Segmentation, targeting and positioning

Overview
Define the four major steps in designing a customer-driven marketing strategy: market segmentation, market targeting, differentiation, and positioning List and discuss the major bases for segmenting consumer and business markets Explain how companies identify attractive market segments and choose a market targeting strategy Discuss how companies position their products for maximum competitive advantage in the marketplace

Why segmentation?
Markets are not homogeneous; consumers vary widely in their needs and preferences A company cannot connect effectively with all customers in a large market Needs of different consumers may actually be in conflict with each other; not possible to design a product that satisfies all groups Consumer buying behavior is different across customer groups, the same channel cannot serve everyone Segmentation allows a company to focus on the needs of a specific group of customers and develop capabilities to serve this chosen group exceptionally well.establish a competitive advantage

Segmentation is not just a grouping of customers based on common characteristics; it is a strategic tool

By going after segments instead of the whole market, companies have a much better chance to deliver value to customers

Market segmentation
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

Issues to consider
Segmenting consumer markets Segmenting business markets Segmenting international markets Requirements for effective segmentation

Segmenting consumer markets

Geographic segmentation

Demographic segmentation

Psychographic segmentation

Behavioral segmentation

Geographic segmentation
This segmentation base divides the market into different geographical units such as nations, regions, states, counties, or cities

Demographic segmentation
This segmentation base divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups Gender segmentation divides the market based on sex (male or female) Income segmentation divides the market into affluent or low-income consumers

Behavioral segmentation
This segmentation base divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product

Occasions Benefits sought User status Usage rate Loyalty status

Psychographic segmentation
This segmentation base divides the market into different segments based on social class, lifestyle or personality characteristics It is often important since people in the same demographic group can have very different psychographic make-ups.

Using Multiple Segmentation Bases

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

Primary segmentation variables for business markets

Demographics Industry company size location

Operating variables - user/non-user status - focus on customers needing many or few services?

Primary segmentation variables for business markets

Purchasing approaches - Focus on centralised or de-centralised purchasing processes? - Focus on engineering or financially dominated firms? - Focus on well-related firms or desirable ones?

Primary segmentation variables for business markets

Situational factors - urgency focus on companies needing quick delivery or service? - Focus on large or small orders?... Sales implications

Personal characteristics - Focus on firms with similar values? - Focus on risk averse or risk-taking companies

Segmenting International markets

Intermarket segmentation divides consumers into groups with similar needs and buying behaviors even though they are located in different countries

Geographic location Politicallegal factors

Economic factors Cultural factors

Remember..
Segmentation is firm and product specific; different firms in the same industry may segment the market differently Segments move and change as markets evolve; segmentation strategies need to be dynamic As markets become more competitive, there is an increasing need to segment across multiple bases.

Requirements for Effective Segmentation

Measurable: size, purchasing power and profits of a market segment can be measured Accessible: segments can be reached and served... tourists in Spain

Substantial: large or profitable enough to serve clothes for tall people

Differentiable: conceptually distinguishable and respond differently to marketing stimuli married unmarried women and perfumes

Actionable: programmes can be designed smaller firms

Targeting
Target market consists of a set of buyers who share common needs or characteristics that the company decides to serve Evaluating Market Segments Segment size and growth Segment structural attractiveness Company objectives and resources

Target Marketing Strategies

Focusing on a Focus on what is Focusing on large share of common rather than several one or few different segments smaller through diverse segments offerings

Focusing on individuals / markets

Targeting
Undifferentiated marketing targets the whole market with one offer
Mass marketing Focuses on common needs rather than whats different

Targeting
Differentiated marketing targets several different market segments and designs separate offers for each Goal is to achieve higher sales and stronger position More expensive than undifferentiated marketing

Targeting
Concentrated (niche) marketing targets a small share of a large market Limited company resources smaller firms Knowledge of the market luxury firms More effective and efficient

Targeting
Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations Local marketing Individual marketing

Local marketing
It involves tailoring brands and promotion to the needs and wants of local customer groups Cities Neighborhoods Stores

Drawback high costs logistics complexity

Individual marketing
It 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

Choosing a Target Market

Depends on:
Company resources Product variability Product life-cycle stage Market variability Competitors marketing strategies

Social responsibility and targeting

Benefits customers with specific needs Concern for vulnerable segments Children
Alcohol Cigarettes Internet abuses