Sessions 8 and 9

Segmentation Targeting and Positioning

Learning Outcomes

1. Explain the importance of market segmentation. 2. Discuss criteria for successful market segmentation. 3. Describe the steps involved in segmenting markets. 4. List the steps involved in segmenting markets. 5. Understand how a company should choose the

most attractive segments 6. Describe the concept of differentiation and its role in

building brands. 7. Understand the positioning process with details on

perceptual positioning.

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The STP Process

Segmentation

Identifying similar groups of customers with distinct needs, characteristics or behaviour

Targeting

Identifying segments to aim based on attractiveness and company objectives and resources

Positioning

Creating a concept to appeal to the target segment

Male/female consumers of

skincare products, aged 18-25. 26-35, 36-45, 46-65, 65+

Female consumers 18-25

Position skincare products as

essential for self-respect

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Segmenting Consumer Markets

Why segment the market? o Better focus on customer needs o Customers are differentially responsive to marketing

efforts. o Facilitate right choice of target market. o Leverage scarce resources. o Help identification of less satisfied segments and

concentrate on them.

The marketer does not create the segments. He only identifies them and decides which ones to target

4

Requirements for Effective Segmentation

Size, purchasing power, and profile of segment Measurable

Can be reached and served Accessible

Large enough to warrant a special marketing mix Substantial

Respond differently Differentiable

Effective programs can be developed Actionable

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Segmentation Criteria

Consumer Criteria

Profile

Demographic

Socioeconomic

Geographic

Psychological

Lifestyle

Personality

Perceptions

Attitudes

Motives

Benefits sought

Behavioural

Purchase

Usage

Media usage

Technology usage

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WHO & WHERE WHO, HOW, WHERE & WHEN

WHY & WHO

Segmentation Considerations

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Demographic

Geodemographic

Psychological

Behavioural

Predictability of consumer choice behaviour

Ease

an

d c

ost

of

me

asu

rem

ent

Low High

Easy and Low

Difficult and High

Demographics

0 to 5, 6 to 11, 12 to 19, 20 to 34, 35 to 49, 50 to 64, 65 plus Age

Single, married no children, married with children, old married without children, senior citizens Family size

Male, female Gender

Pre-independence, post independence, post liberalisation Generation

Low ( up to Rs. 50,000), lower middle ( 50000 to 100000), middle(100001 to 200000, upper middle (200001 to 300000 ), upper (Over 300,000) Income

Unskilled worker, skilled worker, petty trader, businessman, industrialists, self-employed professionals, white collared workers, supervisors, managers Occupation

Illiterate, school up to 4 years, school 5 to 9 years, SSC/HSC, Non-graduate, graduate, post graduate, post graduate professional Education

8

Most popular and easiest to measure

New SEC System

9 Source: MRUC Hansa

Household Distribution New SEC

10

9.7

15.4

18.4

14.7

11.4

7.9

7.5

5.3

4.3

3.2

1.8

0.4

0.0 5.0 10.0 15.0 20.0

E 3

E 2

E 1

D 2

D 1

C 2

C 1

B 2

B 1

A 3

A 2

A 1 Punjab has the highest percentage population of SEC A (A1+A2+A3) followed by Maharashtra, Kerala and Goa. Gujarat, Tamil Nadu and Uttarakhand are average. The states with the lowest percentage of SEC A are Bihar, Madhya Pradesh and West Bengal

Source: MRUC Hansa

Geographic

Urban and rural o 31% and 69% with buying power of 55% to 45%

Regions o North, South, West, East

Cities o Metros / mini metros Popn. of 5 million plus ( 8 22.6%) o Cities with a population of 1 million to 5 million ( 38 17.2%) o Cities with population of 5 lakhs to 1 million ( 45 9.6%) o Cities with population of 2 to 5 lakhs ( 139 13.2%) o Cities with population of 1 to 2 lakhs ( 267 10.9%) o Rurban Population less than 1 lakh (7438 26.6%)

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Change in Living Standards

HPI 2010 Q4 2011 Q 4 Change 2012 Q 4 Change

200 + 2.1 2.7 28.6% 3.4 25.9%

151-200 1.2 1.5 25.0% 1.7 13.3%

101-150 1.8 2.3 27.8% 2.8 21.7%

71-100 3.5 4.1 17.1% 5.4 31.7%

51-70 2.3 2.8 21.7% 3.3 17.9%

31-50 7.5 8.6 14.7% 10.0 16.3%

21-30 8.1 9.4 16.0% 11.1 18.1%

11-20 30.7 33.6 9.4% 36.6 8.9%

6-10 41.2 46.8 13.6% 50.4 7.7%

0-5 135.0 126.1 -6.6% 118.1 -6.3%

Average HPI 13.7 15.9 16.1% 18.1 13.8%

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Source: Indian Readership Survey Reports Household Premiumness Index is a composite of 50 variables including demographics, product ownership/usage and services. It is an indicator of Living Standard It is a continuous variable which lets you define your target group more finely.

Psychographic Segmentation

Division of market into different groups based on social class, lifestyle, or personality characteristics. People in the same demographic classification often have very different lifestyles and personalities. It measures persons activities, interests and opinions.

ACTIVITIES INTERESTS OPINIONS

Work Family Themselves

Hobbies Home Social Issues

Social Events Job Politics

Vacation Community Business

Entertainment Recreation Economics

Club Membership Fashion Education

Community Food Products

Shopping Media Future

Sport Achievements Culture

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VALS Model

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Action oriented Follow fashion and fads Maximum spend on socialising Impulsive buyers

Hands on Shop for comfort, durability and value Unimpressed by luxuries

Self-confident Enjoy the finer things Receptive to new products and technologies Sceptical of advertising

Value knowledge Little interest in image or prestige Like educational programming Voracious readers

Image conscious Limited discretionary income Spend on clothing and personal care products Prefer TV to reading

Traditional Family oriented Slow to change habits Look for bargains Watch TV more than average

Image conscious Relatively affluent Attracted to premium products Average TV watchers

Restricted consumption Concerned with security and safety Brand loyal Trust advertising

Behavioral Segmentation

Benefits Sought Different segments desire

different benefits from the same products. Examples

Decision Roles Initiator Influencer Decider Buyer User

Loyalty Status Hard core loyals Split loyals Shifting loyals Switchers

Occasion Special promotions & labels for

holidays. Special products for special

occasions.

Usage Rate Non-users Light users Medium users Heavy users

Buyer Readiness Stage Unaware Aware Informed Interested Ready to buy

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User & Loyalty Status Segmentation

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Benefit Segmentation - Toothpaste Market

Segment

Sensors Sociables Workers Independent

Principal benefit sought Flavour, product Brightness Decay Price

appearance of teeth prevention

Demographic strengths Children Teens, young Large families Men

people

Special behavioural Users of Smokers Heavy users Heavy users

characteristics spearmint-

flavoured

toothpaste

Personality characteristics High self- High High High

involvement sociability hypochondriasis autonomy

Lifestyle characteristics Hedonistic Active Conservative Value-

oriented

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Major Segmentation Variables for Business Markets

Demographic 1. Industry: Which industries should we serve? 2. Company size: What size companies should we serve? 3. Location: What geographical areas should we serve?

Operating Variables 4. Technology: What customer technologies should we focus

on? 5. User status: Should we serve heavy users, medium users,

light users, or nonusers? 6. Customer capabilities: Should we serve customers needing many or

few services?

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Major Segmentation Variables for Business Markets

Purchasing Approaches 7. Purchasing-function organization: Should we serve companies with

highly centralized or decentralized purchasing organizations? 8. Power structure: Should we serve companies that are engineering

dominated, financially dominated, and so on? 9. Nature of existing relationships: Should we serve companies with

which we have strong relationships or should we go for the most desirable?

10. General purchase policies: Leasing? Service contracts? Systems purchases? Sealed bids?

11. Purchasing criteria: Go for quality, service or price?

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Major Segmentation Variables for Business Markets

Situational Factors 12. Urgency: Do we go for companies with low lead times? 13. Specific Application: Do we focus on some applications of our

products or all applications? 14. Size of order: Should we focus on small or big orders?

Personal Characteristics 15. Buyer Seller similarity: Should we serve companies whose people

and values are similar to ours? 16. Attitudes towards risk: Should we serve risk taking or risk avoiding

concerns? 17. Loyalty: Should we serve companies that show high

loyalty to their customers?

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Targeting

Which segment should the company serve? Normally done on the basis of: o Segment size and growth o Segment profitability o Competitive intensity within the segment o Cyclical nature of the industry

Each of these factors is rated on a 10 point scale and loosely categorised as high, medium and low. Firms select target markets which are a good fit with the firm.

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Selecting Target Market Segments

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Undifferentiated (mass) marketing

Treats market with no individual segments

Differentiated (segmented) marketing

Separate offers for different segments

Concentrated (niche) marketing

Go after a large share of a small segment

Micromarketing (local or individual) marketing

Seeing the individual in marketing

Advantages and disadvantages of each?

Choosing a Target Marketing Strategy

Considerations include: o Company resources o The degree of product variability o Products life-cycle stage o Market variability o Competitors marketing strategies

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Patterns of Target Market Selection:

Product x Market Matrices

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Positioning

Act of designing a companys offering and image to occupy a distinctive place in the mind of the consumers Fundamental elements are physical attributes and communication The result of positioning is the successful creation of a customer focused value proposition.

The Battle for the Mind

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Ladders in the Mind Product ladders with each brand ranked as a step on them

To gain a step you either dislodge the brand above you or

relate to the other companys position

The Positioning Process

Write positioning statement or value proposition to guide marketing strategy

Identify positions where products may be placed

Examine the fit between preferences of market segments and current product position

Determine customers most preferred combination of attributes

Analyse the current positions of products in the competitive set

Collect data about customers perceptions in the competitive set

Identify the set of determinant attributes

Identification of relevant set of competitive products serving a target market

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1. Competitive Frame of Reference

Define the category and sub-category of product. Identify the relevant competitors in the category. Competitors can be based on industry or markets they serve. Identify each competitors real and perceived strengths and weaknesses. Determine their objectives and strategies. Review customer ratings on key success factors.

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Possible Competitive Advantages

Product differentiation

Service differentiation

Channel differentiation

People differentiation

Image differentiation

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Right Competitive Advantage

Important

Distinctive

Superior

Communicable

Pre-emptive

Affordable

Profitable

The idea is to create a Unique Selling Proposition

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2. Determinant Attributes

Features Benefits Parentage Manufacturing process Ingredients Endorsements Comparisons Pro environment Price/Quality

Consumers can consider only attributes of which they are aware More the variables, more the confusion Consider only the important ones Attribute may not be considered important if all alternative brands considered more or less equal

Defining Associations

Points-of-difference

Attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand

Strong brands may have multiple PODs

Points-of-parity

Associations that are not necessarily unique to the brand but may be shared with other brands Some are seen to be essential to a category

3. Collect Data

Qualitative research through interviews or focus groups Quantitative research to determine scores of competitive products

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4. Perceptual Map

A visual technique to show the average target market consumer s understanding of competing brands and their associated attributes. Normally done on two axes which represent the two most important determinant attributes in consumer purchase decision You may superimpose the various segments on the map . Examine the map for gaps to launch a new brand or reposition an existing brand

Steps for Perceptual Maps

1. Select two determinant attributes Price is preferably not taken as a key dimension: o Imitable by competitors o Claim normally not credible

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CATEGORY Likely Determinant Attributes

Shoes Comfort, design/style, quality, functionality

Instant coffee Flavour/taste, country of origin, variety, quality

Breakfast cereal Healthiness, sugar level, variety, fun element

Holiday destination Temperature, travel distance, culture difference, facilities

Camera Zoom, memory, size/weight, picture quality

Steps for Perceptual Maps

2. List the main competitors in the category 3. Create scores for these brands. Simplest way is to

use a 5 point scale 4. Plot the same on a graph paper. This can actually be

done from an excel sheet by converting it to a diagram

5. Superimpose the tastes of different segments.

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Soft Drinks Perceptual Map

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Market Positioning Analysis

Check whether axes represent those which the customers normally use. Are the labels on the axes polarised? Does our product have a clear and distinct market positioning? Are we positioned correctly in regard to our target market? Are the company products positioned too closely together? Does this raise competitive barriers or lead to cannibalisation?

Value Propositions

Represent the full positioning of the brand. Possible value propositions are: Review the positioning of Dominos and how it is changing.

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Example of a Perceptual Map

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Constructing a Brand Positioning Bulls-Eye

Developing a Positioning Statement

A concise description of your target market as well as a compelling picture of how you want that market to perceive your brand. It needs to look at the competitive positioning and the frames of reference that the customer uses while making choices. It becomes a guide post for your marketing efforts. It should be simple, memorable and credible. It should provide an easily understood picture of your brand.

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Communicating and Delivering the

Chosen Position

Once position is chosen, company must take strong steps to deliver and communicate the desired position to target consumers. All the companys marketing mix must support the positioning strategy (e.g., IMC). Positioning strategy must be monitored and adapted over time to match changes in consumer needs and competitors strategies. ..\..\STP\Big Bazaar.docx

Alternative Positioning Strategies

Attribute Positioning o The largest theme park in the world

Benefit positioning o The park for people seeking a fantasy experience

Use/Application positioning o The park for people who can spend only an hour

User positioning o The park for thrill seekers

Competitive positioning o More animals than the Japanese Deer Park

Product category positioning o The educational park

Quality/Price positioning o Best value for money

Which Positioning Approach to Follow?

Look for gaps and see whether you can fill them Internal capability to deliver on the promise Are benefits of most interest to target market? Possible reaction by competitors Profitability Communicability

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Next Session

46

Google Case

Deliverables

Chapter 12 with case lets

Single sheet hand written on plain A 4 by each student

Power point presentation by each group