Lecture 2

12.00 Padarn

Segmentation, Targeting and Positioning

Learning Outcomes

Describe the principles of market segmentation and the benefits of the STP process.
Explain how market segmentation can be undertaken in both consumer and business-to-business markets. Describe different targeting strategies. Explain the concept of positioning. Illustrate how the use of perceptual maps can assist the positioning process.
READING CHAPTER 6 BAINES

STP Process- The Trinity of Marketing

The biggest challenge for any marketer is to understand the customer. Allows marketers to see similarities and differences between groups of customers. e.g. 2012 US Presidential Election Campaign. 100% awareness 48% each. 4% undecided. Obama campaign focused on getting 18-24 to vote. 15% of electorate, 75% democrats.

STP Process

Method by which whole markets are subdivided into

different segments

Three activities that should be undertaken, usually sequentially, if segmentation is to be successful:

Segmentation Targeting Positioning

Benefits of STP
Direction and focus for marketing strategies: more targeted advertising.
better product development. brand differentiation.

Benefits of STP
Identify growth opportunities

new customers
growth segments product uses

Greater return on marketing investment. 8

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 Collect 460billion of taxes a year Did not have a customer approach Segmentation exercise to: Reduce Costs Improve Customer Experience Increase Yield

Initial segment was the whole tax paying population.

 Outcome of exercise were 5 segments Unaware

Willing but need help

Willing and able Rule breakers Potential rule breakers Stakeholder engagement to embed internally.

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 Impact

internal: culturally, thinking about citizens as customers.

specifically targeted external communication. big financial efficiencies: changed targets.

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 Market segmentation is the division of a market into different groups of customers with distinctly similar needs and product/service requirements.

Market segmentation means dividing a market into distinct groups

of buyers with different needs, characteristics or behaviours, who

might require separate products or marketing mixes. (Kotler et al, 4th ed, p.391; 5th ed p.410)

 Market Segmentation and Product Differentiation

Segmenting a market involves 3 stages:

1. Selecting a segmentation basis: The segmentation basis is the set of variables that are used to assign buyers to different groups. (e.g. benefits-sought from a product: decay prevention, whitening, taste from a toothpaste)

2. Grouping together buyers who are similar in terms of the base

variables. (e.g. a segment of people who all seek similar benefits from a product: a decay-prevention segment) 3. Profiling each segment in terms of other (i.e. non-base) variables (e.g. buyers user status, brand preferences, age, income, media-usage, shopping preferences, etc.)
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Source: Integrated Marketing Communications in Advertising and Promotion (AISE, 7th edn. by Shimp (2007). Reprinted with permission of South-Western, a division of Thomson Learning

Business to Business (B2B) market segmentation is the

identification of:
a group of present or potential customers with some common characteristic which is relevant in explaining (and predicting) their response to a suppliers marketing stimuli (Wind and Cardozo,

1974).

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Business to Business Segmentation

 Decision Making Unit

Policy factors Purchasing strategies Attitudes towards vendors and toward risk

Choice Criteria
What specifications of product/service they choose

Purchase Situation
Structure of the purchasing procedures Type of buying situation Stage in the purchase decision process

 Evaluation of Market Segments - DAMP

Distinct is each segment clearly different from other segments?

Accessible can buyers be reached through appropriate promotional programmes and distribution channels?
Measurable is the segment easy to identify and measure? Profitable is the segment sufficiently large to provide a stream of constant future revenues and profits.

 Even if a segment has the right size and growth, the company must consider its own objectives and resources. Some attractive segments can be dismissed..The company should enter only

segments in which it can offer superior value and gain

advantages over competitors. (Kotler et al 5th ed, p.424)
A$ap Rocky Aerosmith Alicia Keys Beyonce Bullet for my Valentine Britney Spears Calvin Harris etc

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Targeting
Once target segment (s) are identified organisation must select its preferred approach:1. Undifferentiated: Mass market, one big segment.

2. Differentiated targeting approach: Marketing Strategy is developed for each segment.

3. Concentrated marketing strategy: just a few market segments or limited resources and go for the most profitable. 4. Customised targeting strategy. Different product for each customer. e.g. some B2B assembly lines.

Targeting

Positioning
Positioning is the means by which goods and services can be differentiated from one another and so give consumers a reason to buy. How a brand positions itself against another brand helps to clarify in the customers mind how that brand is different and, critically, better than the competition. Two fundamental elements: Physical attributes - the functionality and capability that a brand offers.
Communication - the way in which a brand is communicated and how consumers perceive the brand relative to other competing brands in the market place.

Perceptual Maps to aid positioning

A visual representation of each market. Used to determine how various brands are perceived according to attributes valued by customers. Closer products are clustered together, the greater the competition. Further apart they are, the more opportunity there is for new brands to enter. e.g. UK Car Market

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Repositioning
The following four ways outline how to approach repositioning a product, depending on the individual situation facing a brand. In some cases, a brand might need to be adapted before re-launch.
e.g. Ford: Family car. Female bias/low income. Switch to male bias/middle to higher income.
1. Change the tangible attributes and then communicate the new proposition to the same market.

2. Change the way a product is communicated to the original market e.g. engine performance.
3. Change the target market and deliver the same product. e.g. S Class Endless Winter.

4. Change both the product (attributes) and the target market. e.g. use Lincoln brand

Summary
Described the principles of market segmentation and the STP process. Explained the characteristics and differences between market segmentation and product differentiation.

Explained how market segmentation can be undertaken in both consumer and business to business markets. Described different targeting strategies.
Explained the concept of positioning.