Segmentation, Targeting & Positioning

Overview: Segmentation, Targeting & Positioning

Why do this?

Market Segmentation
Represents an effort to identify and categorize groups of customers and countries according to common characteristics

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Why Segment? 1 of 5
Better Matching of Customer Needs
Opportunities and Threats

Customer needs differ hence allows improved customer satisfaction airliner or swatch vs Rolex
Enhanced Profits

Changing needs creates new markets/segments, eg; Next Ignoring segments UK motorcycle manufacturers ignoring mopeds
Targeted Marketing Mix

By segmenting, price differentials can be introduced and overall profits raised, eg Johnnie Walker, Amex Gold, etc
Enhanced Growth & Retention

Easier to get mix right to maximise the potential with a particular segment than get it right in the mass market
Market Share

Airlines not segmented cabins or car manufacturers didnt offer full range then customers would have been taken by competitors

Brand power within a particular niche/segment allows smaller competitors to compete

Market Segmentation - Principles

Segmentation Variables
Geographic Demographic Psychographic Behavioral Other (anything!) There is No single best way to segment a market. Often best to combine variables and identify smaller, betterdefined target groups.

Geographic Segmentation
Divide markets into different geographic units. Examples:
World Region or Country: North America, Western Europe, European Union, Pacific Rim, Mexico, etc. Country Region: Pacific, Mountain, East Coast, etc. City or Metro Size: New York, San Francisco Population Density: rural, suburban, urban Climate: northern, southern, tropical, semi-tropical

Demographic Segmentation
Use Differences in:
age, gender, family size, family life cycle, income, occupation, education, race, and religion Most frequently used segmentation variable
Ease of measurement and high availability.

Usually the worst variable to use.

Psychographic Segmentation
Psychographic segmentation divides a market into different groups based on social class, lifestyle, or personality characteristics.
People in the same demographic classification often have very different lifestyles and personalities.

Psychographic Segmentation

Grouping people according to attitudes, value, and lifestyles

People in the same demographic classification often have very different lifestyles and personalities.

Behavioral Segmentation
Occasion
Special promotions & labels for holidays. Special products for special occasions.

Loyalty Status
Nonusers, ex-users, potential users, firsttime users, regular users.

Benefits Sought
Different segments desire different benefits from the same products.

Usage Rate
Light, medium, heavy.

Loyalty Status Segmentation

Hard-core Split loyals

Shifting loyals
Switchers

Requirements for Effective Segmentation

Segments must be Measurable Accessible Substantial Differentiable Actionable

Lefties are hard to identify and measure, so few firms target this segment.

Evaluating Market Segments

Segment Size and Growth Potential
Sales, profitability and growth rates

Segment Structural Attractiveness

Competition, substitute products, buyers & supplier power, new entrants (Porters Five Forces)

Company Objectives and Resources

Core competencies What business do we want to be in?

Targeting
The process of evaluating segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond

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Target Marketing Strategies

Undifferentiated
One size fits all - Mass market products typically associated with early/new markets eg; Coca Cola, Ford, iPOD, etc. In virtually all markets this will change and there will be an ability to differentiate on price, product size, etc

Differentiated

Fine tune offerings to each customer group to exploit consumer surplus and enhance profits, eg; airlines, drug delivery methods (melt, tablet, capsule, liquid) Higher costs of support (production, marketing, promotion and administration) Niche marketing, likely to be linked to ability to compete and competitiveness (lack of focus from larger competitors); eg; SAGA holidays, sock shop and tie rack Potential creation of sustainable advantage via focus - brand strength, R&D, customer needs and wants Specific customer needs; generally a mix of undifferentiated at the promotional level and customized at the product level, eg; cars, Dell computers More likely to be present in B2B markets where customer order size dictates specific requirements

Focused

Customized

Target Marketing Strategies 1 of 2

Undifferentiat ed Total Market

Company Marketing Mix Customized

Segment 1 Differentiated Segment 2 Segment 3

Mkt Mix 1 Mkt Mix 2 Mkt Mix 3

Customer 1

Customer 2
Customer 3

Focused

Segment 1 Segment 2 Segment 3 Mkt Mix 2

Undifferentiated (Mass) Marketing

Ignores segmentation opportunities

Differentiated (Segmented) Marketing

Targets several segments and designs separate offers for each.
Coca-Cola (Coke, Sprite, Diet Coke, etc.) Procter & Gamble (Tide, Cheer, Gain, Dreft, etc.) Toyota (Camry, Corolla, Prius, Scion, etc.)

Niche Marketing
Targets one or a couple small segments Niches have very specialized interests

Micromarketing
Tailoring products and marketing programs to suit the tastes of specific individuals and/or locations.

Positioning
The place a product occupies in consumers minds relative to competing products.

Positioning Example

eBays positioning: No matter what it is, you can find it on eBay!

Positioning Example
To (target segment and need) our (brand) is a (concept) that (point-of-difference).
To busy mobile professionals who need to always be in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to people and resources while on the go more easily and reliably than the competing technologies.

Positioning Strategy
Competitive advantages Points of Parity Points of Difference => Differentiation Positioning results from differentiation and competitive advantages. Positioning may change over time.

Sources of Differentiation
Product Design Quality Additional Services Image People (Staff) Price Other

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Choosing the Right Competitive Advantages

The best competitive advantages are Important Distinctive Superior Communicable Pre-emptive Affordable (to company and consumer) Profitable Moral: Avoid meaningless differentiation.

Positioning Errors
Under-positioning:
Not positioning strongly enough.

Over-positioning:
Giving buyers too narrow a picture of the product.

Muddled Positioning:
Leaving buyers with a confused image of the product.

In-class Activity
Describe how each of the following brands, companies, or products is positioned: