Formulating Strategic Marketing Programs Market Segmentation and Positioning

What is Market Segmentation? n Process of dividing a potential market into distinct subsets of consumers with common needs or characteristics. n Separating a heterogeneous market into smaller homogeneous units.

Important Elements of Market Segmentation n Each market segment has unique needs and wants and will have a unique demand curve. n Each market segment requires its own marketing strategy and marketing plan. n Market segmentation produces increased costs to the firm in the short run. n Increased costs are generally offset by increasing sales in the long run.

Market Positioning n Match offerings of firm to the needs and wants of market segments. n Effective positioning involves understanding customers’ perceptions about both the psychological and physical characteristics of offerings.

The Segmentation--Positioning Process Needs-Based Segmentation

Primary needs Articulated needs Exciting needs

The Segmentation Process Needs-Based Segmentation Segment Identification

Segmentation Bases n Geographic –Country –Region –County size –SMSA population –Density n Demographic –Age –Sex –Education –Occupation –Race –Family life cycle

Segmentation Bases n Psychographic –Social class –Personality –Lifestyle –Activities, interests, & opinions (AIO’s) n Behavioralistic –Decision unit –Usage rate –Readiness –Benefits sought –Occasion –Brand loyalty

The Segmentation Process Needs-Based Segmentation Segment Identification Segment Attractiveness

The Segmentation Process Needs-Based Segmentation Segment Identification Segment Attractiveness Segment Positioning Strategy

Positioning Strategy n Create positioning statement based on unique customer needs. n Differentiating your product from the competitions’ in the minds of the target customers

Positioning Statement n To communicate positioning, a marketing plan should include a positioning statement following the form: “To (target group and need) our (brand) is (concept) that (point of difference).”

Points to Remember About Positioning: n Based on consumer perceptions of tangible and intangible characteristics of offering. n The intensity of the brand will affect positioning.

The Segmentation Process Needs-Based Segmentation Segment Identification Segment Attractiveness Segment Positioning Strategy Positioning “Acid” Test

Testing the Positioning Statement n Test the positioning statement with target consumers--what do they think, how do they react to the statement? n Assess need level: the stronger the need, the higher the expected customer interest. –“Do you see this product as solving a problem or filling a need for you?”

Testing, continued... n Communicability and believability: if the scores on these dimensions are low, the positioning must be refined or revised. –“Are the benefits clear to you and believable?”

Testing, continued... n Perceived value: The higher the perceived vale, the higher the expected consumer interest. –“Is the price reasonable in relation to the value?”

Testing, continued... n Gap level between the new product and existing products: The greater the gap, the higher the expected consumer interest. –“Do other products currently meet this need and satisfy you?”

The Segmentation Process Needs-Based Segmentation Segment Identification Segment Attractiveness Segment Positioning Strategy Positioning “Acid” Test Strategy Implementation

Segmentation Strategies Mass Marketing Mass Customization

Multisegment Strategy n Pursue two or more segments that are attractive and profitable, but not the whole market.

Sequential Segment Strategy n Multisegment approach, but rather than pursuing all the attractive segments simultaneously, pursue the most attractive first; when cash flow from that segment is positive, then pursue the next most attractive segment, and so on.

Single-Segment Strategy n Focus on just one attractive segment.

Niche Segment Strategy n Focus on a smaller group within a segment. n Requires a further customization of marketing strategy.

Mass Customization Strategy n Focus on all niches within a segment by customizing strategies to each subsegment.