Identifying Market Segments and Targets

Starting Note… Companies can not connect with all customers in large, broad, or diverse market. But they can divide such markets into groups of consumers or segments with distinct needs and wants. A company then need to identify which market it can serve effectively. This decision requires a keen understanding of consumer behavior and careful strategic planning.

Effective Targeting Requires… 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) Establish and communicate the distinctive benefits of the market offering. (market positioning)

Steps in Market Segmentation, Targeting, and Positioning 1.Identify segmentation variables and segment the market 2.Develop profiles of resulting segmentsMarketSegmentation 3. Evaluate attractiveness of each segment 4. Select the target segment(s)MarketTargeting 5. Identify possible positioning concepts for each target segment 6. Select, develop, and communicate the chosen positioning conceptMarketPositioning

Bases for Segmenting Consumer Markets Occasions, Benefits, Uses, or Attitudes Behavioral Geographic Region, City or Metro Size, Density, Climate Demographic Age, Gender, Family size and Fife cycle, Race, Occupation, or Income... Lifestyle or Personality Psychographic

Bases For Segmenting Consumer Markets Geographic Segmentation Division of the market into different geographical units such as nations, states, regions, countries, cities or neighborhoods etc. Demographic Segmentation We divide the market into groups on the basis of variables such as age, family size, family life cycle, gender, income, occupation, religion, race, generation, nationality and social class etc.

Bases For Segmenting Consumer Markets Psychographic Segmentation Buyers are divided into different groups on the basis of psychological/personality traits, lifestyle, or values. Behavioral Segmentation Marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product.

Demographic Segmentation Age and Life-Cycle Stage Gender Income Generation Social Class Occupation

Behavioral Segmentation Behavioral Variables Occasions Benefits User Status Usage Rate Buyer-Readiness Loyalty Status Attitude

Loyalty Status Hard-core Consumer who buy only one brand all the time. Split loyals Consumers who are loyal to two or three brands. Shifting loyals Consumers who shift loyalty from one brand to another. Switchers Consumers who show no loyalty to any brand.

Measurable Accessible Substantial Differential Segments must be large or profitable enough to serve. Segments can be effectively reached and served. Actionable Size, purchasing power, profiles of segments can be measured. Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments. Effective Segmentation

Targeting Target market Segment C Segment B Segment A

Targeting An organization’s proactive selection of a suitable market segment (or segments) with the intention of heavily focusing the firm’s marketing offers and activities towards this group of related consumers.

Target Selection Criteria Assessment Factor What to consider? A. Financial Issues Segment size What is the size of the segment (mainly in terms of unit and revenue sales)? And is this substantial enough for the firm to consider entering? Segment growth rate At what rate is the segment growing (or perhaps declining)? What is its future outlook? Profit margins Is this a high profit margin segment or one that is price competitive?

Assessment Factor What to consider? B. Structural Attractiveness Competitors How dominant are the established competitors? What degree of competitive rivalry exists? Are there significant indirect competitors (or close substitute products)? Distribution channels How easy would it be to gain access to the appropriate distribution channels? What level of new investment would be required in this regard?

Assessment Factor What to consider? C. Strategic Direction Strategy How well does the proposed target market fit with the firm’s strategic direction and growth goals? Goals What does the firm have high or low growth expectations?

Assessment Factor What to consider? D. Marketing Expertise Resources Does the firm have the financial position and staff resources to successfully enter in this segment? Capability Does the firm have the capability to develop appropriate products in a supportive marketing mix Role of brand Would the firm be required to create a new brand, or could an existing brand be leveraged into the new target market, or is brand relatively unimportant?

Assessment Factor What to consider? E. Opportunity Cost Growth options What is a range of other opportunities available for growth to the firm

Positioning

What is Positioning? Positioning is an act of designing a company’s offerings and image to occupy a distinctive place in the mind of the target market. The goal is to locate the brand in the minds of the consumers to maximize potential benefits to the firm. A good brand positioning helps guide marketing strategy by clarifying the brand’s essence, identifying goals it helps consumer achieve and showing how it does so in a unique way.

Value Propositions A result of positioning is the successful creation of customer focused value proposition (a clear, logical and convincing reason why target market should buy you product)

How to do Positioning? Positioning requires the marketers define and communicate similarities and difference between their brand and its competitors. Specifically positioning requires 1) Determining frame of reference by identifying the target market and relevant competition 2) Identifying the optimal point of parity and points of difference brand association given that frame of reference 3) Creating brand mantra to summarize the positioning and essence of brand

Competitive Frame of Reference  The competitive frame of reference defines which a brand competes with and therefore which brands should be the focus of competitive analysis.  A good starting point in defining a competitive frame of reference for brand positioning is to determine category membership—the products or sets of products with which a brand competes and which function as close substitutes  Identifying Competitors  Analyzing Competitors

Defining Associations Points-of-difference Attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand Apple (design, ease of use) Nike (performance, innovative technology, winning) Southwest Airlines (value, reliability and fun personality) Points-of-parity Associations that are not necessarily unique to the brand but may be shared with other brands

Point-of-Difference Criteria Desirable to consumer Deliverable by company Differentiating from competitors Three key criteria determine whether a brand association can truly function as a point-of-difference— desirability, deliverability, and differentiability.

What do you understand by POP and POD?

POP versus POD For an offering to achieve a point-of- parity on a particular attribute or benefit, a sufficient number of consumers must believe the brand is “good enough” on that dimension. There is a zone or range of tolerance or acceptance with points-of-parity. The brand does not literally need to be seen as equal to competitors, but consumers must feel it does well enough on that particular attribute or benefit. If they do, they may be willing to base their evaluations and decisions on other factors potentially more favorable to the brand.

Figure 9.1a Perceptual Map: Current Perceptions

Figure 9.1b Perceptual Map: Possibilities

Brand Mantras

A brand mantra is an articulation of heart and soul of the brand and is closely related to other branding concepts like ‘brand essence’ and ‘brand promises’ Brand mantras are short, three to five word phrases that capture the irrefutable essence or spirit of brand positioning. McDonald – “Food, Folks, and Fun” Nike – “ Authentic Athletic Performance” Disney – “Fun Family Entertainment” CG Group – “Touching Lives Everyday”

Designing a Brand Mantra Communicate Simplify Inspire

Establishing Brand Positioning Requires consumers understand what brand offers and what makes it superior competitive choice. Communicating Category Membership Communicating POPs and PODs

Constructing a Brand Positioning Bull’s-Eye

Means of Differentiation Employee – Singapore Airlines Channel – Eureka Forbes – direct to homes Image - Marlboro Services – McDonald

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