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College 4

Target audience: remember last lecture => integrated marketing communication: business customers
want more information which cannot be given in a 30 second commercial via mass media. However, this
channel is very suitable to make customers aware of new food products for instance. Also consider that not
every consumer can afford the highest quality products, so introduce lower quality (i.e. cheaper) line?

Segment market to respond more effectively to the wants of groups of potential buyers and thus increase its
sales and profits

No mass marketing: people are different, 1 product is no longer enough to meet the needs of all customers.

Market segmentation

Market segmentation involves aggregating prospective buyers into groups that:

1. Have common needs

2. Will respond similarly to a marketing action
3. Have between-group differences!

Market segments are groups of individuals or organizations with similar characteristics that have significant
implications for the determination of the marketing strategy

Firms can adapt their marketing mix to identified segments

Thinking back to the customer decision process: a group of customers may have a similar consideration
set, or similar criteria for the final purchase, or similar preferences towards the service environment where
a product can be sold (online/offline, etc).

Why:

- better matching customer needs

- enhanced profitability
- enhanced opportunities for growth
- improved customer retention
- more effective targeting of communications
- opportunities for segment dominance

Marketing segmentation: dividing the market into groups of customers with the same needs.
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The customers all have the same

needs.

The customers all have different ones

needs. Many people will not like a
product exactly in the middle.

Solution: Create a few different versions of

a product.

Depending on the distance between somebody’s preferences and your offer, the willingness to pay
will increase. If a distance is larger, a customer wants to be compensated. Hence, there are different
strategies here:

1. One product, very low price

2. Multiple products, compensate by excellent service or brand name
3. Make product customizable

THE product does not exist ÿ it is difficult to discover what people really want. People also cannot express
their needs well.

Segmenting, Targeting and Positioning (STP)

- Sustainable competitive advantage

- Segmenting
- Targeting
- Positioning

Step 1: Identify segments

Segment consumer markets by
- Profile
ÿ Geographic
ÿ Demographic
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- Psychographic
ÿ Lifestyle
ÿ Personality
- Behavioral
ÿ Benefits sought
ÿ Purchase occasion
ÿ Usage rate

Geographic: differences in region, city size, etc.

Clothing: warm clothing needed in Scandinavia and alpine countries

Food: preferences for beer, wine, and food differ. E.g. Asian food, French cuisine... With globalization
preferences start to spread out, but differences remain. => World of Coca cola in Atlanta! Tastes of beverages from
around the world.

Demographic: gender, age distribution (e.g. Duplo-Lego-Technics), household size, ethnicity (Pathe)

Psychographic: Demographics are used to segment markets because these data are related to behavior and
becuase they are relatively easy to gather. However, demographics are not in themselves the causes of behavior.
Consumers don’t buy windsurfing equipment because they are young. They buy it because they enjoy an active,
outdoor lifestyle, and it so happens that such people are also typically younger. Thus demographics often correlate
with behavior, but they do not explain it. Marketers often go beyond demographics in an effort to better understand
why consumers behave as they do. They ingage in psychographic segmentation, which involves examining
attributes realted to how a person thinks, feels, and behaves.

Frequently included in apsychographic segementation effort are personality dimensions, life-style characteristics,
and consumer values.

personality (introvert, extrovert => e.g. do you wear clothing/phone to express yourself) and lifestyle (gadgets for
trendsetters) => Frizzell: An insurance company that targeted public employees – civil servants, teachers,
university lecturers – people who do not drive much, and who tend to like a quiet life. Ideal people: no accidents, and
loyal. Easy to target: leaflets at place of work. However, with government cutbacks on state employees, they had to find
another way of attracting similar people. They used mass media, which we have seen in the previous lecture is not
very suitable for targeting a specific group. SHOW CLIP => what do you think? Target audience thought commercial was
charming and engaging, others found it dull and boring.

Result: a lot of new members.

Benefits sought: people seek different benefits from a product. E.g. some drive a car to get to work, others drive a
car to show off. Often used, e.g. computers: gamers, multimedia, workstation, low-budget. E.g. CPU’s:
pentium, celeron...

Purchase occasion: for the gift segment, promotion campaigns are centered around Christmas.
Also with supermarkets: AH to go only carries a restricted range of foods, normal AH carries ordinary range, AH
XL carries luxury articles

Usage rate: light/medium/heavy users

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Segmentation variables

Consumer markets:
-
profile: geographic and demographic -
psychographic -
behavioural

Business-to-business markets
- demographic
- usage -
purchasing oriented -
situational

Relevance of segements

- Homogeneous vs heterogeneous
- Sufficient in size
- Measurable/Identifiable
- Can be reached

Target group selection criteria

- Segment size
- Segment growth -
(potential) segment profitability
- Match between product and customer needs
- Current and potential competition
- Available resources

Step 5: Product positioning

The act of designing the company's offering so that it occupies a meaningful and distinct position in the
target customer's mind
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Where we want to compete / How we want to compete

Target market selection (step 5) has accomplished part of the positioning job already.

Differential advantage accomplished through marketing mix.

Head-to-head: compete directly with competitors on similar product attributes in the same
target market.

Perceptual map is a visual representation of consumer perceptions of the brand and its
competitors using attributes that are important to customers.

*Perceptual*, so it's in the *mind* of a consumer, and may differ from individual to individual.