Market Segmentation, Targeting, and Positioning

Market Needs vs. Segmentation…
Identify Market Needs
Benefits in terms of: Benefits in terms of: •Product Features •Product Features •Expense •Expense •Quality •Quality •Savings in time and •Savings in time and convenience convenience

Process of Market Segmentation, Targeting, & Positioning

Marketing Program
A marketing mix A marketing mix in terms of: in terms of: Product Product Price Price Promotion Promotion Place Place
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BA-3365 Marketing Management

Process of Market Segmentation, Targeting & Positioning
Market Segmentation
1. Identify bases for 1. Identify bases for segmenting the segmenting the market market 2. Develop segment 2. Develop segment profiles profiles

Market Targeting
3. Develop measure 3. Develop measure of segment of segment attractiveness attractiveness 4. Select target 4. Select target segments segments

Market Positioning
5. Develop positioning 5. Develop positioning for target segments for target segments 6. Develop a 6. Develop a marketing mix for marketing mix for each segment each segment

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Market Segmentation
Market Segmentation:
It involves aggregating prospective buyers into groups that: 1. Have common needs and 2. Will respond similarly to the marketing action. The groups that result from the market segmentation process are called market segments, a relatively homogeneous collection of prospective buyers.

Time to Market Segmentation:
One Product & Multiple Market Segments Multiple Products & Multiple Market Segments Segments of One: Mass Customization
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Criteria for Market Segmentation
Criteria for Market Segmentation:
1. Potential for increased profit and ROI. 2. Similarity of needs of potential buyers within a segment. 3. Difference of needs of buyers among/across segments. 4. Feasibility of marketing action to reach a segment. 5. Simplicity and cost of assigning potential buyers to segments.

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Market Segmentation: Variables
Consumer Characteristics:
Geographic: Region, city size, metropolitan area, density,
etc.

Demographic: Gender, age, race, life stage, birth era, HHD
size, residence tenure, marital status, etc. Socioeconomic: Income, education, etc. Psychographic: Personality, values, lifestyle, etc.

Buying Situations:
Outlet type: Instore, direct, etc. Benefits sought: Product feature, needs, etc. Usage: Usage rate, user status, etc. Awareness & intentions: Product knowledge, etc. Behavior: Involvement
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Level of Marketing Segmentation
No

Mass Marketing

Segmentation

Segment Marketing

Niche Marketing

Complete
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Micro Marketing
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Market Segmentation: Product Differentiation
Product Differentiation:
In a broad sense, it involves a firm’s using different marketing mix activities, such as product features and advertising, to help consumers perceive the product as being different and better than competing products. The perceived differences may involve physical or nonphysical features, such as image or price. In a narrower sense, it involves a firm’s selling two or more products with different features targeted to different market segments.
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Criteria for Target Market
Criteria for Target Market:
1. Size: The estimated size of the market to determine whether or not it is worth going after. 2. Expected Growth: The size of the market may be small, but if it is growing significantly it may be worth going after. 3. Competitive position: The less competition the more attractive the market. 4. Cost of reaching the market: Is the market accessible to a firm’s marketing actions? If not it should not be pursued. 5. Compatibility with the organization’s objectives and resources.
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Market Segmentation: Reebok Market-Product Grid
Market Segment
GROUP WITH General NEED Runners Performance- Aerobic conscious Dancers consumers Tennis (athletes) players Basketball players Step exercisers Golfers FashionComfort & conscious style consumers Conscious (nonathletes) walkers Children KEY: P=Primary Market

Product
Running Aerobic Tennis Basketball Children’s Walking Cross Step Athletic Golf Shoes Shoes Shoes Shoes Shoes Shoes Train’g Train’g clothing shoes 1981 1982 1984 1984 1984 1986 1988 1991 1993 1997 P P P p P P P P S P P S P

S

S

S

S

S

S

S

S

S

S

P P

P

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Market Segmentation: Hudson’s Example

Markets Stomach Sleepers Back Sleepers Side Sleepers

Soft Pillow

Medium Pillow M

Firm Pillow S M

L
M S

L
M

L
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BA-3365 Marketing Management

Market Segmentation: Apple’s Segmentation Strategy
MARKETS PRODUCTS (PERSONAL COMPUTERS) POWER MACINTOSH POWERBOOK G4 G4 POWER MACINTOSH G4 SERVER

SECTOR Consumer/ household EDUCATION

SEGMENT Family/ Games

IMAC √ √

Kindergarten Students thru 12th grade Faculty/ administration College and Students Faculty University administration Owners/ employees Administration/ technical Media/graphics/ Internet Desktop publishing

√ √ √ √ √ √ √

√ √ √ √ √ √ √

√ √ √ √ √ √ 12

COMMERICAL Small business Large business Design and Publishing

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Market Segmentation: Impact of Decision Variables I
Econometric Model

McCANN (1974, JMR)

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Market Segmentation: Impact of Decision Variables II

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Market Segmentation: Impact of Decision Variables III

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Market Segmentation: Cross Tabulation
Cross Tabulation:
A method of presenting and relating data having two or more variables. Cross tabs are used to analyze and discover relationships in the data. An important aspect of cross tabulations is deciding which two variables should be paired together for analysis.

Examples:
FREQUENCY
AGE OF HEAD OF HOUSEHOLD (YEARS) 24 or less 25 to 39 40 or over Total ONCE A WEEK OR MORE 144 46 82 272 2 OR 3 TIMES A MONTH 52 58 69 179 ONCE A MONTH OR LESS 19 29 87 135

TOTAL 215 133 238 586 16

BA-3365 Marketing Management

Positioning: Product Positioning
Product Positioning:
It refers to the place an offering occupies in consumers’ minds on important attributes relative to competitive offerings.

Approaches:
Head-to-Head Positioning
It involves competing directly with competitors on similar attributes in the same target market

Differentiation Positioning
It involves seeking a less competitive, smaller market niche in which to locate a brand.

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Positioning: Perceptual Map I
Rationale (or Assumptions):
Consumers generally use a small number (2~4) of product attributes when they think about a particular product or product class. In determining a brand’s position and the preferences of consumers, companies obtain three types of data from consumers:
Evaluations of the important attributes for a product class. Judgments of the existing brands with the important attributes. Ratings of an “ideal” brand’s attributes.
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Positioning: Perceptual Map
Objectives:
It is to identify the relevant dimensions & to locate the positions of existing & potential new products along these dimensions
Products are represented by locations in a space of several dimensions that distinguish among the products

Approaches:
Attribute-based procedures: Factor analysis Similarity-based procedures: Multidimensional scaling (MDS)
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Positioning: GM’s Repositioning Strategies Using Perceptual Map
A. Consumer perceptions in 1982 [o] and GM goals for 1990 [ ] High Price
Cadillac o Buick o Oldsmobile o

B. Potential change in goals from 1990 [ ] to 2000 High Price
Cadillac Buick

? ?
Oldsmobile

Family/ Conservative
Chevrolet o

Personal/ Expressive
o Pontiac

Family/ Conservative

?
Personal/ Expressive

?
Chevrolet Saturn (1990)

Pontiac

?
Saturn

Low Price

Low Price
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BA-3365 Marketing Management