6. Segmentation, Tarketing & Positioning for Competitive Advantage

Segmentation, Targeting & Positioning for Competitive Advantage

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

Marketing Process Involves

• Market orientation as philosophy

• Market segmentation

• Targeting market

• Positioning

• Marketing mix

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

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.

Identify the Total Market

Objective 3

Identify Total MarketIdentify Total Market

Effective SegmentationEffective Segmentation

Bases for SegmentationBases for Segmentation

Select Target SegmentSelect Target Segment

Positioning StrategyPositioning Strategy

Marketing MixMarketing Mix

Monitor, Evaluate and Monitor, Evaluate and ControlControl

Identify the Total Market

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

Segmentation and Effectiveness

Objective 3

Effective Effective SegmentationSegmentation

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.

Criteria for successful segmentation

Distinctive

Measurable Identifiable

Substantia

Actionable

Accessible

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

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

Measurable Identifiable

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

Substantial

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

Actionable

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

Accessible

Determine Bases for Segmentation

Objective 3

Bases for Segmentation

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

Segmentation BaseSegmentation Base

Situation Situation SegmentationSegmentation

Psychographic Psychographic

SegmentationSegmentation

Geographic Geographic SegmentationSegmentation

Behavior/UsageBehavior/Usage SegmentationSegmentation

Demographic Demographic SegmentationSegmentation

Benefits-SoughtBenefits-Sought SegmentationSegmentation

Social classSocial classSocial classSocial class

Income LevelIncome LevelIncome LevelIncome Level

EthnicEthnicEthnicEthnicEducationEducationEducationEducation

Life-cycleLife-cycle

Segmentation Base

Segmentation BaseSegmentation BaseSegmentation BaseSegmentation Base

Segmentation Base

• Localizes its marketing efforts to specific geographic regions

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

Segmentation Base

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

Segmentation Base

• Purchase situation or occasion

– Physical surroundings

– Social surroundings

– Temporal perspective

Light Users

80%Heavy Users

Heavy Users

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

Segmentation Base

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

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

Segmenting Business Markets

• Segmentation variables used to segment business markets:

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

Select Segments for Targeting

Objective 3

Determine Need for Determine Need for SegmentationSegmentation

Determine Bases for Determine Bases for SegmentationSegmentation

Targeting

• 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 toward each.

Target the Mass Market versus the Individual Consumer

Mass Market

Niche Micro-marketing The

Individual

Personal-izationMicro-

marketingNicheStandardized Marketing

Continuum of Market Segmentation Size

Advantage of Targeting Efforts

• 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

Targeting Strategy

1.Undifferentiated marketing

2.Differentiated marketing

3.Concentrated marketing

4.Custom marketing

Targeting Strategy

Undifferentiated targeting Undifferentiated targeting strategystrategy

Concentrated strategy

Differentiated strategy

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

Targeting Strategy

Undifferentiated targeting strategy

Concentrated strategyConcentrated strategy

Differentiated strategy

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

Targeting Strategy

Undifferentiated targeting strategy

Concentrated strategy

Differentiated strategyDifferentiated strategy

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

Alternative of Targeting Strategy

1. Single segment

2. Multi segment

3. Product specialized

4. Market specialized

5. Full market coverage

Select Positioning Strategy

Objective 3

Determine Bases for Determine Bases for SegmentationSegmentation

Targeting SegmentTargeting Segment

Positioning

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

Positioning

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

Positioning Strategy

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

Presumptions of Positioning

• All products have object and subject attributes

• Recognizable

• Comparable

• 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.

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

• 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 User– Product Usage– Product Class– Competition– Symbol

Marketing Mix

Objective 3

Marketing Mix

• The final steps are to develop and a marketing mix matched to the needs of the target market

• This must support 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

Recognize 4Ps and the 7Ps

• Productcustomer value

• Pricecost

• Placeconvenience

• Promotioncommunication

• Peopleconsideration

• Processesco-ordination

• Physical evidenceconfirmation

Marketing Strategy and the Marketing Mix

Objective 4

ProductPlace

(Distribution)

Promotion Price

Marketing Mix

• Refers to goods, services, people, places and ideas

– Household consumers– Business-to-business customers

Product

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

(Distribution)

• 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

• 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

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