Market Segmentation, Targeting, and Positioning for Competitive Advantage

Deciding Who We Want to Mean What to

Marketing Focuses on Customers



Target Market A specific group of customers on whom an organization focuses its marketing efforts
Large or small customer groups Single or multiple product markets Single or multiple products Local to global markets

Components of Strategic Marketing

FIGURE 1.1

Marketing Deals with Products, Distribution, Promotion, and Price



The Marketing Mix Four marketing activitiesproduct, distribution, promotion, and pricingthat a firm can control to meet the needs of customers within its target market
Product Distribution Promotion Pricing

Target Market

Marketing Mix Variables The 4 Ps

Product Distribution
Goods, services, or ideas that satisfy customer needs

The ready, convenient, and timely availability of products

Promotion Pricing

Activities that inform customers about the organization and its products Decisions and actions that establish pricing objectives and policies and set product prices

Some Definitions


Market Segmentation is the process of dividing a total market into groups, or segments, consisting of people or organizations with relatively similar product needs. The purpose is to enable a marketer to design a marketing mix (mm) that more precisely matches the needs of customers in the selected market segments. A Market Segment - consists of individuals, groups, or organizations with one or more similar characteristics that cause them to have relatively similar product needs.

Target Market Selection Process

FIGURE 7.1

Market Segmentation Levels of Market Segmentation

Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Services That Match Their Unique Needs

Mass Marketing
Same marketing mix (mm) directed at all consumers (no segmentation, i.e.,Ford Model T )

Segment Marketing
Different marketing mix (mm) to one or more segments (some segmentation, i.e. GM)

Today, Mass Marketers Rarely Practice Mass Marketing



In other words Mass Marketers do target almost everyone, but they do not do it with one marketing strategy They develop unique marketing strategies for each major target market Product strategy does not equal marketing mix strategy As we will see you can target the same product to different segments using different promotion, pricing, or distribution strategies

Mass Marketing
One mm for all

Segment Marketing
One or more mm targeted to one or more segments

Niche Marketing
One or more mm targeted to one or more sub-segments

Micro Marketing (1-1)

One or more mm targeted to specific individuals or communities

The Classic Segmentation Variables for Consumer Markets

FIGURE 7.3

Demographic Variables
 Perhaps

the most widely used and most widely available  Objective  Often a proxy for harder to obtain Psychographics
College student and interest in education 50 year old and interest in retirement funds

Psychographics Variables


Personality characteristics
Marketers appeal to positive/favorable personal characteristics to influence the purchase decision.

Motives
Marketers use individuals differing purchase motives to segment a product market.

Lifestyles
Marketers segment markets according to how individuals choose to spend their time in various activities, their income, their interest and opinions, and their education.

Behaviorist
often called usage  Very straightforward - target your users  May be hard to get (surprisingly)  80/20 rule (80% sales are to 20% of your customers  Ethical?
 Behaviorist

Vodka targeting alcoholics?

Geographic
you are a regional firm then Geo targeting is also self evident  Some firms have regional product mix (grocery stores and ethnic foods.  Even national firms may target regionally.
 If

Product may mean different things in different parts of the country Coke or Pop or Soda and is it a breakfast drink?

We Slice and Dice Segments



Typically using more then one variable or type of segmentation variable Use multiple Demographic Variables such as age, gender, income & Use various Demographic, Psychographic, Geographic, and Behaviorist Variables Art as much as science So can come up with different segments using different variables and different analytical/statistical techniques

Geodemographic Segmentation
 Marketing

segmentation that clusters people in pim code areas and smaller neighborhood units based on lifestyle (psychographic) and demographic information
(Combines Geographic and Demographic info)

 Example

are PRIZM and MicroVision

Psychographics and Demographics Variables

 VALS

& VALS 2  Based on values, lifestyles, and demographic  Therefore, combines Psychographic and Demographic variables

VALS 2
Percentage of Adults, Classified by VALS 2 Type, Who Participated in Selected Sports in 1996

FIGURE 7.6

Once We Have Our Segments We Need to Target Them With a Marketing Mix
 Three

options:

Undifferentiated Differentiated Concentrated

Targeting Strategies

The classic mass marketing, all things to all people approach Ignore segments One mm Rarely used today Name an undifferentiated product?
FIGURE 7.2

FIGURE 7.2

Differentiated Strategy (cont.)

The firm decides to target several separate segments and designs separate marketing strategies for each GMs a car for every purpose, purse, and personality vs. Fords one car for every purpose for every purse for every personality Typically, for most firms, this means you go for a small share of the larger, total aggregate market (one or two mm for one or two segments (out of maybe six or seven)

Concentrated Marketing

The firm goes for a large share of a single (or very few) segments. Scorpio vs. Scoda Can be niched or larger
FIGURE 7.2

IT IS CRITICAL TO UNDERSTAND THAT

 Mass

marketers do not often practice mass marketing today  They practice differentiated marketing  They likely do not change the product to appeal to different segments  They change price, place, and promotion

Stereotyping vs. Marketing

Does marketing discriminate?

Target Market Selection Process

Focus of Sept. 27

Focus for today

FIGURE 7.1

Recall: Market Segmentation Levels of Market Segmentation

Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Services That Match Their Unique Needs

Mass Marketing
Same marketing mix (mm) directed at all consumers (no segmentation, i.e.,Ford Model T )

Segment Marketing
Different marketing mix (mm) to one or more segments (some segmentation, i.e. GM)

And That Today, Mass Marketers Rarely Practice Mass Marketing



In other words Mass Marketers do target almost everyone, but they do not do it with one marketing strategy They develop unique marketing strategies for each major target market Product strategy does not equal marketing mix strategy As we will see you can target the same product to different segments using different promotion, pricing, or distribution strategies

Mass Marketing
One mm for all

Segment Marketing
One or more mm targeted to one or more segments

Niche Marketing
One or more mm targeted to one or more sub-segments

Micro Marketing (1-1)

One or more mm targeted to specific individuals or communities

The Classic Segmentation Variables for Consumer Markets

FIGURE 7.3

Some Definitions
Market Segmentation dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who might require separate products OR marketing mixes (mm).  Market Targeting evaluating each segments attractiveness and selecting one or more to enter.  Market Positioning setting the competitive positioning for the product and creating a detailed mm. - Terms often used often interchangeably, esp. targeting and positioning


Step 1: Identify The Appropriate Targeting Strategy

Three Basic Targeting Strategies:
Undifferentiated Differentiated Concentrated

Targeting Strategies

  

Classic mass marketing, all things to all people approach Ignore segments One mm for all customers Rarely used today Name an undifferentiated product?

Differentiated Strategy (cont.)



The firm targets several separate segments and designs separate marketing strategies for each

GMs a car for every purpose, purse, and personality vs. Fords one car for every purpose for every purse for every personality For most firms, this means they go for a small share of the larger, total aggregate market (one or two mm for one or two segments (out of maybe six or seven)

Concentrated Marketing

The firm goes for a large share of a single (or very few) segments
Jeep vs. GM

Can be niched or larger

IT IS CRITICAL TO UNDERSTAND THAT

 Mass

marketers do not often practice mass marketing today  They practice differentiated marketing  Often they do not change the product to appeal to different segments  They change price, place, and promotion

Having IDed the Targeting Strategy and Determined Segmentation Variables

  

We develop different segment profiles Evaluate these for profitability And select the target markets we want to enter

Finally We Position
Market Segmentation (ID) 2. Determine which segmentation variables to use 3. Develop market segment profiles Market Targeting (Evaluate) 4. Evaluate relevant market segments 5. Select target markets Market Positioning (Enter) Develop positioning for target segments Develop a marketing mix for each segment

Having Finished the Target Market Selection Process We Act!

How Does McDonalds Practice Market Positioning?

 

Product essentially same (no Indian Big Mac) Promotion (specific promotion campaigns aimed at the Indian market Place (urban stores, suburban stores, express stores, etc.) Price (junior discounts)