Market Segmentation, Targeting and Positioning Chapter 4 Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata

Slides prepared by Joe Rosagrata Market segmentation The process of dividing the total market for a good or service into smaller groups, each of which tends to be homogenous (or similar) in all significant aspects. One or more of these segments is then selected as the firm’s target market/s. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-1

Market segmentation (cont.) A separate marketing mix is then developed for each segment or group of segments. This is referred to as ‘Market Segmentation’. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-2

Slides prepared by Joe Rosagrata Segmentation categories Geographic—the study of city size, urban/suburban/rural population distribution and climate. Demographic—the study of distribution of population’s age, sex, income, stage in family cycle and ethnic background. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-3

Slides prepared by Joe Rosagrata Segmentation categories (cont.) Psychographic—personalties, lifestyles, social class including Activities Interests and Opinions (AIO). Behaviour towards products. Benefits desired or sought. Product usage rate. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-4

Slides prepared by Joe Rosagrata Benefits of segmentation Segmentation enables marketers to: Identify and satisfy specific benefits sought by particular groups. Identify needs, satisfy needs. Divide the market into segments by separating marketing programs. Select the target market. Action the market segmentation plan. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-5

Slides prepared by Joe Rosagrata Limitations of segmentation Segmentation can be expensive in terms of production and marketing of products to only those specific groups of the market. Mass production offers economies of scale. Standardisation of service offers increased delivery speed and efficiency. Increase in promotion, administrative and inventory costs. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-6

Slides prepared by Joe Rosagrata Market segmentation process Identify the needs and wants of customers. Identify the different characteristics between market segments. Estimate the market potential. ? Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-7

Slides prepared by Joe Rosagrata Identify the needs and wants of customers Objective is to identify needs not currently being satisfied. E.g. airlines might offer business travel although research shows that preferred departure and arrival times vary to those being offered. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-8

Slides prepared by Joe Rosagrata Conditions for effective segmentation The characteristics used to categorise customers must be measurable and the data obtainable. The segment itself must be accessible through existing marketing institutions with a minimum of cost and waste. A segment must be large enough to be profitable. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-9

Slides prepared by Joe Rosagrata A useful segmentation process must meet three conditions: Market Coverage Strategies Segment 1 Segment 2 Segment 3 Company Marketing Mix Company Mix 1 Company Mix 2 Company Mix 3 Market A. (Aggregation) Undifferentiated Marketing B. (Single segment) Differentiated Marketing C. (Multiple segments) Concentrated Marketing Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-10

Slides prepared by Joe Rosagrata Target market strategies The target market should be compatible with organisations goals and images. The marketing opportunity presented by the segment must match the company’s resources. The business must generate a profit if it is to continue its existence. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-11

Slides prepared by Joe Rosagrata Positioning The perception of a product or organisation in the consumer’s mind relative to their perception of other offerings in the same category. The key words are perception in the mind of a consumer which include attributes, benefits and brand. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-12

Slides prepared by Joe Rosagrata Factors of consideration Competition—look for a gap or niche. Customers—seek product attributes. The company—status of current image. Repositioning—have the needs of target market changed? The marketing mix—must support the selected position. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-13

Slides prepared by Joe Rosagrata Estimate the market potential Marketers need to know if a market is viable before segmentation occurs. Forecasting of market demand will determine: Market potential. Sales potential. Market share. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-14

Forecasting market demand Demand forecasting: estimating sales of a product during a defined future period. Market factors: items or elements that exist in a market, are measurable and are related to the demand of a product. Market potential: the total sales volume achievable in a given period. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-15

Forecasting market demand (cont.) Sales potential: this is the portion of market potential that a specific company could expect to achieve under ideal conditions. Market share: this is the proportion of total sales, by a single firm or brand, of a product during a given period in a specific market. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-16

Common methods of forecasting Market factor analysis. Direct derivation. Correlation analysis (refer e.g. p.85). Survey of buyer intentions. Test marketing. Trend analysis. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-17