Chapter 4 Mohammad Ovais Market Segmentation, Targeting and Positioning

Consumer Market Segmentation Overview Segment, Segmentation defined Why to segment Types of Segmentation Different approaches towards segmentation Segmentation Bases/variables segmentation Levels Segmentation Criteria Segmentation Process Segmentation cases for students Kottler P. Marketing Management: A S. Asian Perspective. 13th Edition. Baines P. Marketing: 2nd Edition.

Segment, Segmentation defined A market segment consists of a group of customers who share a similar set of needs and wants. Market Segmentation: Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.

Why to Segment? Prevalence of mature markets Diverse buying requirements. Proliferation of media and distribution channels Difficult to practice “one size fits all” marketing

Critical Benefits: Efficiency of marketing, product development and services resources: Most potential segment Need oriented VALUE creation Effective marketing programs Efficient positioning

Segmentation Types Product Differentiation: Adopting and launching different versions of the offering so they may attract various segments of the mass market. (Pantene, Mobile packages) Research focused on product development Mature markets with perfect competition

Segmentation Types Customer Differentiation: When the marketer starts with customer needs i.e. groups uniform customer needs and then offer a solution in the form of a market offering. Easy paisa & Nivea Research Primarily focused on need determination

Segmentation Types Baine page 219

Approaches towards Segmentation Break Down Approach: [traditional, more common in B2B] Market behavior is uniform Find and segment Differences Build up Approach: Markets are divers in behavior Find and segment Similarities

Segmentation Bases: Profile Psychographic Behavioral Occasions Geographic Demographic Life Cycle Geo-demographic Psychographic Values and Lifestyles Benefit Sought Behavioral Occasions Benefits User Status Usage Rate (mobile Services) Buyer-Readiness Loyalty Status

Segmentation Intensity (Baines)

Profile Geographic Demographic Areas and Locality Urbanization Race and ethnicity Mobility Demographic Gender Income Generation Social class

Profile: Geodemographic

Profile Age and life Cycle stages

Psychographic Segmentation Values and Lifestyles: VALS

Psychographic Lifestyles Benefit Sought

Behavioral Segmentation Behavioral Variables Occasions Benefits User Status Usage Rate (mobile Services) Buyer-Readiness

Loyalty Status Hard-core Split loyal Shifting loyal Switchers

Steps in Segmentation Process Need-based segmentation Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem. Segment identification For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable). Segment attractiveness Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment. Segment profitability Segment positioning For each segment, create a “value proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics. Segment acid test. Test marketing Market mix strategy

Four levels of Segmentation Segment Marketing/MKT Segmentation Niche Marketing Local marketing Individual marketing

Niches Niche marketing: Distinct Need Pay premiums for best satisfaction fairly small in size, but with profit and growth potential Economies of scales through specialization. Examples Crack, Meswak, Cricket, Geo Super, QTV

Local areas Marketing programs tailored to the needs and wants of local customer groups in trading areas, neighborhoods, even individual stores. Nestle ek mazedar riwayat Zong boley Ja Lahore

Individuals One on One/ Customerization/ Segment of one marketing: Micromarketing UBL’s Galaria Zong “Choose your number”

Effective Segmentation Criteria Measurable Substantial Accessible Differentiable Actionable

Targeting

Case Study This case is about Amway, a global company that manufactures and distributes over 450 different consumer products and invests heavily in research and development in order to remain competitive and meet customer needs. For example, after several years of research and development, Amway produced a new range of products called Satinique, which used the ‘Ceramide Infusion System’. The core attribute is that Satinique contains a moisturizing agent, which can restore the nutrients in hair. Once Amway had developed the product they then undertook market research to determine which group of consumers they should target. Having identified a segment made up of professional women, who always want to look their best and who want professional, salonquality products and who rely on recommendations from friends when making haircare purchase decisions, they then developed a marketing strategy and implemented a successful marketing plan. Tale 2 is about NIVEA Sun, the leading sun care brand owned by Beiersdorf. There are three main usage segments in the sun care market: protection (from harmful rays), after sun (for relief and moisturizing after being in the sun), and self-tan (for those who want an all year round ‘cosmetic’ tan). Beiersdorf have developed their portfolio of NIVEA Sun brands around these usage segments, but unlike Amway have used innovation to develop products to meet customer needs identified through market research and segmentation analysis. For example, market research has shown that awareness of the need for protection from the sun does not necessarily lead to product purchase and usage. It was also found that women enjoy the luxurious nature of sun care products, men prefer convenience, and children don’t enjoy the sun cream application process. As a result NIVEA Sun developed and introduced a spray application device, designed specifically to appeal to men and their preference for convenience. They also introduced a coloured formulation for children’s sun products in order to make the application process more fun. Which of these two companies use a Build up approach and which uses a break down approach? Justify your selection. Who is following the product differentiation and who with market segmentation? What is the level of market segmentation by each of them? Choose a beauty, fragrance, or grooming product that you like to use and determine likely segments. Do you believe Amway should change their approach? Justify your decision.

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