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Market Segmentation,Market Segmentation,Targeting and PositioningTargeting and PositioningMarket Segmentation,Market Segmentation,Targeting and PositioningTargeting and Positioning
MKTG7501MKTG7501 MarketingMarketingSeminar 6Seminar 6MKTG7501MKTG7501 MarketingMarketingSeminar 6Seminar 6
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10-2
Opening Exercise
Visit any newsagent. Have a look at thevarious magazines on display. Glance
through one or two. Think about theaudiences targeted by the magazine.
Is itpossible to figure out the profile ofthe targeted audience in terms of theirage, gender, income, life style etc., ?
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Seminar Objectives
1. What is a market?
2. Explain market segmentation, and identify severalpossible bases for segmenting markets
3. Distinguish between the requirements for effective
segmentation4. Outline the process of evaluating market segments
and suggest some methods for selecting marketsegments
5. Illustrate the concept ofpositioning for competitive
advantage by offering specific examples6. Discuss choosing and implementing a positioning
strategy, and contrastpositioning based onproduct, service, personnel and imagedifferentiation
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What is a Market
Broadly, a market is the actual and potential customersof a product, service or idea.
Five essential characteristics (Lamb et al., 1998)(1) Markets are composed of individual people
(consumer markets) or organizations (business markets)(2) These customers have wants and needs which canbe satisfied by products and services(3) These people have the ability to purchase theproducts or services
(4) They are willing to exchange resources(5) They have the authority to buy
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Evolution of Approaches to Marketing
MassMarketing
Product-VarietyMarketing
TargetMarketing
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Stages in MarketOrientation
Mass marketing
In mass marketing, the seller mass produces, massdistributes and mass promotes one product to all
buyers Product-variety marketing
Here, the seller produces two or more products thathave different features, styles, quality, sizes
Target marketing Here, the seller identifies market segments, selects
one or more of them, and develops products andmarketing mixes tailored to each
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Three Major Steps in Target Marketing
1. Market segmentation
Dividing a market into distinct groups of buyers withdifferent needs, characteristics or behaviour who
might require separate products or marketing mixes2. Market targeting
Evaluating each market segments attractiveness andselecting one or more of the market segments to
enter3. Market positioning
Setting the competitive positioning for the productand creating a detailed marketing mix
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Why Market Segmentation?
Markets consist of buyers, and buyersdiffer in one or more ways They may differ in their wants, resources, locations,
buying attitudes and buying practices andpreferences for buying channels such as ordering bymail, phone, the Internet or from a physical location.
Because buyers have unique needs and wants, eachbuyer is potentially a separate market. When a
market is segmented a marketing mix can be tailoredto a well-defined target market separate marketingmix for each segment
Provides a better basis for customer service that canhelp companies increasing profits within resource
constraints
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Segmentation - Definition
The process of dividing a heterogeneousgroup of buyers or potential buyers into
more homogeneous groups with relativelysimilar product needs
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Steps in Segmentation, Targetingand Positioning
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Bases for SegmentingConsumer Markets (1)
C
H
A
R
A
CT
E
R
I
S
T
I
C
S
1. Demographic
2. Geographic
3. Behavioural
4. Psychographic
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Bases for SegmentingConsumer Markets (2)
Geographic
Segmentation calls for dividing the market intodifferent geographical units such as nations, regions,states, municipalities, cities, neighbourhoods or
climate
Demographic segmentation
Consists of dividing the market into groups based onvariables such as age, gender, family size, family life
cycle, income, occupation, education, religion, raceand nationality multivariate demographicsegmentation
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Bases for SegmentingConsumer Markets (3)
Psychographic segmentation
Buyers are divided into different groups based onsocioeconomic status, values & lifestyle, attitudes or
personality characteristics Behavioural segmentation
Divides buyers into groups based on their purchaseoccasion, benefits sought, user status, usage rate,
loyalty status, readiness stage, their attitude towardsit market mavens
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Segmenting Business Markets
Bases
forSegmenting
Business
Markets
Demographics
PersonalCharacteristics
SituationalFactors
OperatingVariables
PurchasingApproaches
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Major segmentation variables forindustrial markets
10-15
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Segmentation in International Markets
Universal segments based common needs Eg: business people, the affluent, cyberphiles similarity depends on product category eg:
NOKIA 9000 communicator Regional segments similarity of customer
needs at the regional level
Economic status on the basis of GNP per
capita Political system Eg: Nigeria, Bangladesh and
Argentina in 1988
Intermarket-grouping - Narrow focus on
international niches Eg: Mercedes Benz
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Group Exercise
Form into large groups (around 6-7 in a group)
Discuss the key attributes of the productassigned to the group
Identify more than one market segment usingsegmentation criteria
Identify one viable market segment you want to
target Workout a detailed customer profile for theproduct (description of average person likely tobuy the product)
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Requirements for EffectiveSegmentation (1)
Requirementsfor
EffectiveSegmentation
Measurable
Substantial
Actionable Accessible
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Requirements for EffectiveSegmentation
To be useful, market segments must have the followingcharacteristics: Measurability The degree to which the size and purchasingpower of the segments can be measured. Advantages ofdemographic variables - Certain segmentation variables are difficult
to measure. Accessibility The degree to which the segments can be reached
and served-ease of obtaining data about the segment.
Substantiality The degree to which the segments are large orprofitable enough. A segment should be the largestpossiblehomogeneous group worth going after with a tailored marketingprogram.
Actionability The degree to which effective programs can bedesigned for attracting and serving the segments
Responsiveness The segment must respond in a similar way.
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Market Targeting:Evaluating Market Segments
Marketing segmentation revealsthe market segment opportunitiesfacing a firm. The firm now has to
evaluate the various segments anddecide the number of segments to
cover and the ones to serve.
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Market Targeting:Evaluating Market Segments (3)
Segment size and growth
The company must first collect and analyse data oncurrent dollar sales, projected sales growth rates andexpected profit margins for the various segments. It
wants to select segments that have the right size andgrowth characteristics, but right size growth is arelative matter.
Segment structural attractiveness
A segment might have desirable size and growth and
still not be attractive from a profitability point of view.(a) current and potential competitors (b) substituteproducts (c) power of buyers, and (d) power ofsuppliers
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Market Targeting:Evaluating Market Segments (4)
Company objectives and resources
Even if a segment has positive size growth and isstructurally attractive, the company must
consider its own objectives and resources inrelation to that segment
Some attractive segments may not mesh with thecompanys long-run objectives the company
may be lacking the strengths needed to competein the segment.
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Selecting Market Segments (1)
After evaluating different segments, a company hopes tofind one or more market segments worth entering. Itmust then decide which and how many segments to
serve. A target market consists of a set of buyers sharing
common needs or characteristics that the companydecides to serve. The company can adopt one of threemarket-coverage strategies:
Undifferentiated marketing
Differentiated marketing
Concentrated marketing
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Selecting Market Segments (2)
Segment 1
Segment2
Segment3
CompanyMarketing
Mix
Segment 1
Segment2
Segment3
CompanyMarketing
Mix
CompanyMix 1
CompanyMix2
CompanyMix3
Market
A. UndifferentiatedMarketing
B. DifferentiatedMarketing
C. Concentrated
Marketing
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Selecting Market Segments (3)
Undifferentiated marketing A company might decide to ignore market segment
differences and go after the whole market with onemarket offer. It focuses on what is common in the
needs of consumers rather than on what is different production, inventory and transportation costeconomies.
Differentiated marketing
A company decides to target several marketsegments, and designs separate offers for each. Byoffering product and marketing variations, it hopesfor higher sales and a stronger position within eachmarket segment - costlier in terms ofproduction,
promotion, inventory and administrative costs
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Selecting Market Segments (4)
Concentrated marketing
Is especially appealing when company resources arelimited. Instead of going after a small share of a large
market, the company goes after a large share of oneor a few submarkets.
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Choosing a Market-Coverage Strategy
FactorsAffecting
Strategy
Decisions
CompanyResources
CompetitorsStrategies
MarketVariability
ProductVariability
StageinLife
Cycle
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Market Positioning
Once a company has decided which segments of themarket it will enter, it must decide which positions itwants to occupy in those segments
Product position is the way the product is defined byconsumers on important attributesthe place theproduct occupies in consumers minds relative to
competing products
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Positioning as creating a position inthe prospects mind
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Product Positioning Strategies
Againsta
Competitor
Usage
Occasions
Awayfrom
Competitors
Product
Attributes
Product
Class
Benefits
Offered
Users
B
A
E
D
CH
G
F
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Positioning on product attribute
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Positioning on
benefits offeredWD 40 - There isalways another use
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Positioning on usageoccasion
In the summer,Sustagen is positionedas a beverage forreplacing athletes bodyfluids
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Positioning the product for a certain classof users - Re-positioning Head and Shouldersshampoo as suitable for everyday use
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Positioning against competitor
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Positioning away from competitor Were number two, so we try harder away from largest competitor HERTZ
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Highlight
DeWalt a new range of
professional portable power
tools - Black & Deckers
response to Japanese
brand Makita positioned
as a premium brand of tools
for professionals
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Positioning Strategies
Marketers can follow several positioning strategies.
Some firms find it easy to choose their positioningstrategy.
In many cases, two or more firms will go after thesame position. Then, each will have to find otherways to set itself apart, such as promising highquality for a lower cost or high quality with moretechnical service.
Each firm must differentiate its offer by building aunique bundle of competitive advantages thatappeals to a substantial group within the segment.
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Identifying a Positional Direction
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Identifying a Repositioning Direction
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Identifying Possible CompetitiveAdvantage (1)
Consumers typically choose products and services thatgive them the greatest value
The key to winning and keeping customers is to
understand their needs and buying processes betterthan competitors and to deliver more value
If a company can position itself as providing superiorvalue to selected target marketseither by offeringlower prices than competitors or by providing more
benefits to justify higher pricesit gainscompetitive advantage
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Identifying Possible CompetitiveAdvantage (2)
Product Service
Personnel Image
AreasforCompetitive
Differentiation
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Selecting the Right Competitive Advantage
A difference is worth establishing to the extent that itsatisfies the following criteria: Important The difference delivers a highly valued benefit
to target buyers
Distinctive Competitors do not offer the difference, or the
company can offer it in a more distinctive way Superior The difference is superior to other ways that
customers might obtain the same benefit
Communicable The difference is communicable andvisible to buyer.
Pre-emptive Competitors cannot easily copy the difference
Affordable Buyers can afford to pay for the difference
Profitable The company can introduce the differenceprofitably