Market Segmentation, Targeting, and Positioning

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Selecting a Target Market
 Before a marketing mix strategy can be implemented, the marketer must identify, evaluate, and select a target market. Market: people or institutions with sufficient purchasing power, authority, and willingness to buy Target market: specific segment of consumers most likely to purchase a particular product

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Types of Markets
 Consumer products: goods or services purchased by an ultimate consumer for personal use  Business products: goods or services purchased for use either directly or indirectly in the production of other goods and services for resale  The key to classification is to identify the purchaser and the reasons for buying the goods.

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The Role of Market Segmentation
 Market Segmentation Division of the total market into smaller, relatively homogeneous groups  No single marketing mix can satisfy everyone. Therefore, separate marketing mixes should be used for different market segments.

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Ill Levels of Market Segmentation In mass marketing, the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers. e.g. Coca-Cola. Advantages : creates the largest potential market, which leads to the lowest costs, which in turn can lead to lower prices or higher margins. Disadvantages : increasing splintering of market, advertising media and distribution channels is making it difficult and expensive to reach a mass audience.
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Mass marketing is dying. Most companies are turning to micromarketing at one of four levels: *segments, *niches, *local areas, and *individuals.
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Segment Marketing : A market segment consists of a group of customers who share a similar set of needs and wants. e.g. Car buyers Advantages : Better design, price, disclose and deliver the product or service to satisfy the target market. The company also can fine-tune the marketing program and activities to better reflect competitors' marketing.
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Market segments can be defined in many different ways. One way to carve up a market is to identify preference segments. e.g. ice cream buyers are asked how much they value sweetness and creaminess as two product attributes. Three different patterns can emerge. 1.Homogeneous preferences - a market where all the consumers have roughly the same preferences.

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2. Diffused preferences - At the other extreme, consumer preferences may be scattered throughout the space indicating that consumers vary greatly in their preferences. 3. Clustered preferences - The market might reveal distinct preference clusters, called natural market segments .

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Niche Marketing A niche is a more narrowly defined customer group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into subsegments. Characterics: The customers in the niche have a distinct set of needs; they will pay a premium to the firm that best satisfies their needs; Niches are fairly small and normally attract customers
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Local Marketing : Target marketing is leading to marketing programs tailored to the needs and wants of local customer groups (trading areas, neighborhoods, even individual stores). e.g.Citibank provides different mixes of banking services in its branches, depending on neighborhood demographics.

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Customerization : The ultimate level of segmentation leads to "segments of one," "customized marketing," or "one-to-one marketing." Today customers are taking more individual initiative in determining what and how to buy. They log onto the Internet; look up information and evaluations of product or service offers; dialogue with suppliers, users, and product critics; and in many cases, design the product they want. e.g. Dell The customer's selections send signals to the supplier's manufacturing system that set in motion the wheels of procurement, assembly, and delivery.

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No Market Segmentation

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Segmented by Gender

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Segmented by Age

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Criteria for Effective Segmentation
 Market segmentation cannot be used in all cases. To be effective, segmentation must meet the following basic requirements. The market segments must be measurable in terms of both purchasing power and size. Marketers must be able to effectively promote to and serve a market segment. Market segments must be sufficiently large to be potentially profitable. The number of segments must match the firm’s capabilities.
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Segmenting Consumer Markets
 Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locations Does not ensure that all consumers in a location will make the same buying decision. Help in identifying some general patterns.

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 Geographic Segmentation : Region – NEWS City – Class I, Class II, Metros Rural & Semi urban areas – Rural villages with certain population

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 Using Geographic Segmentation Demand for some goods and services can vary according to the geographic region Most major brands get 40-80 percent of their sales from what are called core regions Climate is another important segmentation factor  North Indian consumers, for example, eat more milk products than South Indians  Southerners use more spicy foods than North Indians.
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Segmenting Consumer Markets
 Demographic Segmentation: dividing consumer groups according to characteristics such as gender, age, income, occupation, education, household size, and stage in the family life cycle  A primary source for demographic data in India is the Census Bureau

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 Demographic Segmentation : Age Family Size Gender Income Occupation Education Socioeconomic classification

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 Segmenting by Age Identify market segments on the basis of age Products designed to meet the specific needs of certain age groups Under 6 years, 6-11, 12-19, 20-34, 3549, 50-60, 60+

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 Segmenting by Family Size: Identify market segments on the basis of Family members Young, Single Young, Married,no children Young, Married, youngest child under 6 Older, Married with Children Older, Married, no chlidern under 18 Older, Single Others
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 Segmenting by Gender Marketers must ensure that traditional assumptions are not false Male , Female Some companies market successfully to both genders

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Segmenting by Income : e.g. Aravind Eye Hospitals *Low *Lower Middle *Upper Middle *High

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 Segmenting by Income and Expenditure Patterns Engel’s Laws, as family income increases:  A smaller percentage of expenditures go for food  The percentage spent on housing and household operations and clothing remains constant  The percentage spent on other items (such as recreation and education) increases

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Segmenting by Occupation : Occupation : Unskilled worker, Skilled Worker , Professional and technical; managers, officials, and proprietors; clerical sales; craftspeople; forepersons; operatives; farmers; retired; students; homemakers; unemployed

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Segmenting by Education :

Education : Grade school or less; some high school; high school graduate; some college; college graduate post graduate

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Segmenting by Socioeconomic class : Social class : Lower lowers, upper lowers, working class, middle class, upper middles, lower uppers, upper uppers

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 Psychographic Segmentation Divides a population into groups that have similar psychological characteristics, values, and lifestyles Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities The most common method for developing psychographic profiles of a population is to conduct a large-scale survey  VALS and VALS 2 “Values and Lifestyles”

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Psychographic Segmentation : Psychographics is the science of using psychology and demographics to better understand consumers. In psychographic segmentation, buyers are divided into different groups on the basis of psychological /personality traits, lifestyle, or values. People within the same demographic group can exhibit very different psychographic profiles.

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Psychographic Segmentation : One of the most popular commercially available classification systems based on psychographic measurements is SRI Consulting Business Intelligence's (SRIC-BI) VALS™ framework. VALS classifies adults into eight primary groups based on personality traits and key demographics. The segmentation system is based on responses to a questionnaire featuring 4 demographic and 35 attitudinal questions. The VALS system is continually updated with new data from more than 80,000 surveys per year
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The major tendencies of the four groups with higher resources are: 1. Innovators - Successful, sophisticated, active, "takecharge" people with high self-esteem. Purchases often reflect cultivated tastes for relatively upscale, niche-oriented products and services. 2. Thinkers - Mature, satisfied, and reflective people who are motivated by ideals and value order, knowledge, and responsibility. Favour durability, functionality, and value in products. 3. Achievers - Successful goal-oriented people who focus on career and family. Favour premium products that demonstrate success to their peers. 4. Experiencers - Young, enthusiastic, impulsive people who seek variety and excitement. Spend a comparatively high proportion of income on fashion, entertainment, and socializing.
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The major tendencies of the four groups with lower resources are: 1.Believers - Conservative, conventional, and traditional people with concrete beliefs. Favour familiar,products and are loyal to established brands. 2. Strivers - Trendy and fun-loving people who are resourceconstrained. Favour stylish products that emulate the purchases of those with greater material wealth. 3. Makers - Practical, down-to-earth, self-sufficient people who like to work with their hands. Favour made products with a practical or functional purpose. 4. Survivors - Elderly, passive people who are concerned about change. Loyal to their favorite brands.
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 Using Psychographic Segmentation Psychographic profiles produce rich descriptions of potential target markets Greater detail aids in matching a company’s image and its offerings with the types of consumers who are likely purchasers
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 Behavioural or Product-Related Segmentation : Dividing a consumer population into homogeneous groups based on characteristics of their relationships to the product Can take the form of segmenting based on:  Benefits that people seek when they buy  Usage rates for a product  Consumers’ brand loyalty toward a product

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 Benefits Focuses on the attributes that people seek in a good or service and the benefits that they expect to receive from that good or service Groups consumers into segments based on what they want a product to do for them  Usage Rates Segmenting by grouping people according to the amounts of a product that they buy and use Markets often divided into heavy-user, moderate-user, and light-user segments The 80/20 principle (“Praedo’s Law”)
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 Brand Loyalty Segmenting consumers grouped according to the strength of brand loyalty felt toward a product Frequent flyer programs of airlines and many hotels

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 Using Multiple Segmentation Bases Increase accuracy in reaching the right markets Combine multiple bases  Geographic and Demographic  Product-related with income and expenditure patterns  Others

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The Market Segmentation Process
 Develop a Relevant Profile for each Segment  Forecast Market Potential  Forecast Probable Market Share  Select Specific Market Segments

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Strategies for Reaching Target Markets
 Undifferentiated Marketing: when a firm produces only one product or product line and promotes it to all customers with a single marketing mix  Differentiated Marketing: when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments
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 Concentrated Marketing (niche marketing): when a firm commits all of its marketing resources to serve a single market segment  Micromarketing: involves targeting potential customers at a very basic level, such as by ZIP code, specific occupation, lifestyle, or individual household

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 Selecting and Executing a Strategy No single, best choice strategy suits all firms Determinants of a market-specific strategy:  Company resources  Product homogeneity  Stage in the product life-cycle  Competitors’ strategy

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Positioning: a marketing strategy that emphasizes serving a specific market segment by achieving a certain position in buyers’ minds  Attributes  Price/quality  Competitors  Application  Product user  Product class

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Positioning map Graphic illustration that shows differences in consumers’ perceptions of competing products Reposition Marketing strategy to change the position of its product in consumers’ minds relative to the positions of competing products

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Hypothetical Competitive Positioning Map for Selected Retailers

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