CH_07

Chapter 7- slide 1Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Chapter Seven

Customer-Driven Marketing Strategy: Segmentation, Targeting &

Positioning


Learning Objectives

After studying this chapter, you should be able to:

1. Define the three steps of target marketing: market segmentation, target marketing, and market positioning

2. List and discuss the major bases for segmenting consumer and business markets

3. Explain how companies identify attractive consumer and business markets

4. Discuss how companies position their products for maximum competitive advantage in the marketplace


Chapter Concepts:

1. Market Segmentation

2. Marketing Target

3. Differentiation and Positioning

4. Positioning for Competitive Advantage


Market Segmentation

Market segmentation is the process that companies use to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs.


Market Segmentation

• Segmenting consumer markets

• Segmenting business markets

• Segmenting international markets

• Requirements for effective segmentation


Market Segmentation

Segmenting Consumer Markets

• Geographic segmentation

• Demographic segmentation

• Psychographic segmentation

• Behavioral segmentation


Market Segmentation

Geographic segmentation

• Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities.


Market Segmentation

Demographic segmentation

• Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality.

• Most popular segmentation method because consumer needs, wants, and usage often vary closely with demographic variables and are easier to measure than other types of variables.


Market Segmentation


Occupation segmentation

• Different occupations could mean different buying power

• eg. Doctors earn more than nurses

• Different occupations could mean different needs for different types of products

• eg. Office workers need to buy work clothes, while blue-collared workers usually attired differently


Market Segmentation


• Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups.

Eg: Age: 18-24, 25-34, 35-44, 45+


Life Cycle Segmentation

Bachelor stage – young, single people;

Young married couples – early married years before the arrival of children;

Full nest I – young married couples with children;

Full nest II – older married couples with dependent children;

Empty nest – older married couples with no dependent children; and

Older single people - still working or retired


Market Segmentation


• Gender segmentation divides the market based on sex (male or female).

• Income segmentation divides the market into affluent or low-income consumers.


Market Segmentation

Psychographic segmentation

Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits.

Example:Social Class Upper, upper middle, lower middle, etc.

Lifestyle Activities (golf, travel); interests (politics, art); Opinions (conservation, capitalism)

Personality Ambitious, self-confident, aggressive, introverted, extroverted, sociable


Market Segmentation

Behavioral segmentation

• Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product.

• Occasion

• Benefits sought

• User status

• Usage rate

• Loyalty status


Market Segmentation


• Occasion segmentation divides buyers into groups according to occasions when they get the idea to buy, actually make purchases, or respond to a product.

Eg: consumers buy special items for occasions like birthdays


Market Segmentation


• Benefit segmentation requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit.

Eg: Quality, Service, Economy, Convenience, Speed


Market Segmentation


• User status divides buyers into ex-users, potential users, first-time users, and regular users of a product.

• Usage rate divides buyers into light, medium, and heavy product users.

• Loyalty status divides buyers into groups according to their degree of loyalty.

Eg: Completely loyal, somewhat loyal (2-3 brands), Not loyal


Market Segmentation

Using Multiple Segmentation Bases

• Multiple segmentation is used to identify smaller, better-defined target groups.

• Geodemographic segmentation is an example of multivariable segmentation that divides groups into consumer lifestyle patterns.


Eg: To segment attitude towards Internet usage & online purchasing among the Malaysian urban adult population, AC Nielsen uses multivariable segmentation based on ownership of PCs, mobile phones, PDAs, satellite TV subscription to find 4 segments

E-Savvy

Mainly Chinese, young, high-income households

The Mobiles

Malay & Chinese, 20s & 30s, mid-income households

Homebodies

15 to 20, mid-income households

Not interested

Mainly Malays, 50s


• What variables can a bank use to identify “wealthy” individuals which it wants to target for a new investment scheme?


Market Segmentation

Segmenting Business Markets

• Business can be segmented by:

• Geographics• Location

• Demographics• Industry, company size

• Customer-operating

characteristics• Technology, user status, service


Market Segmentation

Segmenting Business Markets

• Business can be segmented by:• Purchasing approaches

• purchasing function-organization, power structure, relationship, policy, purchasing criteria

•Situational factors

• Urgency, application, order size

•Personal characteristics• Buyer-seller similarity, attitude towards risk, loyalty


Market Segmentation

Segmenting International Markets

• Geographic location• Region or nations

• Economic factors• Population income levels, economic development

• Political and legal factors• Type and stability of government, receptivity to foreign firms,

monetary regulations, bureaucracy

• Cultural factors• Languages, religions, values and attitudes, customs, behavior


• Intermarket segmentation divides consumers into groups with similar needs and buying behaviors even though they are located in different countries.

• Examples:

• IKEA targets global middle class

• Mercedes-Benz targets worldwide well-to-do

• MTV, Sony, Adidas, Coca-cola – worldwide teenagers

Adidas “Impossible is Nothing”


Requirements for Effective Segmentation• Measurable: The size, purchasing power, and

profiles of the segments can be measured.• Accessible: The market can be effectively

reached and served• Substantial: The markets are large and profitable

enough to serve• Differentiable: The markets are conceptually

distinguishable and respond differently to marketing mix elements and programs

• Actionable: Effective programs can be designed for attracting and serving the segments


Few companies target left handers. Why?


Market Targeting

Evaluating Market Segments

• Segment size and growth

• Segment structural attractiveness

• Company objectives and resources


Evaluating Market Segments• Segment size and growth:

• Smaller versus larger segments

• Growth potential

• Segment structural

attractiveness:

• Competition

• Substitute products

• Power of buyers

• Power of suppliers

Market Targeting

• Company objectives and resources:

• Competitive advantage

• Availability of resources

• Consistent with company objectives


Selecting Target Market Segments

Market Targeting

Target market: the set of buyers who share common needs or characteristics that the company decides to serve


Target Marketing Strategies

Market Targeting



• Undifferentiated marketing targets the whole market with one offer.

• Mass marketing

• Focuses on common needs rather than what’s different

Market Targeting



• Differentiated marketing targets several different market segments and designs separate offers for each.

• Goal is to achieve higher sales and stronger position

• More expensive than undifferentiated marketing

Market Targeting


Differentiated marketing – Colgate targets different market segments with different types of toothpaste.



• Concentrated marketing targets a small share of a large market

• Limited company resources

• Knowledge of the market

• More effective and efficient

Market Targeting



• Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.

• Local marketing

• Individual marketing

Market Targeting


Burger King introduce rendang burgers in Singapore and Malaysia, where local palates prefer spicy food.

•Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups by cities, neighborhoods or stores.

•Benefits of local marketing

•Increased marketing effectiveness in competitive markets

•More customer-specific offerings

•Challenges of local marketing:

•Increased manufacturing and marketing costs

•Less economy of scale

•Logistics

•Dilution of company image


• Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers.

• Also known as:

• One-to-one marketing

• Mass customization

• Markets-of-one

marketing

• Mass customization is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to meet individual needs.


Which Strategy is Best? Depends on:• Company resources

• Limited resources – concentrated marketing

• Product variability• Uniform products – undifferentiated marketing• Vary in design –differentiation or concentrated marketing

• Product life-cycle stage• Introduction– undifferentiated marketing, Maturity - differentiated

marketing

• Market variability• Same taste, amounts, reaction to 4P- Undifferentiated marketing

• Competitor’s marketing strategies• Competitors using undifferentiated marketing - differentiated or

concentrated marketing.


Market Targeting

Socially Responsible Target Marketing

• Benefits customers with specific needs

• Concern for vulnerable segments

• Children

• Alcohol

• Cigarettes


Differentiation and Positioning

• Product position is the way the product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products.

In the automobile industry how are brands positioned?

Volvo is positioned on safety

Mercedes is positioned on luxury

BMW is positioned on performance

Toyota Prius is positioned as a high tech solution to energy shortage


•Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions.

Positioning map: Large luxury SUVs



Choosing a Differentiation and Positioning Strategy

• Identifying a set of possible competitive advantages to build a position

• Choosing the right competitive advantages

• Selecting an overall positioning strategy



Identifying Possible Competitive Advantage

• Product differentiation

• Service differentiation

• Channels

• People

• Image


• Product differentiation takes place along a continuum. – Little variation: chicken, steel, and aspirin. – Highly differentiated: autos, clothing, and furniture.

Differentiated on features, performance, style, or design.• Services differentiation

– Speedy, convenient, or careful delivery– Installation

• Channel differentiation: coverage, expertise, performance.• People differentiation

– hiring and training better people than competitors.• Even when competing offers look the same, buyers may perceive a

difference based on company or brand image differentiation


Singapore Airlines may charge a higher price, but provides excellent services – product and service differentiation.

© Rick Hall© James Cridland

© Nakedsky.org

© juandazeng | Flickr.com


Choosing the Right Competitive Advantages

• A difference is worth establishing to the extent that it satisfies the following criteria:

• Important

• Distinctive

• Superior

• Communicable

• Preemptive

• Affordable

• Profitable



• 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 and visible to buyers.

• Preemptive

• Competitors cannot easily copy the difference.

• Affordable

• Buyers can afford to pay for the difference.

• Profitable

• The company can introduce the difference profitably.



Selecting an Overall Positioning Strategy

• Value proposition is the full mix of benefits upon which a brand is positioned.

• More for more

• More for the same

• Same for less

• Less for much less

• More for less


Figure 7.7Possible value propositions


Developing a Positioning Statement

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


Communication and Delivering the Chosen Position

• Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to target consumers.

• If the company decides to build a position on better quality and service, it must first deliver that position. Designing the marketing mix—product, price, place, and promotion—involves working out the tactical details of the positioning strategy.


Communication and Delivering the Chosen Position

• Establishing a position or changing one usually takes a long time. In contrast, positions that have taken years to build can quickly be lost.

• Once a company has built the desired position, it must take care to maintain it through consistent performance and communication.

• It must closely monitor and adapt the position over time to match changes in consumer needs and competitors’ strategies.

CH_07

Documents

income segmentation

effective segmentation

pearson education

popular segmentation

prentice hall chapter

lifecycle stage segmentation

market positioning

positioning chapter