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Chapter 4 Market Segmentat ion, Targeting and Positioning © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-1 Market Segmentation Definition—The process of dividing the total market for a good or service into smaller groups, each of which tends to be homogenous (or similar) in all significant aspects. One or more of these segments is then selected as the firm’s target market(s). A separate marketing mix is then developed for each segment or group of segments. This is referred to as ‘Market Segmentation’. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-2 Market Coverage Strategies Company Marketing Mix Market A. (Aggregation) Undifferentiated Marketing Company Mix 1 Segment 1 Company Mix 2 Segment 2 Company Mix 3 Segment 3 B. (Multiple segments) Differentiated Marketing Segment 1 SINGLE Marketing Mix Segment 2 Segment 3 C. (Single segment) Concentrated Marketing Benefits of segmentation Segmentation enables marketers to: – Identify and satisfy effectively specific benefits sought by particular groups. Identify needs, satisfy needs. Divide the market into segments by separating marketing programs. Select target market (ref p 103 magazine groups). Action the market segmentation plan. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-4 Limitations of segmentation Segmentation can be expensive in terms of production and marketing of products to only those specific groups of the market. Mass production offers economies of scale. Standardisation of service offers: increased delivery speed and efficiency. Increase in promotion, administrative and inventory costs. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-5 Market segmentation process 1. 2. 3. Identify the needs & wants of customers. Identify the different characteristics between market segments. Estimate the market potential. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-6 STEP 1 Identify the needs & wants of customers Objective is to identify needs not currently being satisfied. eg Airlines might offer business travel although research shows that preferred departure and arrival times vary to those being offered. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-7 STEP 2 Identify the different characteristics between market segments Identifying the characteristics that distinguish particular segments from others. eg Business persons require varying flights and may opt to fly first or business class instead of economy class. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-8 STEP 3 - Estimate the market potential Marketers need to know if a market is viable before segmentation occurs. Forecasting of market demand will determine: – Market demand – Market potential – Sales potential – Market share © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-9 Bases for segmentation Ultimate consumers—buy goods and services for personal or household use. Business users—buy goods and services to generate a profit by reselling or using products as part of the manufacturing process. The segment determines the marketing mix. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-10 BASES FOR SEGMENTATION CONSUMERS -Segmentation Categories Geographic—The study of city size, urban/suburban/rural population distribution and climate. Demographic—The study of distribution of population’s age, sex, income, stage in family cycle and ethnic background. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-11 Segmentation Categories (slide2) Psychographic—Personalties, lifestyles, social class including Activities Interests and Opinions (AIO). Behaviour towards products. Benefits desired or sought. Product usage rate. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-12 BUSINESS segmentation All consumer categories plus: – Customer location Geographic concentration – Type of customer Size, Industry, Organisational structure Purchasing style & criteria – Type of buying situation New buy Straight rebuy Modified rebuy © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-13 Geodemographic clustering, Values and Lifestyles. An extension of segmentation according to demographic criteria is called geodemographic clustering, this also includes lifestyle variables. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-14 Geodemographic clustering, Values and Lifestyles. Values and lifestyles (VALS) categories. Visible achievers Something better Look at me Basic needs Socially aware Young optimists A fairer deal Real conservatives Traditional family life Conventional family life © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-15 Segmenting services markets Two key differences – Customisation of the firms offerings to individuals or groups. – Avoiding clashes between incompatible segments. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-16 Conditions for effective segmentation • The characteristics used to categorise customers must be measurable and the data obtainable. • The segment itself must be accessible through existing marketing institutions with a minimum of cost and waste. • A segment must be large enough to be profitable. A USEFUL SEGMENTATION PROCESS MUST MEET THREE CONDITIONS :PTO © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-17 Target market strategies Must meet 3 conditions: 1. 2. 3. Target market should be compatible with organisations goals and images. Marketing opportunity presented by the segment must match the company’s resources. The business must generate a profit if it is to continue its existence. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-18 Positioning Definition: the perception of a product or organisation in the consumer’s mind relative to their perception of other offerings in the same category. The key words are perception in the mind of consumer’s which include attributes, benefits & brand. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-19 Positioning statement A statement that clearly and succinctly identifies the target market, the benefits offered to it by the product, and the way in which the product is differentiated from its competitors. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-20 Positioning strategies Positioning: – In relation to a competitor. – According to a product class or attribute. – By price and quality. Positioning can be in various forms, although it will always incorporate a statement that identifies, based on the marketing mix, how a business wants their products or services to be perceived in the minds of the consumer. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-21 POSITIONING STATEMENT EXAMPLE CURVES GYM “We offer a convenient and modern, supervised exercise program for busy women.” Other Categories of Product Positioning Product Class Quality Price Product Attributes Benefits Offered G H C A Against a Competitor D E B F Use Or application Users © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-23 Selecting a position Positioning is the final step in the segmentation/targeting process. Marketers must consider various factors in deciding what position they should seek. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-24 Factors of consideration Competition—look for a gap or niche. Customers—seek product attributes. The company—status of current image. Repositioning—needs of target market changed? The marketing mix—must support the selected position. © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-25 EXAMPLE POSITIONING STATEMENT Roast Beef Sandwiches. In this case "Roast Beef Sandwiches" is the tagline. It clearly states/describes what they sell. A positioning statement is a more in depth description of the product, it's competition, quality, etc. The positioning statement might be "We slow roast our beef for 3 hours to lock in all those savory juices!", Or "Try something different for a change" and "Tired of that same old burger?" (regarding the competetion). © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-26 Sample positioning statements – The most cost-effective place for small businesses to purchase office supplies online – The most complete source of grills and barbecue recipes for people who love to cook – The only Web site where corporate event planners can schedule meetings online http://www133.americanexpress.com/osbn/T ool/webmarket/position.asp © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-27 Check-list for determining a positioning strategy i. What position do we own? ~in the mind of the prospect. ii. What position do we want to own? iii. Whom must we outgun? iv. Do we have enough money? v. Can we stick it out? Consistency is essential vi. Does our advertising match our position? © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-28 Positioning maps are also referred to as perceptual maps © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-29 © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-30 © 2001 McGraw-Hill Australia PPT slides t/a Rix, Marketing: A Practical Approach 4th ed 4-31