Targeting 7 Segmentation Positioning Target marketing: Dividing the total market into different segments based on customer characteristics, selecting one or more segments, and developing products to meet those segments’ needs 7

Definition Market Segmentation: Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.

Steps in Market Segmentation, Targeting, and Positioning

Market Segmentation Key Topics Segmenting Consumer Markets Geographic segments Demographic segmentation Psychographic segmentation Behavioral segmentation Using multiple segmentation variables Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation

Market Segmentation Key Topics Segmenting Consumer Markets Geographical segmentation Marketing mixes are customized geographically Demographic segmentation Psychographic segmentation Behavioral segmentation Using multiple segmentation variables Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation

Geographic Segmentation Variables Market Segmentation Geographic Segmentation Variables City or Metro Size Neighborhood Density Climate World Region or Country Country Region City

Market Segmentation Key Topics Segmenting Consumer Markets Geographical segments Demographic segmentation Most popular type Demographics are closely related to needs, wants and usage rates Psychographic segmentation Behavioral segmentation Using multiple segmentation variables Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation

Demographic Segmentation Variables Market Segmentation Demographic Segmentation Variables Age Gender Family size Family life cycle Income Ethnicity Occupation Education Religion Generation Nationality

Market Segmentation Key Topics Segmenting Consumer Markets Geographic segments Demographic segmentation Psychographic segmentation Lifestyle, social class, and personality-based segmentation Behavioral segmentation Using multiple segmentation variables Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation

Market Segmentation Key Topics Segmenting Consumer Markets Geographic segments Demographic segmentation Psychographic segmentation Behavioral segmentation Typically done first Using multiple segmentation variables Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation

Behavioral Segmentation Variables Market Segmentation Behavioral Segmentation Variables Occasions Benefits User Status User Rates Loyalty Status Readiness Stage Attitude Toward the Product

Market Segmentation Key Topics Segmenting Consumer Markets Demographic segmentation Industry, company size, location Operating variables Technology, usage status, customer capabilities Purchasing approaches Situational factors Urgency, specific application, size of order Personal characteristics Buyer-seller similarity, attitudes toward risk, loyalty Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation

Market Segmentation Key Topics Segmenting Consumer Markets Geographic segmentation Location or region Economic factors Population income or level of economic development Political and legal factors Type / stability of government, monetary regulations, amount of bureaucracy, etc. Cultural factors Language, religion, values, attitudes, customs, behavioral patterns Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation

Market Segmentation Key Topics Segmenting Consumer Markets Measurable Size, purchasing power, and profile of segment Accessible Can be reached and served Substantial Large and profitable enough to serve Differentiable Respond differently Actionable Effective programs can be developed Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation

Target Marketing Evaluating Market Segments Segment size and growth Segment structural attractiveness Level of competition Substitute products Power of buyers Powerful suppliers Company objectives and resources

Target Marketing Strategies

Segmentation strategies MARKETING MIX All buyers in 1 segment An undifferentiated strategy is one that essentially avoids segmentation, appealing to a wide-spectrum of people. Products such as anti-freeze or candy bars use this type of approach. Undifferentiated

Differentiated MARKETING MIX 3 MARKETING MIX 1 MARKETING MIX 2 Segment 1 Segment 2 Segment 3 A company that chooses a differentiated strategy develops separate marketing programs for several segments of the market. This is a costly approach that is usually reserved for larger firms such as Nike, Toyota, or GE. Differentiated marketing targets several different market segments and designs separate offers for each. Segment 4 Differentiated

Concentrated/Micromarketing MARKETING MIX Segment 1 When a firm focuses its efforts on offering one or more products to a single segment, it is using a concentrated strategy. A concentrated strategy is often useful for smaller firms that do not have the resources or the desire to be all things to all people. Concentrated/Micromarketing

Target Marketing Choosing a Target- Marketing Strategy Requires Consideration of: Company resources The degree of product variability Product’s life-cycle stage Market variability Competitors’ marketing strategies

Positioning Positioning: The place the product occupies in consumers’ minds relative to competing products. Typically defined by consumers on the basis of important attributes.

Positioning Map Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions

Positioning Choosing a Positioning Strategy: Identifying possible competitive advantages -- many potential sources of differentiation exist: Products Services Channels People Image

Choosing a positioning Strategy IDENTIFY COMPETITIVE ADVANTAGES CHOOSE RIGHT COMPETITIVE ADVANTAGE The differentiation and positioning task consists of three steps: Identifying a set of differentiating competitive advantages upon which to build a position, Choosing the right competitive advantages, and Selecting an overall positioning strategy. SELECT POSITIONING STRATEGY

Competitive advantage To the extent that a company can differentiate and position itself as providing superior customer value, it gains competitive advantage.

Differentiation based on: PRODUCT DISTRIBUTION SERVICES PEOPLE IMAGE Identifying a set of possible competitive advantages to build a position by providing superior value from:

Positioning Choosing a Positioning Strategy: Choosing the right competitive advantage How many differences to promote? Unique selling proposition Positioning errors to avoid Which differences to promote?

Difference to promote should be: DISTINCTIVE IMPORTANT SUPERIOR COMMUNICABLE PREEMPTIVE AFFORDABLE Important: The difference delivers a highly valued benefit to target buyers. Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way. Superior: The difference is superior to other ways that customers might obtain the same benefit. Communicable: The difference is communicable and visible to buyers. Preemptive: Competitors cannot easily copy the difference. Affordable: Buyers can afford to pay for the difference. Profitable: The company can introduce the difference profitably. PROFITABLE

Defining Associations Points-of-difference (PODs) Attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand Points-of-parity (POPs) Associations that are not necessarily unique to the brand but may be shared with other brands

Consumer Desirability Criteria for PODs Relevance Distinctiveness Believability

Deliverability Criteria for PODs Feasibility Communicability Sustainability

Positioning Choosing a Positioning Strategy: Communicating and delivering the chosen position Entire marketing mix must support the chosen strategy May require changes to the product, pricing, distribution or promotion.