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.
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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.
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Geographic Segmentation
World region or country. Region of country. City or metro size. Density or climate.

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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.

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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.
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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.

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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.
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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&Gs multiple brands of laundry detergents to satisfy different needs in the product category.
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Behavioural Segmentation
User status.
Nonusers, ex-users. Potential users. First-time users. Regular users.

Loyalty status.
Brands. Stores. Companies.

Usage rate.
Light. Medium. Heavy.
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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.

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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.
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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.
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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.
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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.
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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.
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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 Fords Model T excellent example of undifferentiated or mass marketing.

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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.
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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.

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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.

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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?

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Market Coverage Strategy

Company resources. Degree of product variability. Product life cycle stage. Market viability. Competitors marketing strategies.

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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.
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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.

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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.

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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

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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.
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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.
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Value Propositions
Price
Benefits
More
More More for more The same More for the same Less More for less

The same

The same for less

Less for much less
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Less
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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