Segmentation, Targeting, and Positioning: Building the Right Relationships with the Right Customers 6

6-2 Steps in Market Segmentation, Targeting, and Positioning

6-3 Market Segmentation Geographic World Region or Country Region of Country City or Metro Size

6-4 Market Segmentation Demographic Segmentation Dividing the market into groups based on variables such as: Dividing the market into groups based on variables such as: –Age –Life-cycle stage or family size –Gender –Income –Occupation –Education –Religion –Race –Nationality

6-5 Market Segmentation P&G has different toothpastes for different age groups. P&G has different toothpastes for different age groups. Avoid stereotypes in promotions. Avoid stereotypes in promotions. Promote positive messages. Promote positive messages. Age and Life-Cycle Stage

6-6 Market Segmentation Women make 90% of home improvement decisions. Women make 90% of home improvement decisions. Women influence 80% of all household consumer purchases. Women influence 80% of all household consumer purchases. Gender

6-7 Market Segmentation Identifies and targets the affluent for luxury goods. Identifies and targets the affluent for luxury goods. People with _____ annual incomes can be a lucrative market. People with _____ annual incomes can be a lucrative market. Some manufacturers have different grades of products for different markets. Some manufacturers have different grades of products for different markets. Income

6-8 Market Segmentation Psychographic Social Class Personality

6-9 Psychographic Segmentation When Honda markets its Reflex and Elite scooters, it appeals to the rebellious, independent kid in all of us.

6-10 Market Segmentation Occasions: Occasions: –Special promotions and labels for holidays. –Special products for special occasions. Behavioral

6-11 Market Segmentation Benefits Sought: Benefits Sought: –Different segments desire different benefits from products. Behavioral

6-12 Market Segmentation User Status: User Status: –Nonusers, ex-users –Potential users –First-time users –Regular users Behavioral Usage Rate: Usage Rate: –Light –Medium –Heavy

6-13 Market Segmentation Loyalty Status: Loyalty Status: –Brands –Stores –Companies Behavioral

6-14 Market Segmentation Best to use multiple approaches in order to identify smaller, better-defined target groups. 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. Start with a single base and then expand to other bases.

6-15 Geodemographic Segmentation Claritas, Inc. Claritas, Inc. Potential Rating Index for Zip Markets (PRIZM) Potential Rating Index for Zip Markets (PRIZM) Based on U.S. Census data Based on U.S. Census data Profiles on 260,000 U.S. neighborhoods Profiles on 260,000 U.S. neighborhoods 62 clusters or types 62 clusters or types

6-16 Segmenting International Markets Factors Used: Geographic Location Economic Factors Political and Legal Factors

6-17 Intermarket Segmentation Teens show surprising similarity no matter where in the world they live. For instance, this teen could live almost anywhere. Thus, many companies target teenagers with worldwide marketing campaigns.

6-18 Size, purchasing power, profiles of segments can be measured. Segments can be effectively reached and served. Segments are large or profitable enough to serve. Accessible Substantial Actionable Segments must respond differently to different marketing mix elements & programs. Effective programs can be designed to attract and serve the segments. Market Segmentation Requirements for Effective Segmentation

6-19 Evaluating Market Segments Segment Size and Growth Segment Size and Growth –Analyze current segment sales, growth rates, and expected profitability. Segment Structural Attractiveness Segment Structural Attractiveness –Consider effects of: competitors, existence of substitute products, and the power of buyers & suppliers. Company Objectives and Resources Company Objectives and Resources –Examine company skills & resources needed to succeed in that segment. –Offer superior value and gain advantages over competitors.

6-20 Target Marketing Strategies

6-21 Undifferentiated Marketing Focus is on common (not different) needs of consumers. Focus is on common (not different) needs of consumers. Product and marketing program are geared to the largest number of buyers. Product and marketing program are geared to the largest number of buyers. Uses mass advertising and distribution. Uses mass advertising and distribution.

6-22 Differentiated Marketing Firm targets several market segments and designs separate offers for each. 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. The goal is to have higher sales and a stronger position with each market segment. This approach increases the costs of doing business. This approach increases the costs of doing business.

6-23 Concentrated Marketing The focus is acquiring a large share of one or a few segments of niches. The focus is acquiring a large share of one or a few segments of niches. Generally, there are fewer competitors. Generally, there are fewer competitors. The Internet is ideal for targeting small niche markets. The Internet is ideal for targeting small niche markets. There is some risk in focusing on only one market. There is some risk in focusing on only one market.

6-24 Micromarketing Tailoring products and marketing programs to suit the tastes of specific individuals and locations. 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, neighborhoods, specific stores. –Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers.

6-25 Choosing a Market Coverage Strategy Company Resources Product Variability Product’s Life-Cycle Stage Market Variability Competitors’ Marketing Strategies Factors to Consider:

6-26 Socially Responsible Target Marketing Smart targeting helps both companies and consumers. Smart targeting helps both companies and consumers. Target marketing sometimes generates controversy and concern. 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.

6-27 Positioning for Competitive Advantage Product’s position is the way the product is defined by consumers on important attributes. Product’s position is the way the product is defined by consumers on important attributes. The place the product occupies in consumers’ minds relative to competing products. The place the product occupies in consumers’ minds relative to competing products.

6-28 Choosing a Positioning Strategy #1 Identify a set of possible competitive advantages on which to build a position #2 Choose the right competitive advantages #3 Select an overall positioning strategy

6-29 Identifying Possible Competitive Advantages Key to winning target customers is to understand their needs better than competitors do and to deliver more value. 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. Competitive advantage – extent to which a company can position itself as providing superior value.

6-30 Services Differentiation (e.g., speed, convenience, careful delivery) Product Differentiation (e.g., consistency, durability, reliability, repairability ) People Differentiation (e.g., hiring, training better people than competitors) Image Differentiation (e.g., convey benefits and positioning) Channel Differentiation Identifying Possible Competitive Advantages

6-31 Positioning Errors Underpositioning: Underpositioning: Overpositioning: Overpositioning: –Giving buyers too narrow a picture of the company. Confused Positioning: Confused Positioning: –Leaving buyers with a confused image of a company.

6-32 Affordable Superior Preemptive Distinctive Important Choosing Right Competitive Advantages

6-33 Possible Value Propositions

6-34 Value Proposition “Much more for much more” value proposition: Häagen- Dazs offers its super- premium ice cream at a price never before charged.

6-35 Communicating and Delivering the Chosen Position Company must take strong steps to deliver and communicate the desired position to target consumers. Company must take strong steps to deliver and communicate the desired position to target consumers. The marketing mix efforts must support the positioning strategy. The marketing mix efforts must support the positioning strategy. Must monitor and adapt the position over time to match changes in consumer needs and competitors’ strategies. Must monitor and adapt the position over time to match changes in consumer needs and competitors’ strategies.