Copyright © 2007 Pearson Education Canada Marketing: An Introduction Second Canadian Edition Armstrong, Kotler, Cunningham, Mitchell and Buchwitz Chapter Seven Segmentation, Targeting and Positioning: Building the Right Relationships with the Right Customers Copyright © 2007 Pearson Education Canada

Copyright © 2007 Pearson Education Canada Looking Ahead Define the three steps of target marketing: market segmentation, market targeting and market positioning. List and discuss the major bases for segmenting consumer and business markets. Explain how companies identify attractive market segments and choose a target marketing strategy. Discuss how companies position their products for maximum competitive advantage in the marketplace. Copyright © 2007 Pearson Education Canada

Segmentation/Positioning Segment markets. Identify bases for segmentation. Develop segmentation profiles. Target segment(s). Measure of segment attractiveness. Select the target segment(s). Position for target segment(s). Develop positioning for each segment. Develop appropriate marketing mix. Copyright © 2007 Pearson Education Canada

Segmentation Variables Geographic. Area, population density, climate etc. Demographic. Age, sex, lifecycle, income, job, etc Psychographic. Lifestyle, personality. Behavioural. Benefits sought, status, usage rate, loyalty, attitudes, etc. Copyright © 2007 Pearson Education Canada

Geographic Segmentation World region or country. Region of country. City or metro size. Density or climate. Copyright © 2007 Pearson Education Canada

Demographic Segmentation Age, gender, family size, income, occupation, etc. The most popular bases for segmenting customer groups. Easier to measure than most other types of variables. Copyright © 2007 Pearson Education Canada

Demographic Segmentation Gender. Women make 90% of home improvement decisions. Women influence 80% of all household consumer purchases. Income. Identifies and targets the affluent for luxury goods. People with low annual incomes can be a lucrative market. Some manufacturers have different grades of products for different markets. Copyright © 2007 Pearson Education Canada

Demographic Segmentation Age and life-cycle. Do not necessarily match. Middle aged people starting new families. Seniors going back to university or college . Products targeted at age or life-cycle stages. P&G has different toothpastes for different age groups. Avoid stereotypes in promotions. Promote positive messages. Copyright © 2007 Pearson Education Canada

Psychographic Segmentation Dividing a market into different groups based on: Social class. Lifestyle. Personality characteristics. Targeting whitening toothpaste at psychographic segment who are active and concerned about sexual attractiveness. Copyright © 2007 Pearson Education Canada

Behavioural Segmentation Occasions. Special promotions for holidays. (e.g., Hershey Kisses). Special products for special occasions. (e.g., Kodak disposable cameras). Benefits sought. Different segments desire different benefits from products. e.g., P&G’s multiple brands of laundry detergents to satisfy different needs in the product category. Copyright © 2007 Pearson Education Canada

Behavioural Segmentation Loyalty status. Brands. Stores. Companies. User status. Nonusers, ex-users. Potential users. First-time users. Regular users. Usage rate. Light. Medium. Heavy. Copyright © 2007 Pearson Education Canada

Copyright © 2007 Pearson Education Canada Market Segmentation Best to use multiple approaches in order to identify smaller, better-defined target groups. Start with a single base and then expand to other bases. Copyright © 2007 Pearson Education Canada

Segmenting Business Markets Consumer and business markets use many of the same variables for segmentation. Business marketers can also use: Operating characteristics. Purchasing approaches. Situational factors. Personal characteristics. Copyright © 2007 Pearson Education Canada

Segmenting International Markets Factors for segmenting foreign markets. Geographic location. Economic situation. Culture. Political and legal situation and issues. Intermarket segmentation. When there is little difference across international markets. Teenagers all over the world tend to be the same. Copyright © 2007 Pearson Education Canada

Evaluating Market Segments Segment size and growth. Analyze current segment sales, growth rates and expected profitability. Segment structural attractiveness. Consider effects of: competitors, existence of substitute products, the power of buyers/suppliers. Company objectives and resources. Examine company skills and resources needed to succeed in that segment. Offer superior value/gain competitive advantage. Chapter 7, page 263 Copyright © 2007 Pearson Education Canada

Segment Success Criteria Measurable - Ability to measure numerically. Accessible - Ability to reach segment. Substantial – Ability to support the business. Differentiable – Ability to find unique position in segment. Actionable – Ability to pursue and capture the segment. Chapter 7, page 261-62 Copyright © 2007 Pearson Education Canada

Levels of Segmentation Mass marketing. No segments and single marketing mix. Differentiated marketing. Large segments with specific marketing mixes. Niche marketing. Small segments with specialized marketing mixes. Micro-marketing. Customized marketing to individuals. Copyright © 2007 Pearson Education Canada

Undifferentiated Marketing Focus is on common (not different) needs of consumers. Product and marketing program are geared to the largest number of buyers. Uses mass advertising and distribution. Henry Ford’s Model T excellent example of undifferentiated or mass marketing. Copyright © 2007 Pearson Education Canada

Differentiated Marketing Firm targets several market segments and designs separate offers for each. The goal is to have higher sales and a stronger position with each market segment. This approach increases the costs of doing business. General Motors claims to make a car for every segment. Copyright © 2007 Pearson Education Canada

Copyright © 2007 Pearson Education Canada Niche Marketing The focus is acquiring a large share of one or a few segments of niches. Generally, there are fewer competitors. The Internet is ideal for targeting small niche markets. There is some risk in focusing on only one market. Copyright © 2007 Pearson Education Canada

Copyright © 2007 Pearson Education Canada Micromarketing Tailoring products and marketing programs to suit the tastes of specific individuals and locations. Local Marketing: Tailoring brands and promotions to the needs and wants of local customer groups—cities, neighbourhoods, specific stores. Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers. Copyright © 2007 Pearson Education Canada

Copyright © 2007 Pearson Education Canada Mass Customization The process of creating customer-unique value by designing products and services tailor-made to individual needs, on a large scale. Having your next car or sneakers built to order? Copyright © 2007 Pearson Education Canada

Market Coverage Strategy Company resources. Degree of product variability. Product life cycle stage. Market viability. Competitors’ marketing strategies. Company Resources: Limited resources – stick with concentrated strategy; lots of resources – use a differentiated strategy. Product Variability: Milk, citrus, aluminum, etc. use undifferentiated strategy. Product Life-Cycle: New product with no competition use undifferentiated strategy; mature stage with competition use differentiated strategy Market Variability: If most buyers have the same tastes, buy the same amounts and react the same way to marketing efforts, undifferentiated approach is OK. Competitors’ Marketing Strategies: If competition is using differentiated or concentrated you have to match that strategy. If competition is using undifferentiated, go with differentiated or concentrated. Copyright © 2007 Pearson Education Canada

Socially Responsible Target Marketing Smart targeting helps both companies and consumers. Target marketing sometimes generates controversy and concern. Vulnerable and disadvantaged can be targeted. Cereal, cigarette, beer and fast-food marketers have received criticism. Internet has raised fresh concerns about potential targeting abuses. Smart targeting helps companies to be more efficient and effective by focusing on the segments that they can satisfy best and most profitably. 1). Target marketing sometimes generates controversy and concern (e.g., cereal with premiums/prizes targeted at children). 2). Industries that have generated controversy include cigarettes, beer and fast-food. 3). The meteoric growth of the Internet and other carefully targeted direct media has raised fresh concerns about potential targeting abuses. 4). In market targeting, the issue is not really who is targeted but rather how and for what (i.e., when vulnerable segments are targeted with questionable products or tactics). Copyright © 2007 Pearson Education Canada

Successful Positioning Product position. How a product is viewed by consumers relative to competing products. Three positioning steps. Identify competitive advantages on which to build a differentiated position. Choose the right competitive differentiation. Select an overall positioning strategy. Copyright © 2007 Pearson Education Canada

Gaining Competitive Advantage Key to winning target customers is to understand their needs better than competitors do and to deliver more value. Competitive advantage – extent to which a company can position itself as providing superior value. Copyright © 2007 Pearson Education Canada

Identifying Competitive Advantage Product differentiation. Consistency, durability, reliability, reparability. Services differentiation. Speed, convenience, careful delivery. Image differentiation. Convey benefits and positioning. People differentiation. Hiring, training better people than competition Copyright © 2007 Pearson Education Canada

Successful Differentiation Important – of value to consumers. Distinctive – obvious and clear. Superior – better value than competitors. Communicable – explainable. Pre-emptive – defendable and unique. Affordable – delivers value for cost. Profitable – company can make money. Copyright © 2007 Pearson Education Canada

Copyright © 2007 Pearson Education Canada Positioning Errors Under-positioning. Failing to really position the company at all. Over-positioning. Giving buyers too narrow a picture of the company. Confused positioning. Leaving buyers with a confused image of a company. Copyright © 2007 Pearson Education Canada

Copyright © 2007 Pearson Education Canada Value Propositions Price More for more for the same less The same Less for much Less Benefits Copyright © 2007 Pearson Education Canada

Communicating and Delivering the Chosen Position Take strong steps to deliver and communicate the desired position to target consumers. Support positioning strategy with marketing mix efforts. Monitor and adapt the position over time to match changes in consumer needs and competitors’ strategies. Copyright © 2007 Pearson Education Canada

Copyright © 2007 Pearson Education Canada Looking Back Define the three steps of target marketing: market segmentation, market targeting and market positioning. List and discuss the major bases for segmenting consumer and business markets. Explain how companies identify attractive market segments and choose a target marketing strategy. Discuss how companies position their products for maximum competitive advantage in the marketplace. Copyright © 2007 Pearson Education Canada