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Segmentation, Targeting and Positioning: Copyright © 2005 Pearson Education Canada Inc. Building the Right Relationships with the Right Customers •Chapter 9 •Powerpoint slides •Extendit! version •Instructor name •Course name •School name •Date Principles of Marketing: 6th Canadian Edition Copyright © 2005 Pearson Education Canada Inc. Opening Vignette: Proctor & Gamble 9.2 • Began operations in Canada in 1915, now employs 650 people at its Canadian headquarters, and regional offices • Operate two manufacturing and one distribution facility in Canada • Parent company sells more than 250 products in 130 countries • Key success factors in P&G growth: – Innovation – Innovative marketing campaigns – Externally competitive while internally collaborative – Encourages personal growth and development of employees – Reputation for integrity • Experts in segmentation and branding strategy Principles of Marketing: 6th Canadian Edition 9.3 Copyright © 2005 Pearson Education Canada Inc. Why Market Segmentation? • At one time, most companies practiced mass marketing • Economically, mass marketing makes the most sense; lower costs due to achieving economies of scale, low prices increase demand • Today’s buyers are too numerous, too widely scattered, and too varied in their needs and buying practices • Companies vary in their resources and ability to serve different markets • Proliferation of distribution channels and media alternatives force segmenting markets • Consumers want it their way! Principles of Marketing: 6th Canadian Edition Steps in Market Segmentation, Targeting, and Positioning 9.4 Copyright © 2005 Pearson Education Canada Inc. • Market segmentation: dividing market into distinct groups with distinct needs, characteristics, or behaviours, who might require separate products or marketing mixes • Target marketing: choosing which group(s) to appeal to • Market positioning: creating a clear, distinctive, and desirable position in the target consumer’s mind, relative to competition Figure 9.1 Principles of Marketing: 6th Canadian Edition Copyright © 2005 Pearson Education Canada Inc. 9.5 Principles of Marketing: 6th Canadian Edition 9.6 Segmenting Consumer Markets Copyright © 2005 Pearson Education Canada Inc. • Geographic segmentation: dividing a market into different geographical units, such as regions, provinces, counties, or cities – Political boundaries make this easy to do • Demographic segmentation: dividing a market into groups based on demographic variables such as: age, gender, family size or life cycle, income, occupation, education, religion, race, and nationality – The most popular bases for segmenting consumer markets because behaviour will vary according to these dimensions Figure 9.1 Principles of Marketing: 6th Canadian Edition 9.7 Segmenting Consumer Markets (continued) Copyright © 2005 Pearson Education Canada Inc. • Psychographic segmentation: dividing a market based on lifestyle or personality characteristics – More difficult to implement but can be very effective for specialty products • Behavioural segmentation: dividing a market based on consumer knowledge, attitude, use, or response to a product – Includes: occasions, benefits sought, user status and/or rate, loyalty status, buyer readiness state, or attitude toward product Figure 9.1 Principles of Marketing: 6th Canadian Edition Business Markets Segmentation (Table 9.2) Copyright © 2005 Pearson Education Canada Inc. • Demographic: – Industry – Company size – Location • Operating variables: – Technology – User/non-user status – Customer capabilities • Situational factors: – Urgency – Specific application – Size of order 9.8 • Purchasing approaches: – – – – – Purchasing organization Power structure Existing relationships General policies Purchasing criteria • Personal characteristics: – Buyer-seller similarity – Attitude towards risk – Loyalty Principles of Marketing: 6th Canadian Edition Segmenting International Markets 9.9 Copyright © 2005 Pearson Education Canada Inc. • International markets can be segmented by: – – – – Geographic location Economic factors Political and legal factors Cultural factors • Intermarket segmentation: – Forming segments of consumers who have similar needs, even though they live in different countries Principles of Marketing: 6th Canadian Edition Copyright © 2005 Pearson Education Canada Inc. Requirements for Effective Segmentation 9.10 • To be useful, market segments must be: – Measurable: • Size, purchasing power, and profiles can be measured – Accessible: • Segments can be effectively reached and served – Substantial: • Large enough or profitable enough to serve – Actionable: • Programs can be developed to attract and serve the segments Principles of Marketing: 6th Canadian Edition 9.11 Copyright © 2005 Pearson Education Canada Inc. Target Marketing Strategies • Three factors used to evaluate segments: – Segment size and growth: • Largest or fastest growing segment may not be the most attractive for a particular company – Structural attractiveness: • Competition, substitute products, power of buyers/suppliers – Company objectives and resources: • Required strengths, skills, and resources Figure 9.2 Principles of Marketing: 6th Canadian Edition 9.12 Target Marketing Strategies (continued) Copyright © 2005 Pearson Education Canada Inc. • Target market: – A set of buyers sharing common needs or characteristics that the company decides to serve • Undifferentiated (mass) marketing: – Market coverage strategy that ignores market segment differences and targets the whole market with one offer (Coca Cola) • Differentiated (segmented) marketing: – Market coverage strategy that targets several market segments and designs separate offers for each (Car industry) Figure 9.2 Principles of Marketing: 6th Canadian Edition 9.13 Target Marketing Strategies (continued) Copyright © 2005 Pearson Education Canada Inc. • Concentrated (niche) marketing: – Market coverage strategy in which a company pursues a large share of one or a few submarkets (Specialty grocery stores) • Micromarketing: – The practice of tailoring products and marketing programs to the needs/wants of specific individuals and local customer groups – Includes: local marketing and individual marketing (depanneur, tailor) Figure 9.2 Principles of Marketing: 6th Canadian Edition Choosing a Target Marketing Strategy 9.14 Copyright © 2005 Pearson Education Canada Inc. • Factors to be considered when choosing a strategy: – Company resources – Product variability (specific fruit, cameras) – Product’s life-cycle stage (introduction, maturity) – Market variability(people with identical tastes or not) – Competitor’s marketing strategies (differentiated or undifferentiated) • Socially responsible target marketing: – Marketing towards children, vulnerable, or disadvantaged consumers (cereals) – Products of questionable benefit – The main issue is not who but how and for what Principles of Marketing: 6th Canadian Edition Positioning for Competitive Advantage 9.15 • Product position: the way the product is defined by consumers Copyright © 2005 Pearson Education Canada Inc. on important attributes, relative to competing products • Competitive advantage: an advantage gained over competitors by offering (and delivering) greater value; either through lower prices or more benefits that justify higher prices • Sources of differentiation: (provide examples) – Product (attributes) – Service (hours opened) – Marketing channels (delivery of product or service) – People (hotel) – Image (brand, color) Principles of Marketing: 6th Canadian Edition Which Differences to Promote? 9.16 Copyright © 2005 Pearson Education Canada Inc. • Unique selling proposition (USP): aggressively promoting one benefit to the target audience; prevents confusing the customer with too many ideas (Crest, Volvo, Michelin) – Some marketers believe that using more than one factor is necessary to offer the multiple benefits that consumers want (in case competition also proposes some similar benefits) • Three major positioning errors: – Under-positioning (no specific positioning) – Over-positioning (too specific) – Confused positioning (too many images changing – indicates too many changes of positioning strategies) • Differences should be: – – – – – – – Important (important) Distinctive Superior Communicable Pre-emptive Affordable (important) Profitable Principles of Marketing: 6th Canadian Edition Possible Value Propositions 9.17 Copyright © 2005 Pearson Education Canada Inc. • Value proposition: – Full positioning of a brand • The full mix of benefits used for positioning • Positioning statement: Figure 9.3 – A statement that summarizes company or brand positioning – To (target segment and need) our (brand) is (concept) that (point of difference) – “For those cola drinkers who really need a lift, Bam! Cola offers all of the sugar and twice the caffeine!” Principles of Marketing: 6th Canadian Edition