Module 4 Target Bases

8/10/2019 Module 4 Target Bases

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Objective: explaining how companies segment,

target and position for maximum competitive

advantage

Market Segmentation, Targeting, and

Positioning for Competitive Advantage


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Markets

Originally, a marketis a physical place where buyers and

sellers gather to exchange goods and services.

In marketing, a marketis the set of all actual and

potential buyers of a product or service. As marketing evolves in time, companies used different

philosophies in their approaches to a market. Their

thinking about serving a market passed through three

stages;


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Mass marketing: here, the seller mass produces, mass

distributes, and mass promotes one product to all buyers.

In the very beginning, McDonalds offered just one type

of hamburger to everyone. Mass marketing leads to

lowest costs and prices and create the largest potentialmarket.

Product-variety marketing: here, the seller produces

two or more products that have different features, styles,

qualities, sizes Later, McDonalds produced Big Mac tooffer variety to buyers rather than appealing to different

market segments. Product-variety marketing supports

that consumers seek variety and change over time.

Target marketing: here, the seller identifies marketsegments, selects one or more of them, and develops

products and marketing mixes for each. Today,

McDonalds offers different menus for different markets.


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Micromarketing

Today companies are using target marketing instead of

mass marketing and product-variety marketing.

Even, today, target marketing is taking the form of

micromarketing- designing the companies marketingprograms to the needs and wants of narrowly defined

segments, often called niche marketing. There will

be no market for products that everybody likes a little,

only for products that somebody likes a lot.


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Steps in Target Marketing

1.Market segmentation; dividing a market into distinctgroups of buyers with different needs, characteristics or

behaviors who might require separate products or

marketing mixes.2.Market targeting; evaluating each market segments

attractiveness and selecting one or more of the market

segments to enter.

3.Market positioning; setting the competitive positioning

(difference) for the product and creating a detailed

marketing mix.


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Bases for Segmenting Services

Markets There are various ways to segment a market. A

marketer has to try different segmentation variables,

alone and in combination to understand the

structure of the market in the best way. The majorvariables are;

geographic segmentation

demographic segmentation psychographic segmentation

behavioral segmentation


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Geographic Segmentation

Companies may divide the market into

different geographic units such as nations,

countries, regions, citiesA company may decide to operate in one or

more geographic locations but it must pay

attention to the geographical differences in

needs and wants.

E.g. McDonalds serve corn soup in Japan,

pasta salads in Rome, wine in Paris...


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Demographic Segmentation

Companies divide the market into groups based

on;

age and life-cycle: needs and wants change with age,

that is why, a company may use different marketing

approaches for different age and life-cycle groups.

Lewis 501 and Pepsi generation next are mainly

targeted to the young people.


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Psychographic Segmentation

Companies may divide the market into different

groups based on;

social class: has a strong effect on preferences in cars,

clothes, home furnishings, leisure activities SportsInternational, Bilkent and Or-an are targeted to people at

higher social class.

lifestyle: Mezzaluna targets to a business lifestyle, whereas

the rest of the restaurants in Ankuva to a student lifestyle. personality: mainly used for cosmetics, cigarettes, and

liquor. Marlboro is targeted to the macho man with its

macho Cowboy image.


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Behavioral Segmentation

Companies may divide buyers into groups based on

their knowledge, attitudes, uses or responses to a

product.

occasions: buyers can be grouped according to occasionswhen they buy or use an item. Coca Cola is for Always

benefit sought: buyers can be grouped according to the

benefits that they seek from the product. In the

toothpaste market, benefit segments are - economic,medicinal, cosmetic, and taste; detergent market -

cleanliness, cost; sewing gum - healthy teeth, fresh

breath


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user status: markets can be segmented into groups of

nonusers, ex-users, potential users, first-time users and

regular users of a product. Potential users and regular

users may require different kinds of marketing appeal

from each other.

usage rate: markets also can be segmented into light-,

medium-, and heavy- user groups. Most beer companies

target the heavy beer drinker.

loyalty status: a market can also be segmented by consumer

loyalty. Consumers can be loyal to brands (Alo), stores

(Vakko), and companies (BMW) Consumer may be

completely loyal (buy one brand all the time), somewhatloyal (favor one brand, sometimes buying others), no

loyalty (each time they buy a different product)


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Segmenting International

Markets Large companies e.g. Coca Cola, Sony sell products

in many different countries which vary in their

economic, cultural and political make up. That is why,

international firms need to group their world marketsinto segments with distinct buying needs and behaviors.

Several variables can be used to segment international

markets;

geographic location; grouping countries by regions e.g. Europe,

Middle East.


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economic factors; grouping by population income levels or

by their overall level of economic development. A

companys economic structure shapes its populationsproduct and service needs, therefore, the marketing

opportunities that it offers.

political and legal factors; grouping by the type of stability of

government, receptive to foreign firms, monetaryregulations, and the amount of bureaucracy. Such factors

can play a crucial role in a companys choice of which

countries to enter and how.

cultural factors; grouping markets according to commonlanguages, religions, values and attitudes, customs and

behavioral patterns.


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Some companies do not prefer to segment the

international markets on the basis of geographic,

economic, political, cultural, and other factors.

Instead they prefer to do intermarket

segmentationin which companies form segments

of consumers who have similar needs and buyingbehavior even though they are located in different

countries. E.g. teenagers live surprisingly parallel

lives all around the world e.g. drink Coke, eat Big

Macs, surf on the Net, wear bluejeans. RecentlyPepsi introduced its sugar-free Pepsi Max in 16

countries with a single ad for teenagers who like to

be on the wild side.


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Market Targeting

Evaluating Market Segments

After segmenting the whole market, the firm has to

evaluate these segments and decide how many and

which ones to target. The company should enter

segments only where it can offer superior value andgain advantages over competitors.

In evaluating different market segments, a firm must

look at three factors:

segment size and growth; companies try to select the segment

with right size and growth for themselves. Some

companies prefer to target segments with large current sales,

a high growth rate, and a high profit


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margin. But smaller companies may find these large

segments too competitive and may find themselves

having lack of skills and resources, therefore, prefer to

target smaller segments

segment structural attractiveness; a segment may have the right

size, but not offer attractive profits if (1) there are strong

competitors; (2) actual or potential substitute products -

may limit prices and profits; (3) buyers with power -buyers may have strong bargaining power relative to

sellers so that they may force prices down, demand more

quality, set competitors against another; (4) powerful

suppliers - can control prices, reduce quality. company objectives and resources; a segment may have the right

size with attractiveness but may not suit with the long-run

objectives of the company.


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Selecting Market Segments

The company must decide which and how many

segments to serve, in other words, the company

must decide which market-coverage strategy to

adopt.

There are three market-coverage strategies:

undifferentiated marketing

differentiated marketing

concentrated marketing


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Company

marketing

mix

Market

Co. marketing mix1

Co. marketing mix2

Co. marketing mix3

Segment1

Segment2

Segment3

Company

marketing

mix

Segment1

Segment2

Segment3

Market-Coverage Strategies

Undifferentiated

marketing

Differentiated

marketing

Concentrated

marketing


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Undifferentiated Marketing

A market-coverage strategy in which a firm decides

to ignore market segment differences and go after

the whole market with one offer.

Here, the offer focus on what is common in theneeds of consumers rather than on what is

different.

The company designs a product and a marketingprogram that appeal to largest


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number of buyers. It relies on mass advertisingand a superior image in peoples minds. E.g.

Levis 501. Provides cost effectiveness because of its low

production, inventory, transportation,

advertising, marketing research costs. Have difficulties in (1) developing a product or

brand that satisfies all consumers; (2) keeping a

strong place in the market and making profit,

when several firms follow this strategy heavy

competition develops; (3) satisfying smaller

segments.


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Differentiated Marketing

A coverage strategy in which a firm decides to

target several market segments and designs separate

offers for each. E.g. Nike offers athletic shoes for

different sports such as running, aeobics, cycling,baseball, basketball, tennis

These companies hope for (1) higher sales; (2) a

strong place within each market segment; (3) moreloyal customers because the firms offerings match

each segments desires better.


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Creates better total sales, but increases the costs

- developing separate marketing plans for the

separate segments requires extra marketing

research, sales analysis, promotional planning,

channel management.

Because of the high costs involved in thisapproach, the company must compare increased

sales with increased costs when deciding to use

differentiated marketing strategy.


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Concentrated Marketing

A market-coverage strategy in which a firm goes

after a large share of one or a few submarkets.

Suitable for smaller companies to achieve a strong

market place in the segments (or niches) that itserves because of its greater knowledge of the

segments needs.

Involves higher-than-normal risks because the targetmay not respond or larger competitors may decide

to enter the same market but offers operating

economies because of specialization in production,

distribution, and promotion.


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Choosing a Market-Coverage Strategy

Factors needed to be considered when choosing a

market-coverage strategy are;

company resources; when the firms resources are limited,

concentrated marketing is the better. product variability; for uniform products e.g. grapefruit or

steel, undifferentiated marketing is more suitable. But

for products that vary in design e.g. cameras or

automobiles, differentiated or concentrated is moresuitable.


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products stage in the life cycle; when the product is new,

it is better to produce only one version of the

product - undifferentiated or concentratedmarketing. For mature products, differentiated

marketing makes more sense.

market variability; when buyers have the same tastes

and react the same way to marketing efforts,undifferentiated marketing is suitable.

competitors marketing strategies; when competitors use

segmentation, undifferentiated marketing can be

suicidal. On the contrary, when competitors useundifferentiated marketing, a firm can gain an

advantage by using differentiated or concentrated

marketing.


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Positioning for Competitive

Advantage

Once a company has decided which segments to

enter, it must decide what positions it wants

to occupy in those segments.

A products position is the place the product has

in consumers minds relative to competing

products. In other words, a products position is

the set of perceptions, impressions, and feelingsthat consumers


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hold for the product compared with

competing products. E.g. Toyota is

positioned on economy, Mercedes andCadillac on luxury and Porsche and BMW on

performance, Volvo on safety.

Consumers simplify the buying process bycategorizing products in their minds.

Marketers do not leave their products

positions to chance. They must plan positionsthat will give their products the greatest

advantage in selected target markets.


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interior design, Ciragan Palace with its building; place

- Swiss Hotel offers the best Bosphorus view...

service: a product can be differentiated by its speedy,

convenient or careful service delivery e.g. Akbank

offers full banking services at home, Garanti offers

service during the lunch time, Osmanli Bank offers

branches in supermarkets, Migros offers home

delivery, McDonalds offer training for its

franchisees

personnel: a company can hire better people than

competitors do e.g. Singapore Airlines is well known

with its beautiful flight attendants, IBMs people are

professional, McDonalds people are polite


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shampoo, Pepsi Max for adventurous men

against another product: this approach can benamed as competitive advertising where the

company positions itself directly against onecompetitor e.g. Avis we try harder against Hertz,

Wendys where is the beef? against McDonald,Sabah against Milliyet; Burger King againstMcDonald; Sheraton against Hilton

product class dissociation: a product may also bepositioned away from all competitors e.g. Sprite haspositioned itself against the cola products, YapiKredi claims to be giving the best services

price:a product can be differentiated by using itsprice. The product would be having the lowest pricein the market e.g. Alo.


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After the company selects the right position

for itself, it must communicate and deliver

the chosen position with promotions.

Module 4 Target Bases

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