmes can be
designed for attracting and serving segments
Process for Segmenting Marketing
1.
2.
3.
4.
5.
6.
7.
Name Broad Market
List Customer Needs
Narrow Product- Market
Identify Determining Variables
Name Possible Market Segments
Evaluate Segments
Estimate Size
Market Targeting
The process of evaluating each segment’s
attractiveness and selecting one or more
segments to enter
Market Targeting : Evaluating Market
Segments
•
•
•
Segment size and growth
Segment structural attractiveness
Company objectives and resources
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Market Targeting : Evaluating Market
Segments
Segment size and growth
•
•
Smaller versus larger segments
Growth potential
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Market Targeting : Evaluating Market
Segments
Segment structural attractiveness
•
•
•
•
Competition
Substitute products
Power of buyers
Power of suppliers
NB: The above factors affect the profitability of the segment
Market Targeting : Evaluating Market
Segments
Company objectives and resources
•
•
•
Competitive advantage
Availability of resources
Consistent with company objectives
• Firms should enter segments only where it has
the capacity to offer superior value and gain
advantages over competitors
Market Targeting : Selecting Target
Market Segments
•
•
•
•
Undifferentiated marketing
Differentiated marketing
Concentrated marketing
Micromarketing
Market Targeting : Selecting Target
Market Segments
Undifferentiated marketing :targets the whole
market with one offer
•
•
Mass marketing
Focuses on common needs rather than what’s different
Market Targeting : Selecting Target
Market Segments
Differentiated marketing (multiple target market
approach) : identifies and targets several different
market segments and designs separate offers for each
•
•
•
Goal is to achieve higher sales and stronger position
Company able to direct resources more effectively.
More expensive than undifferentiated marketing
e.g. Procter & Gamble, Unilever
Market Targeting : Selecting Target
Market Segments
Concentrated marketing (single target market
approach): targets a small share of a large market
•
•
•
Limited company resources
Knowledge of the market
More effective and efficient
e.g. Porsche
Market Targeting : Selecting Target
Market Segments
Micromarketing is the practice of tailoring products
and marketing programs to suit the tastes of
specific individuals and locations
•
•
Local marketing
Individual marketing
e.g. Dell, Nike online business etc.
Market Targeting : Selecting Target Market
Segments
Local marketing involves tailoring brands and
promotion to the needs and wants of local
customer groups
•
Cities
•
Neighborhoods
•
Stores
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Market Targeting : Selecting Target Market
Segments
Local Marketing
•
Benefits:
•
•
•
Increased marketing effectiveness in competitive markets
More customer-specific offerings
Challenges:
•
•
•
•
Increased manufacturing and marketing costs
Less economy of scale
Logistics
Dilution of company image
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Market Targeting : Selecting Target Market
Segments
Individual marketing involves tailoring products and
marketing programs to the needs and
preferences of individual customers
•
Also known as:
•
•
•
One-to-one marketing
Mass customization
Markets-of-one marketing
7-40
Market Targeting : Selecting Target Market
Segments
Mass customization is the process through which firms interact
one-to-one with masses of customers to design products and
services tailor-made to meet individual needs. Has made
relationships with customers important in the new economy.
•
Provides a way to distinguish the company against
competitors
7-41
Market Targeting : Choosing a Target Strategy
Depends on:
•
Company resources
•
Product variability
•
Product life-cycle stage
•
Market variability
•
Competitor’s marketing strategies
7-42
Market Targeting : Socially Responsible Target
Marketing
Benefits customers with specific needs
Concern for vulnerable segments
•
Children
•
•
Alcohol
Cigarettes
7-43
Target Marketers: Combiners Vrs Segmenters
1.
Combiners: try to increase the size of their the target
markets by combining two or more segments. Combiners
look at various submarkets for similarities rather than
differences
- Economies of scale
- Less investment
2. Segmenters: aim at one or more segments and try to
develop different marketing mix for each segment
- Adjust marketing mix to cater for each segment
- Provide superior value
- Better customer satisfaction
- Higher Sales
Discussion Questions
1. Financial services providers are looking to segment
their markets in the face of greater competition and
ever more demanding customers. Would
segmentation work for financial services? Show how
financial services providers might go about
segmenting their markets and implementing
selected targeting strategies
Differentiation & Positioning
Differentiation : how the marketing mix or offer
is designed to be distinct from and better than
what's available from a competitor.
Positioning is the distinct, meaningful and
valued place that the brand occupies or seeks
to occupy in the minds of customers vis a vis
competitors or other manufacturers.
• Positioning begins with differentiating a firm’s
marketing offer, so that it will give consumer
more value than competitors’ offers do.
Differentiation & Positioning
Competitive Advantage is an advantage
over competitors gained by offering
consumers greater value, either through
lower prices or by providing more benefits
that justify higher prices
Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy
•
•
•
Identifying a set of possible competitive advantages
to build a position
Choosing the right competitive advantages
Selecting an overall positioning strategy
7-46
Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy
Identifying a set of possible competitive advantages to build a
position by providing superior value from:
•
Product differentiation
•
Service differentiation
•
Channels
•
People
•
Image
7-47
Differentiation and Positioning
Choosing the Right Competitive Advantages
A difference is worth establishing to the extent that it
satisfies the following criteria:
•
•
•
•
•
•
Important
Distinctive
Superior
Communicable
Preemptive
Affordable
7-49
Product Differentiation
Product anything that can be offered to a market for
attention, acquisition, use, or consumption that
might satisfy a want or need. It includes physical
objects, services, persons, places, organizations, and
ideas.
i Optional features such as cars, furniture etc e.g. Volvo
ii. Performance: Whirlpool designs its dishwasher to
run more quietly
iii. Style & Design e.g. Jaguar, Ikea furniture, Bose
speakers
iv. Innovation, consistency, durability, reliability and
repairability : Give examples
Services Differentiation
Service any activity or benefit that
one party can offer to another that is essentially
intangible and does not result in the ownership of
anything.
i. Speedy, reliable and careful delivery e.g. Domino’s
Pizza in 30 minutes
ii. Installation – IBM
iii. Customer Training – GE
iv. Consulting Services
v. Speed of Service : Unique Trust, FEDEX
NB: People are prepared to pay for premium service
Personnel Differentiation
People
• The people employed in your organisation
will determine the quality of service
your customers receive. This is truer for
services, but also impacts on businesses
making tangible products.
• Companies can gain a strong competitive
advantage through hiring and training better
people than their competitors do
Personnel Differentiation: Key
Differentiating Traits
1. Positive Attitude : A crucial difference between
excellence and mediocrity is a positive attitude
2. Competence and Confidence : Confident people
will always outperform those who are unsure of
themselves.
Knowledge is a source of confidence
3. Passion to listen, learn and grow to be the best
4. Integrity
Image Differentiation
• Even when competing offers look the same, buyers may
perceive a difference based on company and brand images.
• Firms work to establish images that differentiate them from
competitors
• A company or brand image should convey a singular and
distinctive message that communicates the product’s main
benefits and positioning
• Symbols can provide strong company or brand recognition
and image differentiation e.g. Nike, Mercedes, Databank,
Ferrari. The chosen symbols must be communicated through
advertising the conveys the company or brand personality
• A company can also create an image through the types of
event it sponsors Red Bull sponsors Formula 1 and
Differentiation and Positioning :
Selecting overall strategy
Value proposition is the full mix of benefits upon which a brand
is positioned
•
More for more
•
More for the same
•
Same for less
•
Less for much less
•
More for less
7-50
Positioning : Value Positions
Price
Less
More
Benefits
Same
More
More for Less
More for the same
More for More
The Same for Less
Me Too
Same for more
Less for much Less
Same for less
Same
Less
Less for more
Positioning : Value Positions
1.
More for More : Involves providing the most upscale
product or service and charging a higher price to cover the
higher costs. E.g. Mercedes Benz
i. Marketing offer high in quality
ii Offers prestige to the buyer
iii. It symbolizes status and a lofty lifestyle
iv Often price difference exceeds the actual increment in
quality
NB: Can be very vulnerable . They often invite imitators who
claim the same quality but a lower price. Luxury goods that
sell well during good times may be at risk during economic
downturns when buyers become more cautious in their
spending
Positioning : Value Positions
2. More for the same : Attack a competitor’s more for
more positioning by introducing a brand offering
comparable quality but at a lower price. E.g. Toyota
introduced its Lexus line with a “more for the same”
value proposition.
Lexus Headline in the US : “Perhaps the first time in
history that trading $72,000 car for $36,000 could be
considered trading up”
3. The Same for less: Can be a powerful value
proposition-everyone likes a good deal. E.g.
Amazon.com sells the same book titles at lower prices
that store competitors
Positioning : Value Positions
4. Less for much less: It involves meeting
consumers’ lower performance or quality
requirements at a much lower price.
• A market almost always exists for products
that offer less and therefore cost less.
• Not all people can afford the very best
E.g. Motels, EasyJet, Rayanair
Positioning : Value Positions
5. More for Less: Winning value proposition could be
offering more for less.
• Many firms claim to do this E.g. Procter & Gamble
claims that its laundry detergents provide best cleaning
and everyday low prices.
• Long run not sustainable because offering more usually
costs more
• NB: Each brand/firm must adopt a positioning strategy
designed to serve the needs and wants of its target
markets
Positioning: Product Positioning
A product’s position is the way the product is defined
by consumers on important attributes.
• The place the product occupies in consumers’ minds
relative to competing products e.g. Key Soap
• A firm’s competitive advantage & its product’s
position can be quite different
• A competitive advantage, like low costs or high
quality, could influence a product’s position, but in
many cases it is not central to it.
Positioning: Product Positioning
• Product positioning simplifies buying decision
making
• Consumers position products with or without the
help of marketers
• Marketers do not want to leave their products’
positions to chance
• They plan positions that will give their products the
greatest advantage in selected target markets and
they design marketing mixes to create these planned
positions
Positioning: Product Positioning Alternatives
1. Strengthen a brand’s current position in the
mind of consumers e.g. Avis “We’re number
two. We try harder”
2. Search for a new unoccupied position in the
mind of consumers e.g. P&P newspaper in
Ghana and Sun in Nigeria
3. To deposition or reposition the competition
Positioning Strategies
Positioning Strategies use associations to
change consumers’ perception of products
1. Product attributes position many technical products
e.g. cars, watches e.g. BMW “ The Ultimate driving
machine”
2. Benefits offered or the needs they fill position many
products e.g. Crest reduces cavities and Macleans
Sensitive relieves the pain of sensitive teeth.
3. Usage Occasions position many products e.g.
Mentadent Night Action toothpaste or
internationally Kitkat means “Have a break”
Positioning Strategies
4.Users help position products. Johnson & Johnson
reposition baby shampoo towards a new user
category of adults who wash their hair frequently
and need a gentle shampoo
5. Activities after used to sell expensive products e.g.
Rolex for sailing,
6. Personalities often help positioning. Prestigious
brands are often positioned using successful
personalities who can add to a products character
e.g. Nike, Rolex
7. Origin positions product by association of place of
manufacture e.g. shoes, champagne
Positioning Strategies
8. Other brands can help position products E.g. with
VW engineering and Skoda “more for less”
positioning
9. Competitors provide two positioning alternatives
i. Directly against a competitor e.g. Avis vrs Hetz
ii. Away from competitors e.g. 7 Up positioned as
“Uncola, the fresh and thirst quenching alternative to
Coke and Pepsi
10. Product Class membership is another strategy. E.g
“I can’t believe is not butter”
Choosing and Implementing a position Strategy
: Selecting the right competitive advantage
2 decision areas namely how many differences to promote e.g.
only one benefit to the target market or more?
Many argue company should aggressively promote only one
benefit
Unique Selling Proposition (USP) is the unique product
benefit that a firm aggressively promotes in a consistent
manner to its target market. The benefit usually reflects
functional superiority e.g. best quality, best services, lowest
price, most advanced technology
Emotional Selling Proposition: Non functional attribute that
has unique associations for consumers e.g. Rolex, Ferrari
Choosing and Implementing a position Strategy
: Pitfalls to avoid
• Other Marketers advocate that firms position themselves or products on
more than one attribute e.g. Volvo positions its automobiles as “safest”
and “most durable”
• Pitfalls to avoid
i. Underpositioning: an error referring to failure to position a brand or
company
ii Overpositioning: an error referring to too narrow a picture of the company,
its product and brand being communicated to target customers.
iii. Confused positioning: error that leaves consumers with confused image of
the company its products or brand
iv. Implausible Positioning: Making claims that stretch the perception of the
buyers too far to be believed e.g. Launch of Lexus luxury car in US by
Toyota company
Choosing and Implementing a position Strategy
: Selecting the right competitive advantage
•
1.
2.
3.
4.
5.
6.
7.
Which differences to promote? . A difference is worth
establishing if it satisfies the following criteria;
Important : Difference delivers a highly valued benefit to
target buyers
Distinctive : Competitors do not offer the differences or the
firm can offer it in a more distinctive way
Superior : superior to other ways by which customers might
obtain the same benefit
Communicable: Can be communicated and visible to buyers
Pre-emptive: Competitors cannot easily copy the difference
Affordable : Buyers can afford to pay for the difference
Profitable : The firm can introduce the difference profitably
Communicating and Delivering the chosen position
• Once a firm has chosen a position, it must take
strong steps to deliver an communicate the
desired position to target consumers.
i. All the marketing mix effort must support
positioning strategy E.g. “high quality position”
means it must produce high quality product,
charge a high price, distribute through high
quality dealers, advertise in high quality media
etc
Developing a Positioning Statement
Positioning statement states the product’s
membership in a category and then shows its
point-of-difference from other members of the
category.
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Differentiation and Positioning
Positioning maps show consumer perceptions of their
brands versus competing products on important
buying dimensions
•
Price and orientation
7-45
Differentiation and Positioning
A perceptual map for a shampoo market