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Market Segmentation, Targeting and Positioning

Chapter 4
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata

Market segmentation  The process of dividing the total market for a good or service into smaller groups.  One or more of these segments is then selected as the firm’s target market/s. each of which tends to be homogenous (or similar) in all significant aspects. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-1 .

)  A separate marketing mix is then developed for each segment or group of segments. This is referred to as ‘Market Segmentation’. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-2 .Market segmentation (cont.

 Demographic—the study of distribution of population’s age. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-3 .Segmentation categories  Geographic—the study of city size. stage in family cycle and ethnic background. income. urban/suburban/rural population distribution and climate. sex.

 Benefits desired or sought.  Behaviour towards products.Segmentation categories (cont.  Product usage rate.)  Psychographic—personalties. lifestyles. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-4 . social class including Activities Interests and Opinions (AIO).

• Action the market segmentation plan. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-5 .Benefits of segmentation  Segmentation enables marketers to: • Identify and satisfy specific benefits sought by particular groups. • Identify needs. satisfy needs. • Select the target market. • Divide the market into segments by separating marketing programs.

 Standardisation of service offers increased delivery speed and efficiency. administrative and inventory costs.  Increase in promotion.Limitations of segmentation  Segmentation can be expensive in terms of production and marketing of products to only those specific groups of the market. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-6 .  Mass production offers economies of scale.

 Estimate the market potential. ? 4-7 Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata .  Identify the different characteristics between market segments.Market segmentation process  Identify the needs and wants of customers.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-8 . airlines might offer business travel although research shows that preferred departure and arrival times vary to those being offered.Identify the needs and wants of customers  Objective is to identify needs not currently being satisfied. • E.g.

 The segment itself must be accessible through existing marketing institutions with a minimum of cost and waste. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-9 .Conditions for effective segmentation  The characteristics used to categorise customers must be measurable and the data obtainable.  A segment must be large enough to be profitable.

(Single segment) Differentiated Marketing Segment 1 Segment 2 Segment 3 C. (Multiple segments) Concentrated Marketing Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-10 . (Aggregation) Undifferentiated Marketing Company Mix 1 Company Mix 2 Company Mix 3 Company Marketing Mix Segment 1 Segment 2 Segment 3 B.A useful segmentation process must meet three conditions: Market Coverage Strategies Company Marketing Mix Market A.

 The marketing opportunity presented by the segment must match the company’s resources. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-11 .  The business must generate a profit if it is to continue its existence.Target market strategies  The target market should be compatible with organisations goals and images.

 The key words are perception in the mind of a consumer which include attributes. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-12 . benefits and brand.Positioning  The perception of a product or organisation in the consumer’s mind relative to their perception of other offerings in the same category.

    Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-13 . The company—status of current image. Customers—seek product attributes. Repositioning—have the needs of target market changed?  The marketing mix—must support the selected position.Factors of consideration Competition—look for a gap or niche.

 Market share.  Forecasting of market demand will determine:  Market potential.  Sales potential. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-14 .Estimate the market potential  Marketers need to know if a market is viable before segmentation occurs.

 Market potential: the total sales volume achievable in a given period. are measurable and are related to the demand of a product.Forecasting market demand  Demand forecasting: estimating sales of a product during a defined future period. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-15 .  Market factors: items or elements that exist in a market.

 Market share: this is the proportion of total sales. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-16 . by a single firm or brand.Forecasting market demand (cont.)  Sales potential: this is the portion of market potential that a specific company could expect to achieve under ideal conditions. of a product during a given period in a specific market.

Common methods of forecasting  Market factor analysis.85).g.  Direct derivation.  Test marketing.  Survey of buyer intentions. p.  Trend analysis.  Correlation analysis (refer e. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Essential Marketing Skills by Rix Slides prepared by Joe Rosagrata 4-17 .