5 Segmentation Targeting & Positioning PDF PDF

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5 Segmentation Targeting & Positioning Market Definition: People or organisations with needs or wants and the ability and willingness to buy. • Fragmenting communities, breaking them up, discriminatory act - not unethical but we treat people differently because we know they have different wants and needs. • Marketers try to tap into the homogeneity of the market to meet these wants and needs. Market Segment Definition: A subgroup of people or organisation sharing one or more characteristics that cause them to have similar product needs. - Eg. Conduct an environmental scan, the PESTLE factors that affect on the target market. Market Segmentation Definition: The process of dividing a market into meaningful, relatively similar, identifiable segments or groups. • Purpose is to enable the marketer to tailor marketing mixes to meet the needs of one or more specific segments. - Eg. Collecting data on customers, understanding different needs, ensuring products are communicating to tailored marketing mix. Importance of Market Segmentation • Markets have a variety of product needs and preferences. • Marketers can better identify groups of customers and analyse characteristics and buying behaviour to define customer wants and needs more precisely. - Tailor products. • Because market segments differ in size and potential, segmentation helps decision makers accurately define objectives and allocate resources. • Segmentation provides marketers with information to help them design marketing mixes specifically matched with the characteristics and desires of the segment. Personas - Aggregate characteristics of a market segment. Criteria for Segmentation Substantiality • Segment must be large enough to warrant a special marketing mix. Identifiability & Measurability • Segments must be identifiable and their size measurable. - Eg. Social and demographic characteristics. Accessibility • Members of targeted segments must be reachable with marketing mix. Responsiveness • Markets can be segmented using any criteria that seems logical. • Unless segment responds to a marketing mix differently, no separate treatment is needed. - Eg. If all customers are equally price conscious, there is no ned to offer hihg, medium and low priced versions to different segments. Bases for Segmentation

Definition: Variables that are characteristics of individual, groups or organisations to divide a total market into segments. • The aim is to identify bases that will produce substantial, measurable and accessible segments that exhibit different response patterns to marketing mixes. • Geographic - Segmenting markets by region, population, market size, density • Benefits Sought or climate. • Usage Rate - Density = Number of people within a unit of land. - Dividing a market by - Climate - Used because of impact on residents needs and the amount of product purchasing behaviour. bought or consumed. • Demographic - Segmenting markets by age, gender, income, ethnic background, family life cycle. - Gender: Women make up 85% of purchases of consumer goods each year with them being responsible of purchasing the majority of household items. - Income: Income level influences consumers wants and determines their buying power. - Family Life Cycle: Series of stages determined by a combination of age, marital status and the presence/absence of children. - Shows how families needs, incomes, resources and expenditures differ at each stage. • Psychographic - Marketing on the basis of personality, motives, lifestyles, how time is spent, importance of things around you. - Personality: Reflects a person’s traits, attitudes and habits. - Lifestyle: Divides people into groups according to the way they spend their time. Benefit Segmentation Definition: The process of grouping customers into market segments according to the benefits they seek from the product. • Groups potential customers on the basis of their needs or wants rather than on some other characteristics. - Eg. Food - Sugar from chocolate bars. Usage Rate Segmentation Definition: Divides a market by the amount of product bought or consumed. • Enables marketers to focus their efforts on heavy users or to develop multiple marketing mixes aimed at different segments. Bases for Segmenting Business Markets • Company Characteristics - Eg. Geographic location, types of company, company size, product use. - Segmenting by customer type allows business marketers to tailor their marketing mixes to the unique needs of particular types of organisations or industries. - Volumes of purchase affects a company’s purchasing procedures, the types and quantities of products it needs and its responses to different marketing mixes. • Buying Processes - Marketers segment customers on the basis of how they buy. - Satisficers contact familiar suppliers and place the order with the first one to satisfy product and delivery requirements. - Optimisers consider numerous suppliers, put in bids and study all proposals carefully before selecting one. Steps in Segmenting a Market • Purpose of market segmentation is to identify marketing opportunities. 1. Select a market or product category to study.

2. Choose a basis or bases for segmenting the market. - A successful segmentation scheme must produce segments that meet the criteria for the bases for segmentation. 3. Select segmentation descriptors. - Descriptors identify the specific segmentation variables to use. 4. Profile and analyse segments. - Profile should include the segments size, expected growth, purchase frequency, current brand usage, brand loyalty, long term sales and profit potential. - This information can be used to rank potential market segments by profit opportunity, risk, consistency with organisational mission and objectives. 5. Select markets. 6. Design, implement and maintain appropriate marketing mixes. - Use product, place, promotion and pricing strategies intended to bring about a mutually satisfying exchange relationship. - Markets are dynamic so companies must proactively monitor their segmentation strategies over time. Strategies for Selecting Target Markets Target Market: A group of people or organisations for which an organisation designs, implements and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges. Undifferentiated Strategy • Marketing approach that views the market as one big market with no individual segments and requires a single marketing mix. • Assumes individual customers have similar needs that can be met with a common marketing mix. - Eg. Coca Cola, way they market Coca Cola is undifferentiated. Advantages Disadvantages • Potential savings on production and • Unimaginative product offerings. marketing costs. • Company more susceptible to competition. - Only one item is produced, the firm should be able to achieve economies of mass production. - Economies of scale - buying things in bulk bringing costs down, passing savings onto consumer or create a high profit yield. - Marketing costs may be lower when there is only one product to promote and a single channel of distribution. Concentrated Strategy • A strategy used to select one segment of a market for targeting marketing efforts. • Firm is appealing to a single segment so can concentrate on understanding the needs, motives and satisfactions of that segment’s members to develop and maintain a highly specialised marketing mix. - Eg. Niche marketing - Luxury handbags such as Louis Vuitton, Chanel, Fendi etc. Advantages • Concentration of resources - narrowing in on a specific segment is more profitable than spreading resources over several different segments. • Meets narrowly defined segment - message resonates clearly because it’s such a small segment. • Small firms can compete against larger firms. • Strong positioning.

Disadvantages • Segments too small or changing means firm becomes obsolete. Large competitors may market • to niche segment.

Multisegment Strategy • A strategy that chooses two or more well defined market segments and develops a distinct marketing mix for each. • Before a firm decides whether to implement this strategy, it should compare the benefits and costs of multisegment targeting to undifferentiated and concentrated. Advantages • Greater financial success through greater sales volume, higher profits, larger market share and economies of scale in manufacturing and marketing. • Economies of scale. Costs Associated with Multi-Segments • Product design. • Production. • Promotion. • Inventory.

Disadvantages • High costs associated with greater product design, production, promotion, inventory, marketing research and management costs. • Cannibalisation - When sales of a new product cut into sales of a firm’s existing products. • Marketing research. • Management. • Cannibalisation.

Customer Relationship Management • Tracks interactions with customers to optimise customer satisfaction and long-term company profits. • Customise goods and services offered to their customers based on data generated through interactions between carefully defined groups of customers and the company. • Allows marketers to target customers with relevant offerings. Factors that lead to Continuing Growth of CRM • Personalisation - Customers want to be treated as individuals with their own unique sets of wants and needs. - One size fits all approach to marketing is no longer relevant. • Time Savings - Direct and personal marketing efforts will continue to grow to meet the needs of consumers who no longer have the time to spend shopping and making purchase decisions. - CRM makes sure consumers spend less time making purchase decisions. • Loyalty - Techniques focus on finding a firm’s best customers, rewarding them for loyalty. • Technology - Offers marketers a more cost effective way to reach customers and enables businesses to personalise their messages. Positioning Definition: Developing a specific marketing mix to influence potential customers overall perception of a brand product line, or organisation in general. • The place a product, brand or group of products occupies in consumers minds relative to competing offerings. • Positioning assumes that consumers compare products on the basis of important features. • Effective positioning requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions and choosing a position in the market where the organisation’s marketing efforts will have the greatest impact.

Product Differentiation Definition: A positioning strategy that some firms use to distinguish their products from those of competitors. Perceptual Mapping Definition: A means of displaying or graphing, in two or more dimensions, the location of products, brands or groups of products in customers mind. Positioning Bases • Attribute - Product associated with an attribute, product feature or customer benefit. • Price & Quality - High price as a signal of quality or emphases lower price as an indication of value. • Use or Application • Product User - Personality or type of user. • Product Class - Position the product as being associated with a particular category of products. • Competitor - Positioning against competitors. • Emotion - Focuses on how the product makes customers feel. Repositioning Definition: Changing consumers’ perceptions of a brand in relation to competing brands. • Some products are repositioned in order to sustain growth in slow markets or to correct positioning mistakes....