Module V

Segmentation, Targeting and Positioning

Market Segmentation
Its a process of dividing a total market into market groups consisting of people who have relatively similar product needs. There are clusters of needs A market segment consists of individuals, groups or organization with one or more characteristics that cause them to have relatively similar product needs.

Levels of Market Segmentation

Mass Marketing
Seller engages in mass production, mass distribution and mass promotion of one product for all buyers Leads to lower costs that enables either lower price or higher margins

Segment Marketing
Consists of group of customers who share a similar set of needs and wants Marketer does not create segments but identfies and targets them

 A company can better design, price, disclose and deliver the product or service to satisfy the target market Market segments can be defined in terms of preference based on preference segments, three patterns are
Homogenous preferences Diffused preferences Clustered preferences

creaminess

sweetness

Homogeneous Preference
-no natural segments -all buyers have same preference

creaminess

sweetness

Diffused Preference
-no pattern (or poor research) -take center position

creaminess

sweetness

Clustered Preference
-natural segments -increases as number of competitors increases

 Niche Marketing
Segments are divided into sub segments to identify a more narrowly defined customer groups seeking a distinctive mix of benefits. Niche has the following characteristics
Customers have a distinctive set of needs Customers are ready to pay a premium to a firm that best satisfies their needs Nicher gains certain economies through specialization Niche are fairly small and attract one or two players Niche has size, profit and growth potential.

Local Marketing
Marketing activities concentrate on getting as close and personally relevant to individual customers as possible. Local marketing refers to marketing programs being tailored to the needs and wants of local customer groups. experiential marketing promotes a product by not telling its functional benefits but also communicating unique and interesting experiences

Criteria for Effective Segmentation

Measureable : The Size, purchasing power and characteristics of the segment can be measured. Substantial: Segments are large and profitable enough to serve. Segments should be largest possible homogenous group. Accessible: Segments can be

 Differentiable: Segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. Actionable: Effective programs can be formulated for attracting and serving the segments.

Bases for Segmenting Consumer Markets

Geographic
Nation State Region Cities Age Gender Family size and life cycle Income Occupation Education Religion Nationality Social class

Demographic

 Psychographic
Lifestlye Personality

Behavioral
Occasions
Regular occasion or special occasion

Benefits
Quality, service, economy, speed

User status
Non user, ex user, potential user, first time user, regular user.

Usage rate
Light user, medium user, heavy user

Loyalty status
None, medium, strong

Readiness stage
Unaware, aware, informed, interested, desirous, intending to buy

Attitude towards products

Positive, negative, neutral

Targeting
Targeting is a strategy to choose one or more segments to serve Factors to be considered before choosing a segment
Size, growth, profitability, economies of scale Analysis on whether investing in these segments will meet the companys objectives and resources

Selecting the Market Segments

Single segment concentration
Firm gains strong knowledge of the segment needs Firm enjoys operating economies through specialization in production, distribution and promotion Risk quiet prone to competition, consumer preference might change all of a sudden

 Selective Specialization
Caters to a number of segments Segments have no synergy amongst each other Segments are profitable

Product Specialization
Firm makes a single product and sells it across different segments Risk the product might be replaced by entirely new segment

 Market specialization
Firm concentrates on serving many needs of a particular customer group Gains strong reputation in serving the customer needs

Full market coverage

Firm attempts to serve all customer groups with all the products they might need.

Patterns of Target Market Selection: Product and Market Matrices

Market Targeting
Market Coverage Strategies
A. Undifferentiated Marketing

Company Marketing Mix Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 3 Company Marketing Mix
B. Differentiated Marketing

Market

Segment 1

Segment 2 Segment 3
C. Concentrated Marketing

Segment 1 Segment 2 Segment 3

 Undifferentiated Marketing
Covers whole market with one product offer
Relies on mass distribution and advertising Narrow product line keeps down the cost of R&D, Production, inventory, transportation, marketing research, advertising and product management. Company can turn lower cost into lower prices to win price sensitive customers

Concentrated Marketing
Firm concentrates on one segment with one product offering

Differentiated Marketing
Firm operates in several market segments and makes products and programs for each segment Various costs associated with differentiated marketing are
Product modification cost Manufacturing cost Administrative cost Inventory cost Promotion cost

Differentiation and Positioning

Differentiation
It is the act of designing a set of meaningful differences to distinguish the companys offering from competitors offerings Identify what is unique and valuable to customers Being the provider of these unique and valuable benefits leads to competitive advantage

Differentiation Strategies

Product

Personnel

Channel

Image

Positioning
Positioning refers to placing a brand in that part of the market where it will have a favorable reception compared to competing brands Subash Jain A products position is the place it occupies in consumers minds relative to competing products.
Philip Kotler

Generic Positioning Strategies

Our product is unique
e.g. Raffles Hotel (oldest hotel); Westin Hotel (tallest hotel)

Our product is different

e.g. Seng Choon eggs (low in cholesterol) Listerine (kills germs) Amex Blue credit card (6-month rate of 15.9% vs the market rate of 24%)

Our product is similar

e.g. Thai fragrant rice

Approaches to Positioning
By attributes
e.g. Singapore Airlines (first class comfort)

By benefits
e.g. Citibank Credit Card (7/24 availability)

By price/quality e.g. Proton By usage or application e.g.100Plus (fluid

replenishment in sports)

By users e.g. Johnson Baby Shampoo; J&J

Affinity Shampoo (hair conditioner for women)

By product class
e.g. Camay soap (with bath oilsnot just soap)

By competitors e.g. Avis against Hertz

Positioning Map
A tool used to determine the position of a brand in the marketplace
Identify set of competing brands. Identify important attributes that consumers use when choosing between brands using qualitative research (e.g. group discussions). Conduct quantitative marketing research where customers score each brand on all the key attributes. Plot brands on a two-dimensional map using the attributes.

Using the Positioning Map

Ask:
What position do you currently own? What position do you want to own? Whom should you defeat to own that position? Do you have the resources to do it? Can you persist until you get there? Are your tactics supporting the positioning objective you set?

New entrants:
Spot gaps in the map; determine ideal point

Perceptual Map

Positioning Errors
Under-positioning:
Not positioning strongly enough.

Over-positioning:
Giving buyers too narrow a picture of the product.

Muddled Positioning:
Leaving buyers with a confused image of the product.