Market Segmentation, Targeting, and Positioning Chapter 5 Market Segmentation, Targeting, and Positioning

Market Segmentation Involves the division of a diverse market into a number of smaller submarkets that have common features. The objective is to identify groups of potential customers with similar requirements. Market segmentation provides a a commercially viable method of serving customer needs. Segmentation is at the heart of strategic marketing.

The Benefits of Market Segmentation Enhanced Profitability More effective targeting of communications Enhanced Opportunities for Growth Better matching of customer needs Improved Customer Retention Opportunities of segment dominance

© The McGraw-Hill Companies, 2009 Garmin Garmin Unashamedly targets female buyers Note: Replace Maltesers ad with Exhibit 5.2 (Nokia 7270) © The McGraw-Hill Companies, 2009

Segmenting Consumer Markets Consumer segmentation Psychographic Behavioural Profile Demographic Benefits sought Lifestyle Purchase occasion Personality Socio-economic Purchase behaviour Geographic Usage Perceptions and beliefs

Consumer Segmentation Methods Variables Examples Behavioural Benefits sought Convenience, status, performance Purchase occasion Self-bay, gift, special occasions Purchase Behaviour Brand loyal, brand switching, innovators Usage Heavy, light Media Behaviour Primarily online, primarily offline Psychographic Lifestyle Trendsetters, conservatives, sophisticates Personality Conscientious, agreeable, extrovert Profile Age Under 12, 12-18, 19-25, 26-35, 36-49, 50-64, 65 and over Gender Female, male Life Cycle Young single, young couples, young parents, middle-aged empty-nesters, retired Social class Upper middle, middle, skilled working Terminal education age 16, 18, 21 years Income Income breakdown according to study objectives and income levels per country Geographic North vs south, urban vs rural, country Geodemographic Upwardly mobile young families living larger owner-occupied houses, older people living in small houses, European regions based on language, income, age, profile and location.

Benefits Sought of a luxury watch Patek Philippe uses powerful emotional appeal to convey the benefits of ownership of a luxury watch . Note: Replace Maltesers ad with Exhibit 5.2 (Nokia 7270)

The ACORN Targeting Classification

Segmenting Organisational Markets Organisational segmentation Organisational size Industry Geographic location Choice Criteria Purchasing organisation

Five Criteria for Successful Segmentation 1. Effective 2. Measurable 3. Accessible 4. Actionable 5. Profitable Note: New Slide

Target Marketing Strategies Undifferentiated Marketing Target Marketing Strategies Focused Marketing Differentiated Marketing Customised Marketing

Target Marketing Strategies Undifferentiated marketing Marketing mix Whole market

Example of Undifferentiated Strategy ORGANISATION MARKETING MIX TARGET MARKET Price Promotion Product Distribution Post Office Everybody © The McGraw-Hill Companies, 2009 8 8 7 8 8 8

Target Marketing Strategies Differentiated marketing Marketing mix 1 Segment 1 Marketing mix 2 Segment 2 Marketing mix 3 Segment 3

Example of Differentiated Strategy Marketing Mix 1 Miss Selfridges 18- 24 age group Marketing Mix 2 Dorothy Perkins 20s & 30s Arcadia Group Marketing Mix 3 Evans Size 16+ Outfit Out of town convenience Marketing Mix 4 Wallis 30 plus age group Marketing Mix 5

Target Marketing Strategies Focused marketing Segment 1 Segment 2 Marketing mix Segment 3

Example of Focused Strategy Price conscious consumers MARKETING MIX ORGANISATION Unserved Price Promotion Product Distribution Bang & Olufsen Music systems Upmarket consumers Unserved Value seekers 10 10 10 10 9 9

Target Marketing Strategies Customised marketing Marketing mix 1 Customer 1 Marketing mix 2 Customer 2 Marketing mix 3 Customer 3

Example of Customised Strategy ORGANISATION INDIVIDUAL MIXES INDIVIDUAL CUSTOMERS Marketing Mix 1 Nissan Industrial Electronic Systems Supplier Marketing Mix 2 Birdseye Marketing Mix 3 Heinz Marketing Mix 4 Mercedes 14 14 14 14 13 11

Positioning…. ‘....is the act of designing the company’s offering so that is occupies a meaningful and distinct position in the target consumers mind’ Effective positioning is the act of linking products and services to the solutions that customers seek. Note: New Slide

Panasonic Lumix Camera This advertisement for Lumix digital cameras powerfully illustrates its core value proposition

Coke Zero Diet Coke and Coke Zero: virtually identical drinks that are positioned very differently

Keys to Successful Positioning Clarity Consistency Successful positioning Credibility Competitiveness

A Perceptual Map of Supermarkets High price A B C D Wide product range Narrow product range G X F E Low price

Repositioning Strategies Product Same Different Image repositioning Product repositioning Same Target market Intangible repositioning Tangible repositioning Different

Chapter Summary The process of market segmentation is based on the principle that not all customers have the same needs. They are many different variables which can be used for segmenting consumer and industrial markets. The 5 criteria for successful segmentation are: effective, measurable, accessible, actionable and profitable. There are 4 generic target marketing strategies: undifferentiated, differentiated, focus and customised marketing. Positioning is the key tool for conveying how companies meet customer needs with products and services. There are 4 repositioning strategies: image, product, intangible and tangible repositioning .