CH8 SEGMENTATION AND POSITIONING STRATGIES

INTRODUCTION Customer info files have revolutionised banks’ ability to analyse and segment their markets. 5 market segment approaches are; geographic, demographic, psychographic, volume and benefit segment. 3 alternative approaches to segment selection are; undifferentiated marketing, differentiated marketing and concentrated marketing.

SEGMENTING THE MARKET MARKETING SEGMENTATION- an element of the marketing strategy, stresses the importance of specialising to meet the needs of a segment (rather than all). It subdivides a market into groups of customers who have similar needs, allowing the selected market to be targeted with a distinctive marketing mix. Since 1990’s, with the use of MCIF, its major banking tool. They use the info gathered by MCIF to identfy profitable customers.

Data generated by MCIF is used to prepare strategic reports that are used to support marketing goals. The object of marketing segmentation is to identify a specific user group and then pursue it with tailored marketing mix. Market segments must have certain qualities that make it possible to specialise the marketing approach. The segment must be; measurable, accessible and stable. Therefore it must be possible to measure the size and purchasing power of the market segment and it must be feasible to reach in order to generate a profitable volume.

SEGMENTATION STRATEGIES 1.GEOGRAPHIC SEGMENTATION Divides the market according to geographic units. Used to market different good to different areas. For banks it also includes deciding a location for a new branch- want to be in the most promising geographical areas (due to limited resources). 2.DEMOGRAPHIC SEGMENTATION Categorises the market in terms of population characteristics; age, sex, income, occupation and position in the life cycle. Most commonly used strategy

3.PSYCHOGRAPHIC SEGMENTATION Classifies the market in behavioural terms according to; lifestyle, social class, or personality profile. 4.VOLUME SEGMENTATION Marketers try to distinguish heavy, medium and light users of a product. PARETO PRINCIPLE- 80% of profits come from 20% of customers. 5.BENEFIT SEGMENTATION Categorising the market in terms of the main product-related benefits sought by different groups. Builds a strategy around delivery of a specific benefit.

SEGMENTING THE COMERICAL BANKING MARKET 3 Most likely used are; geographic, sales volume and industry segmentation. A bank may use all 3 simultaneously, when trying to achieve sales volume goals. They use demographic segmentation when establishing regional loan centres. They would use industry when identifying specific industries having enough firms in the banks trading area to be sizeable. Targeted segments must be measurable, accessible and profitable.

TARGET MARKET SELECTION Guideline for selecting target market: 1.TARGET SHOULD BE CONSISTENT, OR ATLEAST COMPATIBLE WITH BANK’S GOALS AND IMAGE Selected market needs to support the target market’s perceptions 2.SHOULD SEEK MARKETS THAT ARE CONSISTENT ITS RESOURCES Banks opportunities are limited by their limited supply of resources to carryout these opportunities.

3.SHOULD SEEK MARKETS THAT WILL GENERATE A PROFITABLE VOLUME Customer satisfaction at a profit is important 4.SEEK A TARGET MARKET FOR WHICH THE NUMBER AND SIZE OF COMPETITORS IS SMALL Its harder to shift customers away from need-satisfying situations, than to fill unmet needs

STRATEGIES IN SELECTING A TARGET MARKET 1.UNDIFFERENTIATED MARKETING Also known as market aggregation- avoids segmentation and targets the mass market with one offer. Product, pricing, promotion and distribution designed to appeal to all. This strategy is used in industries where there is little competition. Leads to low penetration of total market.

2.DIFFERENTIATED MARKETING Also known as multiple segmentation- firm selects 2/more segments as target markets and develops different offers for each segment. Done in 2 ways: 1- offer different products to each market segments 2- offer the same product but through a different promotional strategy Results in greater sales volume because of greater penetration of smaller markets. More expensive than undifferentiated marketing.

3.CONCERNTRATED MARKETING Also known as single segment marketing- marketer selects one target market and develops only 1 marketing mix strategy. This enables them to make good use of limited resources. Helping them to penetrate 1 market deeply and develop a reputation as an expert in that market. Can be risky as their success may welcome competitors to that market. Therefore reducing their sales volume and increasing promotional expenses.

POSITIONING “You position the product in the mind of the prospect”- Trout and Ries Positioning strategies: POSITION IN RELATION TO COMPETITORS POSITION IN RELATION TO A PRODUCT CLASS POSITIONING A PRODUCT/SERVICE AS MORE ACCESSIBLE POSITIONING ALONG PRICE/QUALITY DIMENSIONS

5 RULES OF POSITIONING 1- Position your bank or someone else will 2- know your target customer thoroughly 3- be only what you can be 4- tell your customers why they are special 5- be consistent