Segmentation, Targeting & Positioning for Competitive Advantage

Nathan George, M.S., J.D. 1

Marketing Process Involves

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Market orientation as philosophy Market segmentation Targeting market Positioning Marketing mix 3

Marketing Strategy • • • • • •

Select base for segmentation and identify appropriate market segments. Evaluate and appraise the market segments resulting from the first step. Select an overall market targeting strategy and specific target segments. Tailoring a distinct position in selected markets Developing marketing mixes that serve desired positioning strategy in the marketplace Auditing marketing environments and efforts

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Importance of Segmentation and Targeting

• The focus of a successful marketing program is the customer. Effectively marketing must fully understand the needs. • Customers with decent life and individualism have Heterogeneous demands, This has given rise to need segmenting. • The process of understanding the customer and choosing a group of customer you can serve best is targeting. • So target a segmentation is core of the marketing process. 5

Identify the Total Market Identify Total Market Effective Segmentation Bases for Segmentation Select Target Segment

Positioning Strategy Marketing Mix

Monitor, Evaluate and ControlObjective 3

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Identify the Total Market

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The first step in the target market selection process is to specifically define the total market of all potential customers for a product category.

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Segmentation and Effectiveness Identify Total Market

Effective Segmentation Bases for Segmentation Select Target Segment

Positioning Strategy Marketing Mix

Monitor, Evaluate and ControlObjective 3

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Segmentation • • •

Segmenting means dividing a heterogeneous demanding markets into homogenous groups based on similar characteristics or traits Heterogeneous demand- different groups of customers have differing needs from specific products. Homogeneous segment- the separation of markets into distinctive groups based on homogeneous characteristics. 9

Criteria for successful segmentation

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Criteria for successful segmentation

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•Clear differences in consumer preferences for a product must exist.

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Criteria for successful segmentation

Me a Ide sura b nti fiab le le

•Difference preferences for a product must be identifiable and capable of being related to measurable variables. 12

Criteria for successful segmentation

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•The proposed market segment must have enough size and purchasing power to be profitable. 13

Criteria for successful segmentation

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•Companies must be able to respond to difference preferences with an appropriate marketing mix.

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Criteria for successful segmentation

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•The proposed market segment must be readily accessible and reachable with market programs.

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Determine Bases for Segmentation Identify Total Market

Effective Segmentation Bases for Segmentation Select Target Segment

Positioning Strategy Marketing Mix

Monitor, Evaluate and ControlObjective 3

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Bases for Segmentation

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To divide a market into segments, firms use segmenting criterion that describe the characteristics of each part of the market.

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Segmentation Base

Demographic Segmentation

Segmentation

Geographic Segmentation

Situation Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation 18

Segmentation Base

Income Level

Life-cycle

Social class Education

Ethnic 19

Segmentation Base

Demographic Segmentation

Segmentation

Geographic Segmentation

Situation Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation 20

Segmentation Base • Localizes its marketing efforts to specific geographic regions

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Segmentation Base

Demographic Segmentation

Segmentation

Geographic Segmentation

Situation Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation 22

Segmentation Base

• Grouping customers together based on social class, lifestyles and psychological characteristics (attitudes, interests and opinions) • Useful but more difficult to identify and measure compared to demographic variables 23

Segmentation Base

Demographic Segmentation

Segmentation

Geographic Segmentation

Situation Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation 24

Segmentation Base

• Markets can be segmented based on the benefits that consumers desire from using a specific product

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Segmentation Base

Demographic Segmentation

Segmentation

Geographic Segmentation

Situation Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation 26

Segmentation Base

• Purchase situation or occasion – Physical surroundings – Social surroundings – Temporal perspective

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Segmentation Base

Demographic Segmentation

Segmentation

Geographic Segmentation

Situation Segmentation

Psychographic

Behavior/Usage

Segmentation

Benefits-Sought

Segmentation 28

Segmentation Base • Markets can be segmented by how often or how heavily consumers use a specific product – Pareto’s Principle or 80/20 Principle - 80% of revenue generated by 20% of customers

Light s 80%

Heavy s 20% 29

Segmentation Base

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Information for segmenting markets may be obtained from database such as Census, State Statistics, ACORN

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Segmenting Business Markets •

While the steps in the target market selection process are essentially the same for business markets, there are three major differences: – The purchasing process, which differs greatly from the household consumer market. – The use of different segment variables – Standard Industrial classification is often employed 31

Segmenting Business Markets •

Segmentation variables used to segment business markets: – – – – – –

Size Industry Purchasing approaches Product usage Situational factors (seasonal trend) Geographic 32

Select Segments for Targeting Identify Total Market Determine Need for Segmentation Determine Bases for Segmentation Select Target Segment

Positioning Strategy Marketing Mix

Monitor, Evaluate and ControlObjective 3

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Targeting • •

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Targeting: choose the specific segment toward which a firm directs its market efforts. Niche Marketing: the process of targeting a small market segment with a specific, specialized marketing mix. Micromarketing- the process of targeting smaller, more narrowly defined market segments. On the individual consumer end of the continuum, a firm may decide to target individual consumers and personalize marketing efforts 34

Target the Mass Market versus the Individual Consumer Mass Market Niche

Micromarketing

The Individual

ze i S n o i t a t n e m g e S t e k r a M f Continuum o PersonalStandardized Marketing Mix

Niche

Micromarketing

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Advantage of Targeting Efforts •

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Cannot effectively serve all the segments, must target marketing efforts to a segment or segments. Marketing opportunities and unfilled ‘gaps ’ are more accurately identified Marketing mix is created strategically to meet potential customer’s needs Offers the greatest potential to achieve profit or relationship goals 36

Targeting Strategy

1.Undifferentiated marketing 2.Differentiated marketing 3.Concentrated marketing 4.Custom marketing

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Targeting Strategy Undifferentiated targeting strategy Concentrated strategy Differentiated strategy

• Companies might develop one marketing mix strategy that is appropriate for all of the total market.

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Targeting Strategy Undifferentiated targeting strategy Concentrated strategy Differentiated strategy

• Only one marketing mix is developed and directed toward a few, or perhaps one, profitable market segments.

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Targeting Strategy Undifferentiated targeting strategy Concentrated strategy Differentiated strategy

• Exists when a firm develops different marketing mix plans specially tailored for each of two or more market segments.

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Alternative of Targeting Strategy

1. Single segment 2. Multi segment 3. Product specialized 4. Market specialized 5. Full market coverage 41

Select Positioning Strategy Identify Total Market

Effective Segmentation Determine Bases for Segmentation Targeting Segment

Positioning Strategy Marketing Mix

Monitor, Evaluate and ControlObjective 3

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Positioning Positioning • Kotler defined: “deg an offer so that it occupies a distinct and valued place in the minds of the target customer.” 43

Positioning

Positioning Image that customers have about a product in relation to the product’s competitors

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Positioning Strategy

• Key to developing the appropriate marketing mix is the positioning strategy of the product.

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Presumptions of Positioning

• All products have object and subject attributes • Recognizable • Comparable

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Select Positioning Strategy •

Effective positioning – What consumers currently think about the product, especially in relation to competing products – What the marketer wants consumers to think about the product – Which positioning strategy will elevate the consumers’ current product image to the desired product image. 47

Select Positioning Strategy

• Position Mapping- creating a visual description about consumer perceptions of a product on two or more dimensions in relation to competitors. 48

Select Positioning Strategy

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Select Positioning Strategy

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Select Positioning Strategy • •

The positioning strategy must determine where a company wants to go And how to get there by positioning the product according to any of the following ways: – – – – – –

Price/Quality Product Attributes Product Product Usage Product Class Competition

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Marketing Mix Identify Total Market Segmentation Bases for Segmentation Select Target Segment

Positioning Strategy Marketing Mix

Monitor, Evaluate and ControlObjective 3

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Marketing Mix •

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The final steps are to develop and a marketing mix matched to the needs of the target market This must the chosen positional strategy in the selected target markets Therefore determine the ‘4Ps ’ or “7Ps” of its marketing mix as a tool to achieve the desired position

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Recognize 4Ps and the 7Ps •

Productcustomer value

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Pricecost

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Placeconvenience

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Promotioncommunication

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Peopleconsideration

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Processesco-ordination

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Physical evidenceconfirmation 54

Marketing Strategy and the Marketing Mix Place

Product

(Distribution) Marketing Mix

Promotion

Price Objective 4

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Marketing Strategy and the Marketing Mix Product

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Refers to goods, services, people, places and ideas – Household consumers – Business-to-business customers 56

Marketing Strategy and the Marketing Mix Place (Distribution) •

Marketing channel is the network of organizations that create time, place and ownership utilities for household consumers and business customers. 57

Marketing Strategy and the Marketing Mix • •

Integrated Marketing Communication (IMC) System of management and integration of marketing communication elements – Advertising, publicity, sales promotion, personal selling, sponsorship marketing, and point-of-purchase communications

Promotion 58

Marketing Strategy and the Marketing Mix •

Pricing decisions are complex and are driven by a variety of considerations including: – Customer demand, costs, information availability, competition, profit motives, product considerations, and legal considerations

Price 59