1. Copyright © 2007 McGraw-Hill Ryerson Limited

2. Objectives To understand: The most important strategies used by marketers. The concept of market segmentation – meaning, benefits, limitations, and applications. The fundamental principles behind market segment identification and selection. The difference between end-consumer markets (B2C) and business markets (B2B). The principal bases for segmenting consumer markets.

3. Copyright © 2007 McGraw-Hill Ryerson Limited Objectives To understand: Segmentation of the market based on demographic, lifestyle, and product-related factors. The importance of positioning a brand or company to appeal to target customer segments. Niche marketing and other positioning strategies to appeal to target segments. The need for a differentiation strategy to set a brand or company apart from the competition. The basis for a value-add strategy.

4. Copyright © 2007 McGraw-Hill Ryerson Limited Strategic Decision-Making Target decision Positioning decision The offer decision

5. Copyright © 2007 McGraw-Hill Ryerson Limited Nature of Market Segmentation Cannot be “all things to all people.” Market segmentation divides the total market for a product or service into several segments. Each segment tends to be homogenous in many significant aspects. Management selects one or more of these market segments as the organization’s target market.

6. Copyright © 2007 McGraw-Hill Ryerson Limited Benefits of Market Segmentation Satisfy customers better by: Making more efficient use of marketing resources. Developing more efficient and effective marketing strategies for the many target markets a firm reaches.

7. Copyright © 2007 McGraw-Hill Ryerson Limited Conditions for Segmentation Basis for segmentation must be measurable and the data accessible. The targeted market segment must be accessible through existing marketing channels. Each segment should be large enough to be profitable.

8. Copyright © 2007 McGraw-Hill Ryerson Limited Selecting Target Segments A target segment is… A group of customers to whom a company specifically directs its marketing efforts.

9. Copyright © 2007 McGraw-Hill Ryerson Limited Selecting Target Segments Selecting customer segments is essential for the development of an effective marketing program. Competition has intensified. Market fragmentation

10. Copyright © 2007 McGraw-Hill Ryerson Limited Guidelines in Target Segment Selection 1.Target segments should be compatible with the organization’s goals and image. 2.Match the market opportunity represented in the target markets with the company’s resources. 3.Pursue profitable sales volume. 4.Seek a market where there are the fewest and smallest competitors.

11. Copyright © 2007 McGraw-Hill Ryerson Limited Market Opportunity Analysis The existence of an opportunity segment is identified only once a company has determined through analysis that they can offer added value at a profit.

12. Copyright © 2007 McGraw-Hill Ryerson Limited Basis for Segmenting Consumer Markets May segment B2C market on: Geographic bases – where they are located Demographics – their characteristics Psychographic – their attitudes and values Behavioural – why/how product is used Consider trends and their implications.

13. Copyright © 2007 McGraw-Hill Ryerson Limited Geographic Segmentation The process of segmenting a market into geographic regions and developing a different marketing strategy for each region.

14. Copyright © 2007 McGraw-Hill Ryerson Limited Canadian Population and Growth

15. Copyright © 2007 McGraw-Hill Ryerson Limited Demographic Segmentation Dividing the population into groups according to some characteristic. Consider differences across segments based upon age, gender, family life-cycle stage, income distribution, education, occupation, or ethnic origin. Demographic differences are easiest to observe, but are very simplistic.

16. Copyright © 2007 McGraw-Hill Ryerson Limited The Family Life Cycle

17. Copyright © 2007 McGraw-Hill Ryerson Limited Income Has considerable influence on how people buy. There is an important distinction in personal purchasing power  disposable and discretionary income. Key is to study spending patterns across segments, and the distribution of consumer income. People spend differently at different life cycle stages and in different income groups.

18. Copyright © 2007 McGraw-Hill Ryerson Limited Psychographic and Relationship Segmentation Helps explain “why.” Values are an important psychographic description. The principles which guide how we live our lives, the relative importance of which will vary between individuals. Other psychographic measures include attitudes, interests and opinions.

19. Copyright © 2007 McGraw-Hill Ryerson Limited Psychographic and Relationship Segmentation Segments markets based on the kind of relationship the customer has or wants to have with the company. Some customers want a close relationship, others do not. Requires a detailed understanding of the current nature and state of the relationship, and the type of relationship that the customer will find satisfying.

20. Copyright © 2007 McGraw-Hill Ryerson Limited Behavioral Segmentation Involves segmenting the market based on how consumers interact with the product. Three behavioural bases: Benefits delivered Usage rated Occasions

21. Copyright © 2007 McGraw-Hill Ryerson Limited How Many Segments? Single segment or multiple. The market opportunity represented by the segment must match the company’s resources. The segment must represent an opportunity to produce enough sales to generate a profit. The company should select target segments where it can enjoy a competitive advantage.

22. Copyright © 2007 McGraw-Hill Ryerson Limited How Many Segments? Single-Segment Segmentation Selecting a single market to target Risk: All eggs in one basket Multiple-Segment Segmentation Identifying two or more segments as target markets Involves developing a different approach for each

23. Copyright © 2007 McGraw-Hill Ryerson Limited Profiling Target Segments Purpose: To prepare as detailed an overview as possible of the customers who make up each of the segments of interest, in terms of their demographic, psychographic, and lifestyle characteristics. Main Premise: “The better we know the customers in each of the segments we plan to target, the more likely it is that we can put together an integrated marketing program that they will find attractive.”

24. Copyright © 2007 McGraw-Hill Ryerson Limited Positioning The strategy of creating an appropriate image for a company or brand in the minds of its target customers – what the brand stands for, what it means to customers. Based on certain attributes which the customer considers important.

25. Copyright © 2007 McGraw-Hill Ryerson Limited Positioning Position against competitors. Either in direct comparison or by trying to occupy the same position Position by appealing to a specific target segment of the market. The position is closely tied to characteristics of the target segment The creation of an image Position on the basis of inherent characteristics. Address a market gap or set the brand apart from obvious competitors

26. Copyright © 2007 McGraw-Hill Ryerson Limited Niche Marketing A specific form of positioning The company decides to occupy a market niche where it can be distinct and competition-weak. Four steps 1.Identify segments that are not well-served 2.Determine how to gain a competitive advantage 3.Expand the niche by meeting consumer needs 4.Defend the niche position by improving product and service offerings

27. Copyright © 2007 McGraw-Hill Ryerson Limited Positioning Strategies Take on the competition head-on. Occupy a gap in the market. Set a brand apart from the competition. Occupy a position of leadership. Appeal to certain lifestyle segments.

28. Copyright © 2007 McGraw-Hill Ryerson Limited Positioning Maps A visual depiction of the position relative to competition, based on relevant attributes.

29. Copyright © 2007 McGraw-Hill Ryerson Limited Positioning Maps

30. Copyright © 2007 McGraw-Hill Ryerson Limited Repositioning The process of moving a company, store, or brand to a new position in the minds of target customers, usually by changing its image. Results from: Gap in market Increase in competitive activity A change in the demographic characteristics, attitudes, or values of the target consumer market

31. Copyright © 2007 McGraw-Hill Ryerson Limited Differentiation An attempt to gain an advantage over competition by distinguishing its value proposition. Creates the impression that what the company offers is more attractive to target customers than competition.

32. Copyright © 2007 McGraw-Hill Ryerson Limited Differentiation 1.Focus on creating product differences and communication: Changing some feature of the product Using a promotional appeal Using advertising and other promotional strategies

33. Copyright © 2007 McGraw-Hill Ryerson Limited Differentiation 2.Focus on the customer experience: The experiences that the customers have in dealing with the firm The kinds of experiences that the company can make possible for the customer

34. Copyright © 2007 McGraw-Hill Ryerson Limited Adding Value Companies need to develop a strategy that will set themselves apart from their competitors by adding value for the customers, which competitors have not thought of adding.