Segmentation The act of dividing the market into specific groups of consumers/buyers who share common needs and who might require separate products and/or marketing mixes. Market Segmentation Identifying the most productive bases for dividing a market, identifying the customers in different segments and developing segment descriptions. Marketing And Sales Operations
Let us focus on the following questions: • How can a company identify the segments that make up a market? • What criteria can a company use to choose the most attractive target markets?
Target Marketing • Target marketing requires marketers to take three major steps: • Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation). • Select one or more market segments to enter (market targeting). • For each target segment, establish and communicate the key distinctive benefit(s) of the company’s market offering (market positioning).
Targeting The process of evaluating the various segments in the market and selecting the most suitable segment(s) to go after. Positioning Using the elements of the marketing mix to establish in the minds of consumers a particular image of your product or service, in relation to those of your competitors.
The Process Of Market Segmentation Segmentation Consider the basis on which to segment the market Look at the profile of people and how they break into groups Confirm that these groups are valid segments Targeting Decide on a target strategy Decide which segments should be targeted and why Positioning Understand consumer perceptions Position products in the mind of the consumer Design an appropriate marketing mix to meet customer requirements Marketing And Sales Operations
Market Segmentation and Competitive Positioning Segments are often formed based upon common customer characteristics, brand preferences, and upon customer attitudes. Basis for segmenting consumer markets: Geographic; Demographic (social grading system); Geo-demographic (ACORN); Behavioural; Lifestyle (Psychographic); Basis for segmenting business to business markets: Using the Standard Industrial Classification (SIC); by the industry technology; by the size of the organisation; by season purchasing trends; by geographical location; by the type of product needed Marketing And Sales Operations
Variables For Segmenting Consumer Markets Geographic Variables Demographic Variables Age, gender, race, ethnicity, income, education, occupation, family size, family life-cycle, religion, social class Region, urban,suburban, rural, city size, county size, state size, market density, climate, terrain Psychographic/Lifestyle Variables Behavioural Variables Volume usage, end use, benefit expectations, brand loyalty, occasions price sensitivity Personality attributes, motives, lifestyles Marketing And Sales Operations
Variables For Segmenting Organisational Markets Geographic Location Type of Organisation Customer Size Product Use Marketing And Sales Operations
Socio-Economic Grading System Income Range (Annual) Socio-economic Status Characteristics of Occupation Grades A B C1 C2 D E Upper Middle Class Above $4.0m High Managerial/Professional Intermediate Managerial/ administrative professional Middle Class $2.4m - $4.0m Supervisory/Clerical/Junior managerial/ professional Lower Middle Class $1.3m - $2.3m Skilled manual labour/administrative $0.7m - $1.2m Skilled Working Class Semi-skilled and Unskilled labour $0.4m - $0.6m Working Class Lowest Level of Subsistence Casual workers, pensioners, unemployed Below $0.4m
Geo-Demographic Segmentation ACORNconsumer targeting classification 1. Wealthy achievers – suburban area 2. Affluent greys, rural communities 3. Prosperous pensioners Category A Thriving 19.8% 11.5% 7.6% 22.3% 13.7% 22.6% 2.4% Category B Expanding 4. Affluent executives 5. Well-off workers, family areas 6. Affluent urbanites, town and city areas 7. Prosperous professionals, metropolitan areas 8. Better-off executives, inner-city areas Category C Rising 9. Comfortable middle-aged, mature home owning areas 10. Skilled workers, home owning Category D Settling Category E Aspiring 11. New home-owners, mature communities 12. White-collar workers, better-off multi-ethnic areas 13. Older people, less prosperous areas 14. Council estate residents, better off homes 15. Council estate residents, high unemployment 16. Council estate residents, greatest hardship 17. People in multi-ethnic low-income areas Category F Striving Unclassified Marketing And Sales Operations
Table 10-1: Steps in Segmentation Process See text for complete table
Effective Market Segmentation Measurable Accessible Substantial Differentiable Actionable
The foundation of any marketing plan lies in answering the question, “ What business are we in, and where are we going? ” The answer is in the firm’s Mission Statement: Go to Hooley chapter 10 Marketing And Sales Operations
The foundation of any marketing plan lies in answering the question, “ What business are we in, and where are we going? ” The answer is in the firm’s Mission Statement: • Corporate Positioning Strategies The development of a positioning strategy is essential not only for products and services, but also for the organisations which offer them. • Market Leaders - are extremely dominant and high profile, and possess significant market share within their industry. Pepsi and Coca-cola are good examples. 2. Market Challengers – fairly significant, cash rich and well resourced organisations who are aggressive in seeking to take market share away from other players. This makes them particularly difficult to compete with. Marketing And Sales Operations
The foundation of any marketing plan lies in answering the question, “ What business are we in, and where are we going? ” The answer is in the firm’s Mission Statement: • Corporate Positioning Strategies...continued 3. Market Followers - are found second or third or even lower down the rankings in the marketplace. It is can sometimes prove more advantageous to be a market follower than a market leader. Whatever the leader does, the follower duplicates. 4. Market Nichers - apply the previously discussed strategy of “focus”, to differentiate their product or service offerings so as to achieve competitive advantage in a particular segment of the market. Nichers mostly move towards the high end of the market. Marketing And Sales Operations
Developing and Communicating a Positioning Strategy • Positioning • Value position
Table 11.1: Examples of Value PropositionsDemand States and Marketing Tasks
Developing and Communicating a Positioning Strategy • Positioning According to Ries and Trout • Strengthen own current position • Grab an unoccupied position • De-position • Re-position • Product ladders • Positioning According to Treacy and Wiersema • Value disciplines • Product leader • Operationally excellent firm • Customer intimate firm
Developing and Communicating a Positioning Strategy • Treacy and Wiersema propose that a business should follow four rules for success • Become best at one of the three value disciplines. • Achieve an adequate performance level in the other two disciplines. • Keep improving one’s superior position in the chosen discipline so as not to lose out to a competitor. • Keep becoming more adequate in the other two disciplines, because competitors keep raising customers’ expectations.
Developing and Communicating a Positioning Strategy • Positioning: How many ideas to promote? • Unique selling proposition • Four major positioning errors • Underpositioning • Overpositioning • Confused positioning • Doubtful positioning
The foundation of any marketing plan lies in answering the question, “ What business are we in, and where are we going? ” The answer is in the firm’s Mission Statement: Go to Hooley chapters 13 - 16 Marketing And Sales Operations