04 Market Segmentation & Positioning RAC

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Marketing Management

Market Segmentation and

Positioning

Lecture 04

Ian McPhee

Positioning is not what you do to a product; it is

what you do to the mind of a prospect (Ries and

Trout, 1972)


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Learning Outcomes

Describe the principles of market segmentation and

the STP process.

Explain the characteristics and differences between

market segmentation and product differentiation. Explain how market segmentation can be undertaken

in both consumer and business to business markets.

Describe different targeting strategies.

Explain the concept of positioning.

Illustrate how the use of perceptual maps can assist

the positioning process.


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Underlying Assumptions

Not all buyers are alike

Sub-groups can be identified

With similar behaviour, background, valuesand needs

Smaller & more homogeneous

Easier to satisfy a small group than larger

(Zikmund & DAmico, 1995)


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Levels of Analysis

Individual

Group or team

Departmental

Organizational

Environmental


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Maslows Hierarchy of Needs

(Abraham

Maslow)

(Abraham

Maslow)


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Case Insight - Stagecoach

One of the largest bus operators in

the UK

Operate express and local bus

services across the country

Comprehensive network of intercity

operations under the Megabus brand

So how do Stagecoach identify whotheir customers are and where they

might want to access their services?


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STP Process

Method by which whole markets are

subdivided into different segments

Three activities that should be undertaken,usually sequentially, if segmentation is to

be successful:

Segmentation

Targeting

Positioning


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STP Process


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Benefits of STP Process

80% of profits usually derived by 20% of customersParetos Principle

Enhancing a companys competitive position by

providing direction & focus for marketing strategies.

Examining and identifying growth opportunities in themarket through the identification of new customers,growth segments or new product uses.

More effective and efficient matching of companyresources to targeted market segments promising thegreatest ROMI.


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Market Segmentation

Market segmentation is the division of a market into

different groups of customers with distinctly similar

needs and product/service requirements.

Purpose of market segmentation:

Leverage scarce resources.

To ensure that the elements of the marketing mix are designed

to meet particular needs of different customer groups.

Allows organisations to focus on specific customers needs, inthe most efficient and effective way.


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Marketing Segmentation

Market Segmentation & Product Differentiation


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Process of Market Segmentation

There are two main approaches to segmenting markets:

Breakdown Method:Adopts the view that the market is

considered to consist of customers which are essentiallythe same, so the task is to identify groups which share

particular differences.

Build-Up Method: Considers a market to consist ofcustomers that are all different, so here the task is to find

similarities.


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Process of Market Segmentation

Aim is to identify segments where:

identifiable differences exist between

segments (segment heterogeneity).

similarities exist between members within

each segment (members homogeneity).


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Segmenting Consumer Markets

Segmentation Bases/Criteria

ProfileC

riteria - Who my market are andwhere are they?

Behavioural Criteria - Where, when, and

how does my market behave?

Psychological Criteria - Why does my

market behave that way?


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Segmenting Business Markets

Segmentation Bases/Criteria

OrganisationalC

riteria e.g.,Organisational size and location

BuyerCharacteristics e.g., Choice criteria,

purchase context


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Organisational Characteristics

Source: McDonald and Dunbar(2004). Reproduced with kind permission.


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BuyerCharacteristics

Decision Making Unit Policy factors

Purchasing strategies

Attitudes towards vendors and toward risk

Choice Criteria What specifications of product/service they choose

Purchase Situation Structure of the purchasing procedures

Type of buying situation

Stage in the purchase decision process


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Targeting

To determine which, if any, of the segments uncovered

should be targeted

Evaluation of Market Segments - DAMP Distinct is each segment clearly different from other segments?

Accessible can buyers be reached through appropriate

promotional programmes and distribution channels?

Measurable is the segment easy to identify and measure?

Profitable is the segment sufficiently large to provide a streamof constant future revenues and profits?


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Segment Attractiveness Factors

Rating approach for different segment attractiveness

factors:

Market growth

Segment profitability

Segment size

Competitive intensity within the segment

Cyclical nature of the industry

Each of these attractiveness factors is rated on a scaleof 0-10 and loosely categorized as high, medium or low

in attractiveness.


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Segment Attractiveness Factors


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Targeting Approaches


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Positioning

The act of designing the companys offering and image

so that they occupy a meaningful and distinct

competitive position in the target customers minds.

Two fundamental elements:

Physical attributes - the functionality and capability that a brand

offers.

Communication - the way in which a brand is communicated and

how consumers perceive the brand relative to other competingbrands in the market place.


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Perceptual MapsRepresent a geometric comparison of how competing

products are perceived


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Positioning Strategies

Position a brand either functionally or expressively

(symbolically)

Functional Features

Quality

Use

Expressively

User

Benefit

Heritage


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Repositioning Srategies

1. Change the tangible attributes and then communicatethe new product to the same market

2. Change the way a product is communicated to theoriginal market

3. Change the target market and deliver the same product

4. Change both the product (attributes) and the targetmarket


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Summary

Described the principles of market segmentation and theSTP process.

Explained the characteristics and differences betweenmarket segmentation and product differentiation.

Explained how market segmentation can be undertakenin both consumer and business to business markets.

Described different targeting strategies.

Explained the concept of positioning.

Illustrated how the use of perceptual maps can assist thepositioning process.

04 Market Segmentation & Positioning RAC

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