Ajax Persaud Shirley Lichti Dhruv Grewal Michael Levy Week Five Segmentation Targeting and Positioning Ajax Persaud Shirley Lichti Dhruv Grewal Michael Levy

Chapter Objectives LEARNING OBJECTIVES LO1 Describe the STP process LO2 Describe the bases marketers use to segment a market LO3 Discuss the criteria for determining the attractiveness of a segment and whether it is worth pursuing (targeting) LO4 Explain how a firm decides what type of segmentation strategy to use: undifferentiated, differentiated, concentrated, or micromarketing LO5 Explain what positioning is and describe how do firms do it

Chapter Roadmap

Coke Zero “Real Men” didn’t want diet drinks Segment of men who wanted a lower calorie beverage Very successful new product launch

Segmentation Targeting Positioning Process LO1 Segmentation Targeting Positioning Process

Step 1: Establish Overall Strategy or Objectives LO1 Step 1: Establish Overall Strategy or Objectives Consistent with mission statement Derived from mission and current state The first step in the planning process is to articulate the mission and the objectives of the company’s marketing strategy clearly. The marketing strategy must be consistent with the mission and objectives, as well as its current situation (SWOT)

Step 2: Profile Segments LO2 Step 2: Profile Segments Segmentation Base Sample Segments Geographic Country, province, city, urban, rural, climate Continent: North America, Asia, Europe, Africa Region: Atlantic, Central, Western Canada Demographic Age, gender, income, education, occupation, ethnic background, religion, family life cycle, etc. Psychographic Lifestyles, Values, Personality, Self Concept Behavioural Benefits sought, Usage rates, User status, Loyalty Use a formal approach to segment the market. This step develops descriptions of the different segments, their needs, wants and characteristics, which helps firms better understand the profile of the customer in each segment. Marketers use various segmentation bases such as :

Geographic Segmentation LO2 Geographic Segmentation Divide market into separate geographic units Countries, regions provinces, cities, neighbourhoods, climate, etc. Develop appropriate marketing programs Geographic segmentation organizes customers into groups on the basis of where they live. It’s more useful for companies whose products satisfy needs that vary by region. They do adjustments to meet the needs of smaller geographic groups.

Test Your Knowledge Geographic segmentation is most useful for companies whose products satisfy needs that vary by __________. A) gender B) region C) age D) nationality

Demographic Segmentation LO2 Demographic Segmentation Most common method Divide market into groups based on: gender age ethnic group family lifecycle stage household type income Other, e.g. occupation, education, religion Census excellent source of segmentation data Statistics Canada Census data Groups consumers according to easily measured, objective characteristics such as age, gender, income and education. Depending on the nature of the market and the product, marketers may find it more advantageous to combine demographic segmentation with other segmentation bases.

Psychographic Segmentation LO2 Psychographic Segmentation How consumers describe themselves Self-values Self-concept Lifestyles This segmentation base delves into how consumers describe themselves. Allow people to describe themselves by using those characteristics that help them choose how they occupy their time (behaviour) and what underlying psychological reasons determine those choices. Determining psychographic involves knowing and understanding three key components : Self value are life goals, not just the goals one wants to accomplish in a day; a component of psychographics that refers to overriding desires that drive how a person lives his or her life. Self concept : The image a person has of himself or herself; a component of psychographics Lifestyle : Refers to the way a person lives his or her life to achieve goals.

LO2 VALS Framework The most widely used psychographic system is the VALS : A psychographical tool developed by strategic business insights, classifies consumers into eights segments in two dimensions. Vertical : Segments are described by their resources. Horizontal : Shows the segment’s primary motivation. It enables firms to identify target segments and their underlying motivations. It shows correlations between psychology and lifestyle choices. Psychographics are a very good complement to demographics. Limitations : Not as objective as demographics, and it is harder to identify potential customers. VALS Website

Behavioural Segmentation LO2 Behavioural Segmentation Benefits Sought User Status Usage Rate Loyalty Behavioural segmentation groups consumers on the basis of the benefits they derive from products or services, their usage rates of products or services, their user status, and their loyalty Benefit segmentation : Groups consumers based on the benefits they derive from products or services. Dividing the market into segments according to which consumers’ needs and wants your offerings can best satisfy makes a lot of sense. Loyal Customers : They feel so strongly that the firm can meet their relevant needs best that any competitors are virtually excluded from their considerations. It pays to retain loyal customers. Today’s companies are using Loyalty Segmentation (strategy of investing in retention and loyalty initiatives to retain the firm’s most profitable customers. Usage rates (Heavy users,…) User status (current users,…)

Using Multiple Segmentation Methods LO2 Using Multiple Segmentation Methods Companies use a combination of geographic, demographic, and lifestyle characteristics, called Geodemographic segmentation to classify consumers. One of the most widely used tools for geodemographic segmentation in Canada are PSYTE cluster profiles, developed by computersearch. It groups all neighbourhoods in Canada in 60 different lifestyles clusters with specific locations. Demographic and products preferences to explain consumer behavior. Geodemographic can be useful for retailers, and it is useful for finding new locations. It can also help marketers track and compare sales performance among various clusters in different locations. Such segmentation schemes present a problem for marketers attempting to identify specifically which customers are seeking these benefits. Developing a marketing strategy over the internet is easier.

Test Your Knowledge Which of the following tools is widely used for geodemographic segmentation? A) PRISM B) LSAT C) GNP D) LIMRA

LO2 Finding a Place to Live How can geodemographic segmentation be used to help consumers find the perfect place to live?

Case in Point: Neighborhood Scout LO2 Case in Point: Neighborhood Scout Challenge Answer Results To help homebuyers find the perfect neighborhood for their needs. Use geodemographic segmentation to identify the neighborhoods that most closely match their needs and wants. A patented neighborhood search engine with 70,000 subscribers and more than 1 million people who have used the service.

LO2

Step 3: Evaluate Segment Attractiveness LO3 Step 3: Evaluate Segment Attractiveness Evaluating the attractiveness of the various segments. Marketers first must determine whether the segment is worth pursuing by using several descriptive criteria :

Identifiable Who is in their market? Are the segments unique? LO3 Identifiable Who is in their market? Are the segments unique? Does each segment require a unique marketing mix? Who is within their market to be able to design products or services to meet their needs. Important to ensure that the segments are distinct from one another because too much overlap between segments means that distinct marketing strategies aren’t necessary to meet segment members’ needs. Discussion question When would these women all be in the same segment? When would they be in different segments?

Reachable Know the product exists Understand what it can do LO3 Reachable Know the product exists Understand what it can do Recognize how to buy Consumers must know the product or service exists, understand what it can do for them, and recognize how to buy it.

Responsive Customers must: React positively to firm’s offering LO3 Responsive Customers must: React positively to firm’s offering Move toward the firm’s products/services Accept the firm’s value proposition The customers in the segment must react similarly and positively to the firm’s offering.

Substantial and Profitable LO3 Substantial and Profitable Size matters Too small and segment is insignificant, not profitable Growth potential equally important Once the firm has identified its potential target markets, it needs to measure their size and growth potential. Marketers must also focus their assessments on the potential profitability of each segment, both current and future. Key factors to keep in mind in this analysis : Market Growth, Market Competitiveness, Market Access. Segment profitability = (Segment size*Segment adoption percentage*purchase behavior*profit margin percentage) – Fixed Costs In Some cases, it’s more accurate to evaluate the profitability of a segment over the lifetime of one of its typical customers (through customer lifetime value, the total value of purchases of the customer over a lifetime of patronage.

Profitable Segments Segment size = 60 million (<15 yrs) LO3 Profitable Segments Segment size = 60 million (<15 yrs) Segmentation Adoption Percentage = 35% Purchase Behavior = $500 x 1 time purchase Profit margin % = 10% Fixed Cost = $50M Is this segment profitable?

Test Your Knowledge Which of the following factors would be most useful in determining whether or not a product will be profitable? A) the region where the consumer lives B) the inflation rate C) the defection rate D) the speed of the distribution factors

Step 4: Selecting a Target Market LO4 Step 4: Selecting a Target Market You are a marketing manager for a denim company and need to choose a target market for a new line of jeans. Both the consumers pictured wear jeans. How do you choose? The key factor likely to affect this decision is the marketer’s ability to pursue such an opportunity or target segment. A firm is likely to assess both the attractiveness of the opportunity and its own competencies.

Segmentation Strategy LO4 Segmentation Strategy Undifferentiated segmentation strategy, or Mass Marketing : A marketing strategy a firm can use if the product or service is perceived to provide the same benefits to everyone, with no need to develop separate strategies for different groups. Can be useful for very basic items, or for smaller firms that offer product/services that consumers perceive to be indistinguishable. Differentiated Segmentation strategy : A strategy which a firm targets several market segments with a different offering for each. Help them obtain a bigger share of the market and increase the market for their products overall, and helps diversify the business thereby lowering the company’s overall risk. But can be expensive. Concentrated (Niche) Segmentation Strategy : A marketing strategy of selecting a single, primary target market and focusing all energies on providing a product that fit that market’s needs. Micromarketing (One-To-One) : An extreme form of segmentation that tailors a product or service to suit an individual customer’s wants or needs. It can lead to mass customization : The practice of interacting on a one-to-one basis with many people to create custom-made products or services; providing one-to-one marketing to the masses.

Test Your Knowledge Which of the following products is most likely to use an undifferentiated segmentation strategy? A) shoes B) jewellery C) cereal D) flour

Step 5: Identify and Develop Positioning Strategy Value Product Attributes Benefits & Symbolism Competition Market Leadership Positioning Methods The last step in developing a market segmentation strategy is Positioning : The mental picture that people have about a company and its products or services relative to competitors. Positioning is what determines consumers’ preference for a company’s product or brands. Preference is when consumers wants a company’s brand and won’t accept competitors’ substitues. It’s difficult because it’s not easy to shape consumers’ perceptions in the way marketers may want. Consumers’ perception do not change easily, and if it’s not done correctly, the brand may not succeed in the marketplace. Marketing positioning involves a process of defining the marketing mix variables so that target customers have a clear, distinctive, desirable understanding of what the product does or represents in comparison with competing products. Firms position their products and services according to value, products attributes, benefits and symbolism, and against competition.

Test Your Knowledge Positioning strategies generally focus on either how the product or service affects the consumer or how it is _______________. A) better than the previous year’s product line B) advertised on the Internet C) better than competitors’ products and services D) positioned relative to the company mission statement

Value Meet Grandpa Tony, now retired: LO5 Value Meet Grandpa Tony, now retired: He knows the price of everything he has ever bought. He clips the newspaper coupons. He goes to multiple stores to get the best price. He is willing to pay more for quality. He trusts brand names. It’s popular positioning method because the relationship of price to quality is among the most important considerations for consumers when they make a purchase decision. Good to attract new customer segments. Consumers are offered the best product or service but must pay a premium price to cover the additional cost. The relationship of price to quality Different consumers = different value

Product Attributes Meet Selia, first year student. LO5 Product Attributes Meet Selia, first year student. Reasons for her college choice: Close to home. Good academic reputation. Good financial aid package. Did we mention cute guys? Focuses on those attributs that are most important to the target market. Tend to focus on product leadership, emphasizing dimensions such as innovation, quality, performance, design and reliability. Focus on the attributes that are most important Vary by target market

Benefits and Symbolism LO5 Benefits and Symbolism Emphasizes the benefits of the brand as well as the psychological meaning of the brand to consumers. A well-known symbol can also be used as a positioning tool, especially to appeal to loyal customers. It can distinguishes it from its competitors.

Competition Position against a specific competitor LO5 Competition Position against a specific competitor Position against an entire product classification Head-to-head against a specific competitor or an entire product/service classification on similar attributes within the target market. Leads to price wars : Good for consumers, bad for business. Firms can also choose a differentiation strategy by going after a less competitive, smaller market niche.

Market Leadership May emphasize their leadership position within their industry.

Positioning by Using Perceptual Mapping When developing a positioning strategy, firms go through 5 important steps Perceptual Map : Displays, in two or more dimensions, the position of products or brands in the consumer’s mind. The position of each brand is denoted by a small circle, and the numbered asterisks denote consumers’ Ideal points (Where a particular market segment’s ideal product would lie on the map

LO5 Positioning Steps 1. Determine consumers’ perceptions and evaluations in relation to competitors’. 2. Identify competitors’ positions. 3. Determine consumer preferences. 4. Select the position. 5. Monitor the positioning strategy. 1 – Asking consumers a series of questions about their and competitors’ products. 3 – Now it must find out what the consumer really wants, and determine the ideal product or service that appeals to each market 5 – Firms must always view the first 3 steps of the positioning process as ongoing, with adjustments made in step 4 if necessary.

LO5 Perceptual Maps

Repositioning Whirlpool: New design Surf detergent: New message LO5 Repositioning Whirlpool: New design Surf detergent: New message Elizabeth Arden: New faces YM: New audience Gallo: New image Aqua Velva: New packaging Arm & Hammer: New uses Good marketers constantly re-evaluate their brand’s position to determine when to reposition it. Proactive companies change or tinker with their positioning to keep up with market dynamics. It strengthens the brand in the marketplace, thereby allowing the company to keep its core customers satisfied while drawing new customers to the brand. Brand repositioning refers to a strategy in which marketers change a brand’s focus to target new markets or realign the brand’s core emphasis with changing market preferences. New marketing opportunities also may spur firms to reposition their brands. Can change the quality image of the brand But can improve the brand’s fit with its target segment or boost the vitality of old brands, it’s not without costs and risks.