Unit 2Principles of Marketing

Market Segmentation

(Targeting & Positioning)

Subhajit Sanyal

STP Marketing recap…SEGMENTING•Consider variables for segmenting market.•Look at profile of emerging segments.•Validate segments emerging.

TARGETING•Decide on targeting strategy.•Decide which and how many segments should be targeted.

POSITIONING•Understand consumer perceptions.•Position products in the mind of the consumer.•Design appropriate marketing mix.

Market Coverage StrategiesUndifferentiated Strategy

Marketing Mix Entire Market

Concentrated Strategy

Marketing Mix Target Market

Differentiated Strategy

Marketing Mix Segment 1

Marketing Mix Segment 2

Marketing Mix Segment 3

Target market selection

• Single segment concentration (eg. Volkswagen -Porche

• Selective specialization (e.g New york’s KISS FM

• Product specialization (eg. –Microscope)

• Market specialization (assortment of products to various University labs.

• Full market coverage (Coke ,IBM)

Target Marketing Strategies

Undifferentiated marketing

Differentiated marketing

Concentrated/Focused marketing

Customized marketing (Levis, Mattel, De beers)

Undifferentiated Marketing

Marketing mix Whole market

Differentiated Marketing

Marketing mix 1 Segment 1

Segment 2

Segment 3

Marketing mix 2

Marketing mix 3

Concentrated/ Focused Marketing

Segment 1

Segment 2

Segment 3

Marketing mix

Customized Marketing

Marketing mix 1 Customer 1

Customer 2

Customer 3

Marketing mix 2

Marketing mix 3

• “Positioning starts with a product. A piece of merchandise, a service, a company, an institution, or even a person… But positioning is not what you do to a product. Positioning is what you do to the mind of the prospect. That is, you position the product in the mind of the prospect..” (Al Ries & Jack Trout)

• The process of creating an image for a product in the mind of target customers

Positioning

Position

The place a product, brand,

or group of products

occupies in consumers’

minds relative to competing

offerings.

Product Differentiation

A positioning strategy that

some firms use to distinguish

their products from those of

competitors.

Characteristics of positioning

1. Positioning is a facilitating process that coordinates marketing functions.

2. Positioning strategy can be applied to both micro and macro levels of marketing.

3. The position a customer perceives for a product may be based on the product’s physical features or intangible images created by the company’s promotional efforts.

4. To be effective positioning must be consumer oriented.

ConsistencyClarity

Credibility Competitiveness

Keys to successful positioning

Successful positioning

Perceptual mapping to establish (product) position

Perceptual mapping is a means

of displaying or graphing, in

two or more dimensions, the

location of products, brands,

or groups of products in

customers’ minds.

Developing perceptual maps

• Identify a set of competing brands

• Identify important attributes

• That consumers use when choosing between brands using qualitative research

• Conduct quantitative marketing research where consumers score each brand on all key attributes

• Plot brands on a two dimensional brands

Tools for drawing perceptual maps…

• Experiential basis (stereotypes..)

• Market research (consumer surveys; focus groups etc.) Qualitative as well as quantitative.

• With tools such as – – Multi dimensional scaling techniques– Discriminant analysis

Perceptual Mapping – Levi’s

High PriceHigh Price

Low PriceLow Price

Cla

ssic

Cla

ssic

Desig

ner

Desig

ner

Old product

New product

Vintage

Red Line

Silver Tab

Slates

DockersPremium

DockersClassics

501

Red TabBasics

Red TabDry Goods

L2

Red TabElesco

Positioning Strategies

Positioning strategies are designed to answer

2 basic questions:

• Against whom should you position?

• How should you position?

Positioning Strategy-What does it mean?

• Developing a favourable image in the mind of consumers that differentiates the organisation from its competitors– Focus on intangible element, as tangible element difficult

to differentiate

• Ensuring that target markets clearly understand what the service, product or brand stands for

• Establishing a match between the benefits sought by the consumer, the company’s strengths and its competitors weaknesses

Steps in positioning

Step 1: Identify product positions

• To identify a product’s existing or desired position, we need to understand the product and the consumer.

• A product can be described – – physically with respect to its function or its sensory

or physiological characteristics;– Socially in terms of the social uses to which it can be

put; or– Psychologically in terms of its use in expressing

human emotions, desires or behaviours.

Step 2: Identify positioning bases

AttributeAttribute

Price and QualityPrice and Quality

Use or ApplicationUse or Application

Product UserProduct User

Product ClassProduct Class

CompetitorCompetitor

Positioning Positioning BasesBases

Positioning Positioning BasesBases

Positioning bases contd.

• Product characteristics and customer benefits: they tell us how the customer is going to be benefited by the attributes of the product.

• Price quality: this positioning approach is based on the notion of giving value through quality products sold at low prices.

• Product use: this associates the product with a use.

• Product user: this is association of a product with a user or user type.

• Product class: some products may benefit by positioning themselves within a product class

• Symbols: the use of symbols to position brands.

• Competition positioning

Positioning bases contd.

Steps 3: Selecting a position

• Factors to consider when selecting the basis for a position –– The market position: is the product a leader, no. 2, or

one of the small brands– The positioning used by current competitors.– Compatibility of the desired positioning with

consumers’ needs, wants and current perception of the product’s positioning versus its competitors, and a given product class.

Selecting a position contd.– The newness of the considered basis for positioning

and its departure from the current practice in the market.

– The resources available to communicate the positioning effectively and the compatibility of the positioning with the firm’s marketing strategy

– The firm’s desire for an innovative image rather than a “me-too” image.

– The firm’s ability to execute the chosen positioning effectively and creatively; and

– The legality of the proposed positioning.

• To communicate a co. or brand positioning a marketing plan should include a positioning statement, viz; To (target group and need) our (Brand) is (concept) that (point-of-difference). E.g. -– “To busy professionals who need to stay organized,

Palm Pilot is an electronic organizer that allows you to back-up files on your PC more easily and reliably than competitive products”.

Step 4: Communicating a position

Repositioning

Changing consumers’

perceptions of a brand

in relation to

competing brands.

Q: How is repositioning

accomplished?

Repositioning

Reasons For Repositioning• Falling sales• An opportunity to serve an emerging market• The threat of competition eroding market share

Dangers• Sending confusing signals• Losing existing customers• May require change in personnel

Repositioning strategiesPRODUCT

Same Different

TARGET MARKET

Same

Different

Image repositioning

Intangible repositioning

Productrepositioning

Tangible repositioning

Choosing a Market Coverage Strategy

Several factors to consider

• Company resources• Degree of product homogeneity• Market homogeneity• Competitors’ strategies

The Gradual Change of McDonald’s Marketing Strategy

• The example of McDonald’s shows a typical development in the marketing approach of various companies (in Kotler et al, 1999)

1 MASS MARKETING

2 PRODUCT VARIETY MARKETING

3 TARGET MARKETING

The Gradual Change of McDonald’s Marketing Strategy

Mass Marketing• Featured by mass production, mass distribution and

mass promotion of one product to all buyers• Firms benefit from economies of scale

EXAMPLE:

In the beginning, McDonald’s only produced one size of hamburgers hoping it would appeal to everyone

The Gradual Change of McDonald’s Marketing Strategy

Product Variety Marketing• Firm sells two or more products that have different

features, styles, qualities etc.• Designed to offer variety to buyers rather than to

target different segments

EXAMPLE:

McDonald’s is now offering variety to its buyers by selling regular Hamburgers, Big Macs, Cheeseburgers etc

The Gradual Change of McDonald’s Marketing Strategy

Target Marketing

• Seller identifies different segments, selects one or more according to the scope of the company and develops products and marketing mixes tailored to each selected segment

EXAMPLE:

McDonald’s developed a salad line to target diet-conscious diners