Segmentation

Segmenting, Targeting & PositioningSegmenting, Targeting & Positioning

Steps in the Steps in the Target Marketing ProcessTarget Marketing Process

The 12 billion dollar question:The 12 billion dollar question:

Global $12 billion dollar sneaker market for all kinds of athletic shoes.

Reebok’s marketing research shows that in 1971 only 1 of every 27 women was involved in sports; today it is 1 in 3!! Thus Reebok has put special emphasis on the female market.

Sells multiple brands within the same product category for a variety of products

Brands feature a different mix of benefits and appeal to different segments

Has also identified different niches within certain segments

Product modifications are useful: Tide offers seven different product formulations to serve different niches’ needs

Procter & GambleProcter & Gamble

A Market is...A Market is...

(1) people or organizations with

(2) needs or wants, and with

(3) the ability and

(4) the willingness to buy.

A group of people that lacks any one of these characteristics is not a market.

Market SegmentationMarket Segmentation

MarketMarket

MarketSegmentMarket

Segment

MarketSegmentation

People or organizations with needs or wants and the ability and

willingness to buy

People or organizations with needs or wants and the ability and

willingness to buy

A subgroup of people or organizations sharing one or more characteristics that cause them to

have similar product needs.

A subgroup of people or organizations sharing one or more characteristics that cause them to

have similar product needs.

The process of dividing a market into meaningful, relatively similar, identifiable segments or groups.

DefinitionDefinition

Market Segmentation:

–Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.

MARKET SEGMENTATION =MARKET SEGMENTATION =

Dividing market into segments, each of which behaves differently vis-à-vis your product

Selecting certain segment(s) Developing one marketing plan for

each segment Thinking small(er)

Market segmentation

aggregating buyers into groups that:

1. Have common needs and

2. Will respond similarly to marketing action.

The groups that result from the

market segmentation process are

called market segments.

PRODUCT

MARKETSOFT

PILLOWMEDIUMPILLOW

FIRMPILLOW

Stomach sleepers

Back sleepers

Side sleepers

Key: L, Large market; M, medium market; S, small market

Product/Usage Habits Product/Usage Habits SegmentationSegmentation

Pillow ManufacturerPillow Manufacturer

Segmentation ----WHY!!!!!!!!!!!!!!!!!!!!Segmentation ----WHY!!!!!!!!!!!!!!!!!!!!

Buyer Preference Patterns

Homogeneous preference

Diffused preference

Clustered preference

DURABLE

Homogeneous Preference -No natural segments -All buyers have same preference

TITAN WATCHESTITAN WATCHES

DURABLE

Diffused Preference -No pattern (…or poor research) -Take center position

DURABLE

Clustered Preference -Natural segments -Increases as number of competitors increases

Values of the Two Segments- Values of the Two Segments- Youngsters & Adults - WATCHESYoungsters & Adults - WATCHES

Attribute 1PRICE

Attribute 2BEAUTY

Attribute 3DURABILITY

Adults

Youngsters

Segmentation DilemmaSegmentation Dilemma

Mass Marketing --(Economies of Scale)

(However, everyone is different)

CUSTOMIZATION

Choosing a Targeting StrategyChoosing a Targeting Strategy

Undifferentiated Marketing Differentiated Marketing Concentrated Marketing Customized Marketing

Undifferentiated MarketingUndifferentiated Marketing

Appeals to a broad spectrum of people

Efficient due to economies of scale Effective when most consumers

have similar needs Example: Big Bazaar

Differentiated MarketingDifferentiated Marketing Develops one or more products for each

of several customer groups with different product needs

Appropriate when consumers are choosing among well-known brands with distinctive images and it is possible to identify one or more segments with distinct needs for different types of products

Example:Lakme, Ponds, Fair & Lovely

Concentrated MarketingConcentrated Marketing

Entails focusing efforts on offering one or more products to a single segment

Useful for smaller firms that do not have the resources to serve all markets

Example:HMT Watches

Customized MarketingCustomized Marketing

Segments are so precisely defined that products are offered to exactly meet the needs of each individual

– Example:

Mass customization is a related approach in which a company modifies a basic good to meet the needs of an individual

– Example: Dell Computers

SegmentationSegmentation

Why segment?

– Identifies opportunities and needs.

– Allows firm to focus on specific needs.

– Improves marketing mix for each segment.

– Allows small firm to exist.

The Importance of The Importance of Market SegmentationMarket Segmentation

Markets have a variety of product needs and preferences

Marketers can better define customer needs

Decision makers can define objectives and allocate resources more accurately

Criteria for Successful Criteria for Successful SegmentationSegmentation

Criteria Criteria for for

Market Market SegmentsSegments

Criteria Criteria for for

Market Market SegmentsSegments

SubstantialitySubstantiality

IdentifiabilityIdentifiability

AccessibilityAccessibility

ResponsivenessResponsiveness

Criteria for SegmentationCriteria for Segmentation

SubstantialitySubstantialitySubstantialitySubstantiality

IdentifiabilityIdentifiabilityMeasurabilityMeasurabilityIdentifiabilityIdentifiabilityMeasurabilityMeasurability

AccessibilityAccessibilityAccessibilityAccessibility

ResponsivenessResponsivenessResponsivenessResponsiveness

Segment must be large enough to warrant a special

marketing mix.

Segment must be large enough to warrant a special

marketing mix.

Segments must be identifiable and their size measurable.

Members of targeted segments must be reachable with

marketing mix.

Members of targeted segments must be reachable with

marketing mix.Unless segment responds to a marketing mix differently, no separate treatment is needed.

Unless segment responds to a marketing mix differently, no separate treatment is needed.

WHEN DO YOU HAVE "GOOD" WHEN DO YOU HAVE "GOOD" SEGMENTS?SEGMENTS?

You can reach them Group is large enough to be

profitable You have the capability to build a

marketing program target for them

Segmentation BasesSegmentation Bases

Characteristics of

individuals, groups,

or organizations used

to divide a total market

into segments.

(variables)

Bases for SegmentationBases for Segmentation

BehavioralBehavioral

Benefits SoughtBenefits Sought

PsychographicsPsychographics

DemographicsDemographics

GeographyGeography

Bases Bases Used toUsed toSegmentSegment

ConsumerConsumerMarketsMarkets

Geographic SegmentationGeographic Segmentation

Region of the country or world

Market size

Market density : TV Companies

Climate: woollen clothes

GeographyGeography

Bases for Bases for Demographic SegmentationDemographic Segmentation

Age: Cartoon Network; MTV; News Channels Gender: Cosmetics & After Shave Income: Economical & Luxury goods Ethnic background: Food Family Life Cycle: Life Insurance Companies Generation: Apparels Education Occupation: PC Selling

GeographyGeography

Psychographic segments market in terms of shared attitudes, interests, and opinions

Segments include demographic information such as age and income, but also includes richer descriptions

Some organizations develop their own psychographic segments for their consumers, but others utilize national systems (VALS by SRI International)

Bases for Bases for Psychographic SegmentationPsychographic Segmentation

PsychographicPsychographicSegmentationSegmentation

PersonalityPersonality

MotivationMotivation

LifestylesLifestyles

AttitudeAttitude

MOTIVATIONMOTIVATION

•Health Supplements

•Cosmetics

•Safola

•Life Insurance

•LG Products

•Health Supplements

•Cosmetics

•Safola

•Life Insurance

•LG Products

Life Style: VALSLife Style: VALS

VALS FrameworkVALS Framework•PRINCIPLE ORIENTED:

•Fulfilled: Mature, Well Educated, Informed, Respectful but Open minded

•Believers: Conservative, Conventional, follow established rules

•STATUS ORIENTED:

•Achievers:Committed to family and Work, Image is very Important

•Strivers: Unsure of themselves, Money is a measure of success

•ACTION ORIENTED:

•Experiencers: Young, Vital, Enthusiastic, rebellions

•Makers: Practical, Suspicious of new ideas, value working with their hands

•PRINCIPLE ORIENTED:

•Fulfilled: Mature, Well Educated, Informed, Respectful but Open minded

•Believers: Conservative, Conventional, follow established rules

•STATUS ORIENTED:

•Achievers:Committed to family and Work, Image is very Important

•Strivers: Unsure of themselves, Money is a measure of success

•ACTION ORIENTED:

•Experiencers: Young, Vital, Enthusiastic, rebellions

•Makers: Practical, Suspicious of new ideas, value working with their hands

GeographyGeography

Benefit SegmentationBenefit Segmentation

The process of grouping

customers into market

segments according to

the benefits they seek

from the product .

Maruti Esteem, Honda City

Behavioral Behavioral

GeographyGeography

Segmenting by BehaviorSegmenting by Behavior

Behavioral segmentation slices consumers on the basis of how they act toward, feel about, or use a product

Behavioral Segmentation Behavioral Segmentation VariablesVariables

Market SegmentationMarket Segmentation

Occasions User Status

User Rates: Airlines Loyalty Status: Credit

Cards Readiness Stage

Attitude Toward the Product

Business Marketing SegmentationBusiness Marketing SegmentationGeographic

Customer Type

Customer Size

Product UseBusinessBusinessMarketsMarkets

BusinessBusinessMarketsMarkets

Purchasing Criteria

Purchasing Strategy

Importance

Personal Characteristics

Micro- segmentation

Macro- segmentation

Steps in Segmenting a MarketSteps in Segmenting a Market

Select a

market for

Choosebases

for segmen-

tation

Selectdescrip-

Profileand

analyzesegments

Selecttarget

markets

Design,imple-ment,

maintainmkting

Target MarketTarget Market

A group of people or

organizations for which an

organization designs,

implements, and maintains a

marketing mix intended to

meet the needs of that

group, resulting in mutually

satisfying exchanges.

Strategies for SelectingStrategies for SelectingTarget MarketsTarget Markets

ConcentratedStrategy

UndifferentiatedStrategy

MultisegmentStrategy

Undifferentiated Undifferentiated Targeting StrategyTargeting Strategy

AdvantagesAdvantages: Potential savings on

production and marketing costs

DisadvantagesDisadvantages: Company more

susceptible to competition

Concentrated Concentrated Targeting StrategyTargeting Strategy

AdvantagesAdvantages: Concentration of resources Meets narrowly defined

segment Small firms can compete Strong positioning

DisadvantagesDisadvantages: Segments too small, or

changing Large competitors may market

to niche segment

AdvantagesAdvantages: Greater financial success Economies of scale

DisadvantagesDisadvantages: High costs Cannibalization

Multi-segment Multi-segment Targeting StrategyTargeting Strategy

PositioningPositioning

Developing a specific

marketing mix to influence

potential customers’ overall

perception of a brand,

product line, or organization

in general.

PositionPosition

The place a product, brand,

or group of products

occupies in consumers’

minds relative to competing

offerings.

Procter & Gamble--11 Brands of DetergentProcter & Gamble--11 Brands of Detergent

Tide: all purpose family detergent, tough on stains, keeps clothing looking like new

Cheer with Triple Color Guard: the color expert, guards against fading

Bold: built in fabric softener Gain: gives you clean, fresh-smelling clothes Era: built in stain removers Dash: does it all for a low price Dreft: removes tough baby stains but gently Ariel: targeted to Upper Class market

Toothpaste ExampleToothpaste Example

Pepsodent Tooth Decay Close-Up Freshness Appeal Aqua fresh Triple Benefit Teeth Colgate CDC Strong Teeth Colgate Jr. Kids brand with fluoride

POSITIONING THE PRODUCTPOSITIONING THE PRODUCT

Choosing a Positioning Strategy:Choosing a Positioning Strategy:– Identifying possible competitive advantages

• Products, services, channels, people or image can be sources of differentiation.

– Choosing the right competitive advantage• How many differences to promote?

– Unique selling proposition (pick one benefit; Volvo = safety)

– Choose more than one if others share a claim to be best:

• Which differences to promote? - Some: Important, Distinctive, Superior, Affordable, visible to buyers.

POSITIONING THE PRODUCTPOSITIONING THE PRODUCT

Choosing a Positioning Strategy:Choosing a Positioning Strategy:– Developing a positioning statement

• Positioning statements summarize the company or brand positioning

• EXAMPLE: To (target segment and need) our (brand) is (concept) that (point-of-difference).

– Communicating the chosen position

Steps to Choosing and Implementing Steps to Choosing and Implementing

a Positioning Strategya Positioning Strategy

Step 1. Identifying a set of possible competitive advantages:

– Competitive Differentiation.

Step 2. Selecting the right competitive advantage.

Step 3. Effectively communicating and delivering the chosen position to the market.

Step 4: Evaluate market response and reposition if necessary

What Kind of Advantages to Focus On?What Kind of Advantages to Focus On?

Against aCompetitor

UsageOccasions

Away fromCompetitors

Product/ServiceAttributes

ProductClass

BenefitsOffered

UsersUsers

CCHHGG

ImageImagePersonnelPersonnel

1.Attribute Positioning 1.Attribute Positioning GM: SafetyGM: Safety

2.Benefit Positioning2.Benefit Positioning Maruti:EconomyMaruti:Economy

3. Use Positioning 3. Use Positioning PVR:Leisure Based Entertainment

PVR:Leisure Based Entertainment

4. User Positioning4. User Positioning Bungee Jumping: Adventurous

Bungee Jumping: Adventurous

5.Competitor Positioning 5.Competitor Positioning

6. Product Category 6. Product Category IIMs: Best B SchoolIIMs: Best B School

IIPM:Better Than IIMsIIPM:Better Than IIMs

Which Competitive Advantages?Which Competitive Advantages?

Criteriafor

DeterminingWhich

Differencesto

PromoteAffordableAffordable SuperiorSuperior

ProfitableProfitable

PreemptivePreemptive

DistinctiveDistinctive

ImportantImportant

CommunicableCommunicable

How Many Differences to Promote?How Many Differences to Promote?

Trend to broaden and position to more segments– Lux soap: cleanses, deodorizes, moisturizes– Risks of disbelief and loss of clear position

Avoid– Under positioning– Over positioning– Confusion

Effective PositioningEffective Positioning

Assess the positions of competing products

Determine the dimensions of these positions

Choose an effective market position

RepositioningRepositioning

Changing consumers’

perceptions of a brand

in relation to

competing brands.

Segmentation

market segments

customized marketing

market segmentation

different segments

segmentation segment

market segmentation

definition market segmentation

marketing plan

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