Segmenting, Targeting & Positioning

Segmenting, Targeting & Positioning Lecture 4

Steps in the Target Marketing Process

The 12 billion dollar question: • Global $12 billion dollar sneaker market for all kinds of athletic shoes. • Reebok’s marketing research shows that in 1971 only 1 of every 27 women was involved in sports; today it is 1 in 3!! Thus Reebok has put special emphasis on the female market.

Sells multiple brands within the same product category for a variety of products Brands feature a different mix of benefits and appeal to different segments Has also identified different niches within certain segments Product modifications are useful: Tide offers seven different product formulations to serve different niches’ needs Procter & Gamble

A Market is... (1) people or organizations with (2) needs or wants, and with (3) the ability and (4) the willingness to buy. A group of people that lacks any one of these characteristics is not a market.

Market Market Segment Market Segmentation Market Segmentation People or organizations with needs or wants and the ability and willingness to buy A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.

Definition • Market Segmentation: • Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.

MARKET SEGMENTATION = • Dividing market into segments, each of which behaves differently vis-à-vis your product • Selecting certain segment(s) • Developing one marketing plan for each segment • Thinking small(er)

Market segmentation aggregating buyers into groups that: 1. Have common needs and 2. Will respond similarly to marketing action. The groups that result from the market segmentation process are called market segments.

Product/Usage Habits Segmentation Pillow Manufacturer L M S M M L L S M

Segmentation ----WHY!!!!!!!!!!!!!!!!!!!! Buyer Preference Patterns Homogeneous preference Diffused preference Clustered preference

STYLE TITAN WATCHES DURABLE Homogeneous Preference -No natural segments -All buyers have same preference

TITAN WATCHES STYLE DURABLE Diffused Preference -No pattern (…or poor research) -Take center position

TITAN WATCHES STYLE DURABLE Clustered Preference -Natural segments -Increases as number of competitors increases

Values of the Two Segments- Youngsters & Adults - WATCHES Adults Youngsters Attribute 2 BEAUTY Attribute 3 DURABILITY Attribute 1 PRICE

Mass Marketing -- (Economies of Scale) Segmentation Dilemma (However, everyone is different) CUSTOMIZATION

Choosing a Targeting Strategy • Undifferentiated Marketing • Differentiated Marketing • Concentrated Marketing • Customized Marketing

Undifferentiated Marketing • Appeals to a broad spectrum of people • Efficient due to economies of scale • Effective when most consumers have similar needs • Example: Big Bazaar

Differentiated Marketing • Develops one or more products for each of several customer groups with different product needs • Appropriate when consumers are choosing among well-known brands with distinctive images and it is possible to identify one or more segments with distinct needs for different types of products • Example:Lakme, Ponds, Fair & Lovely

Concentrated Marketing • Entails focusing efforts on offering one or more products to a single segment • Useful for smaller firms that do not have the resources to serve all markets • Example:HMT Watches

Customized Marketing • Segments are so precisely defined that products are offered to exactly meet the needs of each individual • Example: • Mass customization is a related approach in which a company modifies a basic good to meet the needs of an individual • Example: Dell Computers

Segmentation Why segment? • Identifies opportunities and needs. • Allows firm to focus on specific needs. • Improves marketing mix for each segment. • Allows small firm to exist.

The Importance of Market Segmentation • Markets have a variety of product needs and preferences • Marketers can better define customer needs • Decision makers can define objectives and allocate resources more accurately Competitive Advantage

Criteria for Market Segments Substantiality Identifiability Accessibility Responsiveness Criteria for Successful Segmentation

Substantiality Identifiability Measurability Accessibility Responsiveness Criteria for Segmentation Segment must be large enough to warrant a special marketing mix. Segments must be identifiable and their size measurable. Members of targeted segments must be reachable with marketing mix. Unless segment responds to a marketing mix differently, no separate treatment is needed.

WHEN DO YOU HAVE "GOOD" SEGMENTS? • You can reach them • Group is large enough to be profitable • You have the capability to build a marketing program target for them

Segmentation Bases Characteristics of individuals, groups, or organizations used to divide a total market into segments. (variables)

Geography Demographics Bases Used toSegmentConsumerMarkets Psychographics Benefits Sought Behavioral Bases for Segmentation

Geographic Segmentation • Region of the country or world • Market size • Market density : TV Companies • Climate: woollen clothes • City

Bases for Demographic Segmentation • Age: Cartoon Network; MTV; News Channels • Gender: Cosmetics & After Shave • Income: Economical & Luxury goods • Ethnic background: Food • Family Life Cycle: Life Insurance Companies • Generation: Apparels • Education • Occupation: PC Selling

Psychographics • Psychographic segments market in terms of shared attitudes, interests, and opinions • Segments include demographic information such as age and income, but also includes richer descriptions • Some organizations develop their own psychographic segments for their consumers, but others utilize national systems (VALS by SRI International)

PsychographicSegmentation Personality Motivation Lifestyles Attitude Bases for Psychographic Segmentation

MOTIVATION • Health Supplements • Cosmetics • Safola • Life Insurance • LG Products

Life Style: VALS

VALS Framework • PRINCIPLE ORIENTED: • Fulfilled: Mature, Well Educated, Informed, Respectful but Open minded • Believers: Conservative, Conventional, follow established rules • STATUS ORIENTED: • Achievers:Committed to family and Work, Image is very Important • Strivers: Unsure of themselves, Money is a measure of success • ACTION ORIENTED: • Experiencers: Young, Vital, Enthusiastic, rebellions • Makers: Practical, Suspicious of new ideas, value working with their hands

Benefit Segmentation The process of grouping customers into market segments according to the benefits they seek from the product . Maruti Esteem, Honda City

Segmenting by Behavior • Behavioral segmentation slices consumers on the basis of how they act toward, feel about, or use a product

Occasions User Status User Rates: Airlines Loyalty Status: Credit Cards Readiness Stage Market Segmentation Behavioral Segmentation Variables • Attitude Toward the Product

Geographic Customer Type Macro- segmentation Customer Size Business Markets Product Use Purchasing Criteria Purchasing Strategy Micro- segmentation Importance Personal Characteristics Business Marketing Segmentation

Select a market for study Choosebasesfor segmen-tation Selectdescrip-tors Profileandanalyzesegments Selecttargetmarkets Design,imple-ment,maintainmktingmix Steps in Segmenting a Market

Target Market A group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges.

Undifferentiated Strategy Concentrated Strategy Multisegment Strategy Strategies for SelectingTarget Markets

Undifferentiated Targeting Strategy • Advantages: • Potential savings on production and marketing costs Disadvantages: • Company more susceptible to competition

Concentrated Targeting Strategy • Advantages: • Concentration of resources • Meets narrowly defined segment • Small firms can compete • Strong positioning Disadvantages: • Segments too small, or changing • Large competitors may market to niche segment

Multi-segment Targeting Strategy • Advantages: • Greater financial success • Economies of scale Disadvantages: • High costs • Cannibalization

Positioning Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general.

Segmenting, Targeting & Positioning