Topic 3: Market Segmentation, Targeting

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Topic 3 Market Segmentation, Targeting
Positioning

• By the end of this session you will
• Understand the concepts of market segmentation
  target marketing their use in developing
  marketing strategy
• Understand how companies identify attractive
  market segments choose a target market strategy
• Appreciate how companies position their products
  for maximum competitive advantage

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Reminder! The Marketing Process (Armstrong
Kotler, 2005)
Create value for customers
Understand the marketplace, customer needs and
wants
Design a customer driven marketing strategy
Construct a marketing programme that
delivers superior value
Build profitable relationships create customer
delight
Capture value from customers to create profits
customer equity
Capture value from customers in return
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Designing a customer driven marketing strategy
marketing mix

• 1. Divide markets up into meaningful consumer
  groups
• segmentation
• 2. Choose which customer groups to serve
• target marketing (the what)
• 3. Create market offerings that best serve
  targeted customers
• positioning (the how)

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Market Segmentation Target Marketing

• There are 2 general approaches to identifying
  target markets
• 1. The total market approach
• 2. The market segmentation approach
• Market segmentation is a means to an end target
  marketing
• Target marketing is the choice of specific
  segments to serve and is a key marketing strategy

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The Total Market Approach (mass or
undifferentiated marketing)

• The organisation designs a single marketing mix
  and directs it at a total market for a particular
  product. 2 requirements
• 1 A large proportion of customers in the total
  market must have similar needs for the product
• 2 The organisation must be able to develop and
  maintain a single marketing mix that satisfies
  customers needs
• Advantages ?

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The Market Segmentation Approach

• Rather than trying to compete in an entire market
  (cant appeal to all buyers in the same way),
  sometimes against superior competitors, a company
  must identify the parts of the market it can
  serve best differential advantage
• Segmentation is a compromise between the rash
  assumption that all people are the same and the
  uneconomic assumption that each person needs a
  dedicated marketing effort
• Build the right relationships with the right
  customers

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Segmentation Definitions

• Segmentation the process by which customers in
  markets with some heterogeneity can be grouped
  into smaller, more similar or homogeneous
  markets - differentiation
• - tailored marketing mix
• A Segment a discrete group target market, of
  consumers enjoying common characteristics, who
  with other groups of consumers (or segments)
  comprise the total market for a product or
  service
• Choice of appropriate base(s) for segmentation is
  a creative act

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Segmenting Consumer Markets variables or
predictors of differences
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Benefit segmentation

• Sampson (1992) re. car/accessory buying
• Pleasure seekers driving is all about pleasure
  (freedom, enjoyment, well-being)
• Image seekers driving is all about self-image
  (power, prestige, status, self-enhancement).
  Driving is secondary
• Functionality seekers driving is only a means
  of getting from A to B (convenience)
• Profile analyses could then follow to identify /
  classify the type of people in each benefit
  segment

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Purchase Behaviour / Perceptions and Beliefs

• Solus buying (totally brand loyal)
• Brand switching
• Innovators
• 7 value groups (Reed, 1995)
• Self-explorers, experimentalists, conspicuous
  consumers, belongers, social resisters, survivors
  and the aimless
• Biographics

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Psychographic Segmentation Malteasers

• Lifestyle(trendsetters,
• conservatives, sophisticates) and personality
  (extroverts, introverts, aggressive,
  submissive) data help to segment and target
  markets
• The brand becomes a badge

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Develop Segment Profiles

• Allows consumer groups to be classified in such a
  way that they can be reached by the
  communications media
• Often needed in relation to behaviour and/or
  psychographic segmentation
• Demographic age, gender, lifecycle, family size
• Socio-economic social class, terminal education
  age, income
• Geographic, geodemographic (eg ACORN targeting
  classification thriving, expanding, rising,
  settling, aspiring, striving)

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Segmenting Business Markets

• Profile organisations and organisational buyers
• 1. Macro-segmentation Variables
• organisational size, industry (SIC codes),
  geographic location
• 2. Micros-egmentation Variables
• choice criteria, decision-making unit structure,
  buy class (new task or re-buy?), purchasing
  organisation (centralised?), organisational
  innovativeness

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Target Marketing Strategies

• Undifferentiated single marketing mix for the
  whole market
• Differentiated specific marketing mixes
  developed to appeal to particular segments
• Focused (concentrated or niche) single
  marketing mix aimed at just one of the market
  segments
• Customised (Micro marketing or local) unique
  requirements of individual buyers

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Example of Undifferentiated Strategy
ORGANISATION
MARKETING MIX
TARGET MARKET

• Price
• Promotion
• Product
• Distribution

Post Office
Everybody
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Example of Differentiated Strategy
Marketing Mix 1
Utilitarian Customer

Marketing Mix 2
Trendy- Casual
LEVI Jeans
Marketing Mix 3
Price shopper
Marketing Mix 4
Mainstream
Tradition- alist
Marketing Mix 5
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Example of Focused Strategy
Independent DIY Shops
MARKETING MIX
ORGANISATION
Unserved

• Product
• Price
• Promotion
• Distribution

Cement Manufacturer
Builders Merchants
Unserved
National DIY Chains
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Example of Customized Strategy
INDIVIDUAL MIXES
ORGANISATION
INDIVIDUAL CUSTOMERS
Marketing Mix 1
Nissan
Industrial Electronic Systems Supplier
Marketing Mix 2
Birdseye
Marketing Mix 3
Heinz
Marketing Mix 4
Levis
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Target Marketing Evaluating Market Segments re
1. Market Attractiveness

• Market Factors
• segment size growth rate, price sensitivity,
  bargaining power of customers of suppliers,
  barriers to market segment entry to exit
• Competitive Factors
• nature of competition, new entrants, competitive
  differentiation
• Political, Social and Environmental Factors
• political issues, social trends, environmental
  issues

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Evaluating Market Segments re 2. Company
Capability of Competing in the Segment

• Exploitable marketing assets
• Cost advantages
• Technological edge
• Managerial capabilities and commitment
• Market segmentation is the foundation upon which
  a positioning strategy is then developed

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Key Tasks in Positioning
Where and how we compete
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Market Positioning

• Arranging for a product to occupy a clear,
  distinctive desirable place relative to
  competing products in the minds of target
  customers
• Develop positioning for target segments
• Develop a marketing mix for each segment
• For example

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Keys to Successful Positioning
Successful positioning
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Developing the Marketing Mix for each segment

• Where the right product is available at the right
  price in the right place at the right time to
  satisfy the needs of target customers in the
  chosen market segments
• Effective marketing management ensures a
  coordinated whole in exactly the right
  combination for the targeted customer the 4
  marketing mix categories their component
  activities are significantly interdependent
• Aim to create a long term relationship with the
  customer

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The Marketing Mix
The marketing mix
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Developing an Effective Marketing Mix

• Need to understand
• The target customer
• How customers choose between rival offerings
• How the 4Ps come together to derive competitive
  advantage (within the financial constraints of
  the company)
• Strength of 4Ps represents a memorable and
  practical framework for marketing decision making
• Weakness may oversimplify the reality of
  marketing management