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Marketing: An Introduction Second Canadian Edition Armstrong, Kotler, Cunningham, Mitchell and Buchwitz Chapter Seven Segmentation, Targeting and Positioning: Building the Right Relationships with the Right Customers 7-1 Copyright © 2007 Pearson Education Canada Looking Ahead • Define the three steps of target marketing: market segmentation, market targeting and market positioning. • List and discuss the major bases for segmenting consumer and business markets. • Explain how companies identify attractive market segments and choose a target marketing strategy. • Discuss how companies position their products for maximum competitive advantage in the marketplace. 7-2 Copyright © 2007 Pearson Education Canada Segmentation/Positioning • Segment markets. – Identify bases for segmentation. – Develop segmentation profiles. • Target segment(s). – Measure of segment attractiveness. – Select the target segment(s). • Position for target segment(s). – Develop positioning for each segment. – Develop appropriate marketing mix. 7-3 Copyright © 2007 Pearson Education Canada Segmentation Variables • Geographic. – Area, population density, climate etc. • Demographic. – Age, sex, lifecycle, income, job, etc • Psychographic. – Lifestyle, personality. • Behavioural. – Benefits sought, status, usage rate, loyalty, attitudes, etc. 7-4 Copyright © 2007 Pearson Education Canada Geographic Segmentation • • • • World region or country. Region of country. City or metro size. Density or climate. 7-5 Copyright © 2007 Pearson Education Canada Demographic Segmentation • Age, gender, family size, income, occupation, etc. • The most popular bases for segmenting customer groups. • Easier to measure than most other types of variables. 7-6 Copyright © 2007 Pearson Education Canada Demographic Segmentation • Gender. – Women make 90% of home improvement decisions. – Women influence 80% of all household consumer purchases. • Income. – Identifies and targets the affluent for luxury goods. – People with low annual incomes can be a lucrative market. – Some manufacturers have different grades of products for different markets. 7-7 Copyright © 2007 Pearson Education Canada Demographic Segmentation • Age and life-cycle. – Do not necessarily match. • Middle aged people starting new families. • Seniors going back to university or college . – Products targeted at age or life-cycle stages. • P&G has different toothpastes for different age groups. – Avoid stereotypes in promotions. – Promote positive messages. 7-8 Copyright © 2007 Pearson Education Canada Psychographic Segmentation • Dividing a market into different groups based on: – Social class. – Lifestyle. – Personality characteristics. • Targeting whitening toothpaste at psychographic segment who are active and concerned about sexual attractiveness. 7-9 Copyright © 2007 Pearson Education Canada Behavioural Segmentation • Occasions. – Special promotions for holidays. • (e.g., Hershey Kisses). – Special products for special occasions. • (e.g., Kodak disposable cameras). • Benefits sought. – Different segments desire different benefits from products. • e.g., P&G’s multiple brands of laundry detergents to satisfy different needs in the product category. 7-10 Copyright © 2007 Pearson Education Canada Behavioural Segmentation • User status. – – – – Nonusers, ex-users. Potential users. First-time users. Regular users. • Loyalty status. – Brands. – Stores. – Companies. • Usage rate. – Light. – Medium. – Heavy. 7-11 Copyright © 2007 Pearson Education Canada Market Segmentation • Best to use multiple approaches in order to identify smaller, better-defined target groups. • Start with a single base and then expand to other bases. 7-12 Copyright © 2007 Pearson Education Canada Segmenting Business Markets • Consumer and business markets use many of the same variables for segmentation. • Business marketers can also use: – Operating characteristics. – Purchasing approaches. – Situational factors. – Personal characteristics. 7-13 Copyright © 2007 Pearson Education Canada Segmenting International Markets • Factors for segmenting foreign markets. – – – – Geographic location. Economic situation. Culture. Political and legal situation and issues. • Intermarket segmentation. – When there is little difference across international markets. – Teenagers all over the world tend to be the same. 7-14 Copyright © 2007 Pearson Education Canada Evaluating Market Segments • Segment size and growth. – Analyze current segment sales, growth rates and expected profitability. • Segment structural attractiveness. – Consider effects of: competitors, existence of substitute products, the power of buyers/suppliers. • Company objectives and resources. – Examine company skills and resources needed to succeed in that segment. – Offer superior value/gain competitive advantage. 7-15 Copyright © 2007 Pearson Education Canada Segment Success Criteria • Measurable - Ability to measure numerically. • Accessible - Ability to reach segment. • Substantial – Ability to support the business. • Differentiable – Ability to find unique position in segment. • Actionable – Ability to pursue and capture the segment. 7-16 Copyright © 2007 Pearson Education Canada Levels of Segmentation • Mass marketing. – No segments and single marketing mix. • Differentiated marketing. – Large segments with specific marketing mixes. • Niche marketing. – Small segments with specialized marketing mixes. • Micro-marketing. – Customized marketing to individuals. 7-17 Copyright © 2007 Pearson Education Canada Undifferentiated Marketing • Focus is on common (not different) needs of consumers. • Product and marketing program are geared to the largest number of buyers. • Uses mass advertising and distribution. • Henry Ford’s Model T excellent example of undifferentiated or mass marketing. 7-18 Copyright © 2007 Pearson Education Canada Differentiated Marketing • Firm targets several market segments and designs separate offers for each. • The goal is to have higher sales and a stronger position with each market segment. • This approach increases the costs of doing business. • General Motors claims to make a car for every segment. 7-19 Copyright © 2007 Pearson Education Canada Niche Marketing • The focus is acquiring a large share of one or a few segments of niches. • Generally, there are fewer competitors. • The Internet is ideal for targeting small niche markets. • There is some risk in focusing on only one market. 7-20 Copyright © 2007 Pearson Education Canada Micromarketing • Tailoring products and marketing programs to suit the tastes of specific individuals and locations. – Local Marketing: Tailoring brands and promotions to the needs and wants of local customer groups— cities, neighbourhoods, specific stores. – Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers. 7-21 Copyright © 2007 Pearson Education Canada Mass Customization • The process of creating customerunique value by designing products and services tailor-made to individual needs, on a large scale. • Having your next car or sneakers built to order? 7-22 Copyright © 2007 Pearson Education Canada Market Coverage Strategy • • • • • Company resources. Degree of product variability. Product life cycle stage. Market viability. Competitors’ marketing strategies. 7-23 Copyright © 2007 Pearson Education Canada Socially Responsible Target Marketing • Smart targeting helps both companies and consumers. • Target marketing sometimes generates controversy and concern. – Vulnerable and disadvantaged can be targeted. – Cereal, cigarette, beer and fast-food marketers have received criticism. – Internet has raised fresh concerns about potential targeting abuses. 7-24 Copyright © 2007 Pearson Education Canada Successful Positioning • Product position. – How a product is viewed by consumers relative to competing products. • Three positioning steps. – Identify competitive advantages on which to build a differentiated position. – Choose the right competitive differentiation. – Select an overall positioning strategy. 7-25 Copyright © 2007 Pearson Education Canada Gaining Competitive Advantage • Key to winning target customers is to understand their needs better than competitors do and to deliver more value. • Competitive advantage – extent to which a company can position itself as providing superior value. 7-26 Copyright © 2007 Pearson Education Canada Identifying Competitive Advantage • Product differentiation. – Consistency, durability, reliability, reparability. • Services differentiation. – Speed, convenience, careful delivery. • Image differentiation. – Convey benefits and positioning. • People differentiation. – Hiring, training better people than competition 7-27 Copyright © 2007 Pearson Education Canada Successful Differentiation • Important – of value to consumers. • Distinctive – obvious and clear. • Superior – better value than competitors. • Communicable – explainable. • Pre-emptive – defendable and unique. • Affordable – delivers value for cost. • Profitable – company can make money. 7-28 Copyright © 2007 Pearson Education Canada Positioning Errors • Under-positioning. – Failing to really position the company at all. • Over-positioning. – Giving buyers too narrow a picture of the company. • Confused positioning. – Leaving buyers with a confused image of a company. 7-29 Copyright © 2007 Pearson Education Canada Value Propositions Price Benefits More 7-30 More The same Less More for more More for the same More for less The same The same for less Less Less for much less Copyright © 2007 Pearson Education Canada Looking Back • Define the three steps of target marketing: market segmentation, market targeting and market positioning. • List and discuss the major bases for segmenting consumer and business markets. • Explain how companies identify attractive market segments and choose a target marketing strategy. • Discuss how companies position their products for maximum competitive advantage in the marketplace. 7-32 Copyright © 2007 Pearson Education Canada