MARKET SEGMENTING, TARGETING & POSITIONING

5th Lecture, 27th March 2017

LECTURE CONTENTS

Target marketing

– Why is it not possible to satisfy all customers?

Market segmentation

– How to choose potential customers?

Market targeting

– How to reach customers?

Market positiong

– How to create market offering for chosen targets?

INTRODUCTION

Companies cannot connect with all customers in large, broad or diverse markets

Markets can be divided into groups of consumers or segments with distinct needs and wants

Companies need to identify which market segments it can serve effectively

To develop the best marketing plans, managers need to understand what makes each segment unique and different

INTRODUCTION

Target marketing is the process of identifying customers and promoting products and services via mediums that are likely to reach those potential customers

Target marketing is generally limited in scope but is often more productive than broader types of marketing because it is designed around specific customer preferences

It is also called niche marketing

INTRODUCTION

INTRODUCTION

Target marketing includes three activities:

1) Identify and profile distinct groups of buyers who differ in their needs and preferences market segmentation

2) Select one or more market segments to enter market targeting

3) For each target segment, establish and communicate the distinctive beneıfits of the company's market offering market positioning

TARGET MARKETING

Companies can target the markets at four levels:

1) Segment - identifiable group of individuals, families, businesses or organizations, sharing one or more characteristics or needs

2) Niche - a small but profitable segment of a market suitable for focused attention by a marketer.

Market niches do not exist by themselves, but are created by identifying needs or wants that are not being addressed by competitors, and by offering products that satisfy them

3) Local areas

4) Individual customers

TARGET MARKETING

An ideal market segment meets all of the following criteria:

1) It is possible to measure

2) It must be large enough to earn profit

3) It must be stable enough that it does not vanish after some time

4) It is possible to reach potential customers via the organization's promotion and distribution channel

5) It is internally homogeneous (potential customers in the same segment prefer the same product qualities)

TARGET MARKETING

An ideal market segment meets all of the following criteria:

6) It is externally heterogeneous (potential customers from different segments have different quality preferences)

7) It responds consistently to a given market stimulus

8) It can be reached by market intervention in a cost-effective manner

9) It identifies the target customers surrogates

10) It provides supporting data for a market positioning or sales approach

MARKET SEGMENTATION

MARKET SEGMENTATION

Target markets are groups of individuals that are separated by distinguishable and noticeable aspects:

1) Geographic

2) Demographic

3) Psychographic

4) Behavioral

MARKET SEGMENTATION

MARKET SEGMENTATION

1) Geographic segmentation – WHERE?

Collecting and analyzing information according to the physical location of the customer or other data source

Dividing the market into different geographical units such as nations, states, regions, counties, cities, or neighborhoods

Where the products are being sold – where to increase advertising and sales efforts?

MARKET SEGMENTATION

2) Demographic segmentation – WHAT?

Market segmentation based on differences in demographic factors of different groups of consumers

Dividing markets into groups based on age, gender, income, occupation, religion, race, etc.

Demographic variables are popular because they are often associated with consumer needs and wants and they are easy to measure

MARKET SEGMENTATION

3) Psychographic segmentation – WHO?

Buyers are divided into different groups on the basis of psychological/personality traits, lifestyle, or values

Dividing the market by studying the activities, interests, and opinions (AIOs) of customers

Lifestyle segmentation reflects on how the target subject identifies themselves, or how they desire to identify themselves in society

MARKET SEGMENTATION

4) Behavioral segmentation – HOW?

A more focused form of market segmentation that groups consumers based on specific behavioral patterns they display when making purchasing decisions

Dividing market according to consumers knowledge of a product, attitude towards a product, usage rate or response to a product

Segmentation can take place according to benefits sought by the consumer or according to perceived benefits which a product/service may provide

MARKET SEGMENTATION

MARKET SEGMENTATION

Example – VALS framework:

MARKET SEGMENTATION

VALS framework (higher resources groups):

I. Innovators - Successful, sophisticated, active, "take-charge" people with high selfesteem. Purchases often reflect cultivated tastes for relatively upscale, niche-oriented products and services.

II. Thinkers –Mature, satisfied, and reflective people who are motivated by ideals and who value order, knowledge, and responsibility. They seek durability, functionality, and value in products.

III. Achievers - Successful, goal-oriented people who focus on career and family. They favor premium products that demonstrate success to their peers.

IV. Experiencers - Young, enthusiastic, impulsive people who seek variety and excitement. They spend a comparatively high proportion of income on fashion, entertainment, and socializing.

MARKET SEGMENTATION

VALS framework (lower resources groups):

I. Believers –Conservative, conventional, and traditional people with concrete beliefs. They prefer familiar, national products and are loyal to established brands.

II. Strivers - Trendy and fun-loving people who are resource constrained. They favor stylish products that emulate the purchases of those with greater material wealth.

III. Makers – Practical, down-to-earth, self sufficient people who like to work with their hands. They seek national-made products with a practical or functional purpose.

IV. Survivors - Elderly, passive people who are concerned about change. They are loyal to their favorite brands.

MARKET SEGMENTATION

Example – Needs based market segmentation approach:

Select the target audience – the customers are grouped based on similar needs and benefits sought by them on purchase of a product

Identify clusters of similar needs – demographics, lifestyle, usage behaviour and pattern used to differentiate between segments

Apply a valuation approach – market growth, barriers to entry, market access, switching, etc. are used

Test the segments – A segment storyboard is to be created to test the attractiveness of each segment’s positioning strategy

Modify marketing mix – expanding segment positioning strategy to include all aspects of marketing mix

MARKET SEGMENTATION

Industrial market segmentation (Bonoma & Shapiro Model)

Demographics: industry, company size, customer location

Operating variables: company technology, product/brand use status, customer capabilities

Purchasing approaches: purchasing function, power structure, buyer-seller relationships, purchasing policies, purchasing criteria

Situational factors: urgency of order, product application, size of order

Buyers’ personal characteristics: character, approach

MARKET TARGETING

MARKET TARGETING

Market targeting - identifying a target market after detailed research, and developing specific marketing campaigns focused at it

MARKET TARGETING

Marketers have outlined four basic strategies to satisfy target markets:

1) Mass marketing

2) Differentiated marketing strategy

3) Concentrated marketing

4) Direct marketing / Micromarketing

MARKET TARGETING

1) Mass marketing:

An attempt to appeal to an entire market with one basic marketing strategy utilizing mass distribution and mass media

It is the type of marketing of a product to a wide audience

Traditionally mass marketing has focused on radio, television and newspapers as the medium used to reach this broad audience

MARKET TARGETING

2) Differentiated marketing strategy:

Company decides to provide separate offerings to each different market segment that it targets

Also called multisegment marketing and as is clearly seen that it tries to appeal to multiple segments in the market

Each segment is targeted uniquely as the company provides unique benefits to different segments

It increases the total sales but at the expense of increase in the cost of investing in the business

MARKET TARGETING

3) Concentrated marketing:

A strategy which targets very defined and specific segments of the consumer population

It is particularly effective for small companies with limited resources as it does not believe in the use of mass production, mass distribution and mass advertising

There is no increase in the total profits of the sales as it targets just one segment of the market

MARKET TARGETING

4) Direct marketing / micromarketing:

Contacting and influencing carefully chosen prospects with means such as telemarketing and direct mail advertising

This is done by buying consumer database based on the defined segmentation profiles

These databases usually comes with consumer contacts (e.g., email, mobile no., home no.)

MARKET TARGETING

MARKET POSITIONING

MARKET POSITIONING

Market positioning - identifying and attempting to occupy a market niche for a brand, product or service utilizing traditional marketing placement strategies

Strategy angles: price, promotion, distribution, packaging, competition

Also - the way by which the marketers attempt to create a distinct impression in the customer's mind

MARKET POSITIONING

Product positioning process (1):

1) Defining the market in which the product or brand will compete

2) Identifying the attributes that define the product 'space'

3) Collecting information from a sample of customers about their perceptions of each product on the relevant attributes

4) Determine each product's share of mind

MARKET POSITIONING

MARKET POSITIONING

Product positioning process (2):

5) Determine each product's current location in the product space

6) Determine the target market's preferred combination of attributes

7) Examine the fit between the product and the market

MARKET POSITIONING

MARKET POSITIONING

Positioning statement is a written description of the objectives of a positioning strategy. It states:

How the firm defines its business or how a brand distinguishes itself?

How the customers will benefit from its features?

How these benefits or aspects will be communicated to the intended audience?

MARKET POSITIONING

MARKET POSITIONING

Harley Davidson positioning statement:

The only motorcycle manufacturer

That makes big, loud motorcycles

For macho guys (and “macho wannabes”)

Mostly in the United States

Who want to join a gang of cowboys

In an era of decreasing personal freedom

Brand tagline:

American by birth. Rebel by choice.

MARKET POSITIONING

Positioning statement – tagline form:

Mercedes-Benz: Engineered like no other car in the world

BMW: The ultimate driving machine

Volvo: For life

Microsoft: A computer on every desk and in every home

MARKET POSITIONING

What makes a good positioning statement?

It is simple, memorable, and tailored to the target market

It provides an unmistakable and easily understood picture of your brand that differentiates it from your competitors

It is credible, and your brand can deliver on its promise

Your brand can be the sole occupier of this particular position in the market. You can “own” it

It leaves room for growth

CONCLUSION

Target marketing is the process of identifying customers and promoting products and services via mediums that are likely to reach those potential customers and it includes:

1) Identify and profile distinct groups of buyers who differ in their needs and preferences market segmentation

2) Select one or more market segments to enter market targeting

3) For each target segment, establish and communicate the distinctive beneıfits of the company's market offering market positioning