Kotler Marketing 8e

Chapter 9 Market segmentation, targeting and positioning

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

1.

2.

3.

4.

5.

Explain market segmentation, and identify several possible bases for segmenting markets and international markets. Distinguish between the requirements for effective segmentation: measurability, accessibility, substantiality, actionability. Outline the process of evaluating market segments and suggest some methods for selecting market segments. Illustrate the concept of positioning for competitive advantage by offering specific examples. Discuss choosing and implementing a positioning strategy, and contrast positioning based on product, service, personnel and image differentiation.
Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Organisations that sell to consumer and business markets recognise that they cannot appeal to all buyers in those markets, or at least not to all buyers in the same way. Buyers are too numerous, too widely scattered and too varied in their needs and buying practices. Different companies vary widely in their abilities to serve different segments of the market. Rather than trying to compete in an entire market, sometimes against superior competitors, each company must identify the parts of the market that it can serve best.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Mass marketing
In mass marketing, the seller mass produces,

mass distributes and mass promotes one product to all buyers.

Product-variety marketing
Here, the seller produces two or more products

that have different features, styles, quality, sizes and so on.

Target marketing
Here, the seller identifies market segments,

selects one or more of them, and develops products and marketing mixes tailored to each.
Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

1.

Market segmentation Dividing a market into distinct groups of buyers with different needs, characteristics or behaviours 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 for the product and creating a detailed marketing mix.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Markets consist of buyers, and buyers differ in one or more ways.

They may differ in their wants, resources,

locations, buying attitudes and buying practices. Because buyers have unique needs and wants, each buyer is potentially a separate market. Ideally, then, a seller might design a separate marketing program for each buyer. Most sellers face larger numbers of smaller buyers and do not find complete segmentation worthwhile; instead, they look for broad classes of buyers who differ in their product needs or buying responses.
Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Market positioning B. Market segmentation C. Target marketing D. None of the above

A.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Market positioning B. Market segmentation C. Target marketing D. None of the above

A.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Geographic: dividing a market into different geographical units such as nations, regions, states, municipalities, cities or neighbourhoods. Demographic: dividing the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race and nationality.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Age and life-cycle stage: consumer needs and wants change with age, so some companies use age and life-cycle segmentation which divides a market based on age and life-cycle groups. Gender: long used in clothing, cosmetics and magazines. Other opportunities include finance and cars, amongst others.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Income: used in goods and services such as cars, boats, clothing and travel. Multivariate demographic: most companies segment a market by combining two or more demographic variables.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Psychographic: buyers are divided into different groups based on psychological/personality traits, lifestyle or values. People in the same geodemographic group can have different profiles. Behavioural: divides buyers into groups based on their knowledge of the product, their attitude towards it, the way they use it and their responses to it. Benefits sought: buyers are segmented according to the different benefits they seek from the product.
Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

User status: many markets can be segmented into on-users, ex-users, potential users, first time users and regular users of a product. Usage rate: markets can also be segmented into light, medium and heavy user groups. Loyalty status: a market can be segmented by consumer loyalty, divided according to their degree of loyalty. Buyer-readiness stage: there are different stages of readiness to buy a product. Some people are aware, some are informed, some are interested, some want the product, and some intend to buy. Attitude towards the product: people can be enthusiastic, positive, indifferent, negative or hostile.
Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

A.
B. C. D.

Geographic segmentation Psychographic segmentation Demographic segmentation All of the above are ways to segment consumer markets

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

A.
B. C. D.

Geographic segmentation Psychographic segmentation Demographic segmentation All of the above are ways to segment consumer markets

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

There are many ways to segment a market, but not all segmentations are effective. To be useful, market segments must rate favourably on five key criteria: Measurable- the size and purchasing power of the segments must be able to be measured. Certain segmentation variables are difficult to measure. Accessible- the segments must be able to be reached and served. Substantial- the segments must be large or profitable enough. A segment should be the largest possible homogeneous group worth going after with a tailored marketing program. Differentiable- the segments must be conceptually distinguishable and respond differently to different marketing mix elements and programs. Actionable- effective programs must be able to be designed for attracting and serving the segments.
Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

By international standards, Australian consumers and industrial buyers are very sophisticated. They are attracted by products that meet their particular needs. The population is only 21m, so buyer expectation can present a problem. The marketer must determine whether or not it is feasible and economic to reach a small market segment.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Market segmentation reveals the market segment opportunities facing a firm. The firm now has to evaluate the various segments and decide on the number of segments to cover and the ones to serve. This is selecting target segments.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Segment size and growth

The company must first collect and analyse data on

current dollar sales, projected sales growth rates and expected profit margins for the various segments. It wants to select segments that have the right size and growth characteristics, but right size growth is a relative matter.

Segment structural attractiveness

A segment might have desirable size and growth and

still not be attractive from a profitability point of view. The company must examine several major structural factors that affect long-run segment attractiveness.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Company objectives and resources

Even if a segment has positive size growth

and is structurally attractive, the company must consider its own objectives and resources in relation to that segment. Some attractive segments could be quickly dismissed because they do not mesh with the companys long-run objectives.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

After evaluating different segments, a company hopes to find one or more market segments worth entering. It must then decide which, and how many segments to serve. A target market consists of a set of buyers sharing common needs or characteristics that the company decides to serve. The company can adopt one of three market-coverage strategies:

Undifferentiated marketing
Differentiated marketing Concentrated marketing
Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

There are many factors to consider when choosing a market-coverage strategy. This has moved from mass marketing to direct to one-to-one marketing. Permission marketing has emerged, which is a process of converting strangers into friends and friends into customers.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Once a company has decided which segments of the market it will enter, it must decide which positions it wants to occupy in those segments. Product position is the way the product is defined by consumers on important attributesthe place the product occupies in consumers minds is relative to competing products.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Marketers can follow several positioning strategies:

Positioning on specific product attributes

such as price and performance. A product can be positioned against a competitor. A product can be positioned for different product classes, e.g. some margarines are positioned against butter and others against cooking oils.
Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Some firms find it easy to choose a positioning strategy, but in many cases, two or more firms will go after the same position. Then, each will have to find other ways to set itself apart.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

A cornerstone of brand marketing strategy is the concept of brand positioning identifying the position of a brand in the mind of the customers. One type of analysis to achieve this is known as perceptual mapping.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Consumers choose products and services that give them the greatest value. If a company can position itself as providing superior value to selected target markets either by lowering prices or increasing benefits, it gains competitive advantage.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Product differentiation - A company can differentiate its physical product. At one extreme, some companies offer highly standardised products that allow little variation: chicken, steel, aspirin. Other companies offer products that can be highly differentiated, such as motorcars, commercial buildings and furniture. Services differentiation - In addition to differentiating its physical product, the company can also differentiate the services that accompany the product. Many possibilities exist. Personnel differentiation - Companies can gain a strong competitive advantage by hiring and training better people than their competitors. Image differentiation - Even when competing companies offer the same products and accompanying services, buyers may perceive a difference based on company or brand images. Thus, companies work to establish images that differentiate them from competitors.
Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

A. B. C. D.

selling and advertising lower prices and advertising lower prices and more benefits advertising and more benefits

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

A. B. C. D.

selling and advertising lower prices and advertising lower prices and more benefits advertising and more benefits

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

A difference is worth establishing to the extent that it satisfies the following criteria:
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 buyer. Pre-emptive: Competitors cannot easily copy the difference. Affordable: Buyers can afford to pay for the difference. Profitable: The company can introduce the difference profitably.
Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

The company must take steps to deliver and communicate the desired position to the target consumers. The marketing mix must support the positioning strategy. Designing the marketing mix involves working out the tactical details of the positioning strategy.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Sellers can take three approaches to a market: mass marketing, product variety marketing, or target marketing. The key steps in target marketing are segmentation, targeting and positioning. Segments must be measurable, accessible, substantial and actionable.

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia

Discuss the segmentation variables and their breakdowns that are important to a marker who: Sells organic meat Sells cars Travel package You are an exporter of Australia made cars. Which of the factors would you consider to analyse attractiveness of an international market?

Kotler, Brown, Burton, Deans, Armstrong Marketing 8e 2010 Pearson Australia