Market Segmentation and Position

Chapter 7

Agenda

Quiz Market Segmentation Market Targeting Market Positioning Next Class

Market Segmentation, Targeting, and Positioning

Develop profiles ofresulting segments

MarketSegmentation

Develop measures ofsegment attractiveness

Select thetarget segment(s)

Develop positioningfor each segment

Develop marketing mixfor each segment

Identify bases forsegmenting market

Markettargeting

Marketpositioning

Figure 7-1

Market Segmentation

Dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviours, who might require separate products or marketing mixes

The key is their response to a different marketing mix

If all consumers respond the same way, then there should be no need to segment a market

Mass marketing

Segment marketing

Niche marketing

Micromarketing

Figure 7-2

Treats all customers the same

isolating broad segments & isolating broad segments & adapting mktg to match 1+ segmentadapting mktg to match 1+ segment

focusing on sub-segments that may focusing on sub-segments that may seek a special combination of benefitsseek a special combination of benefits

tailoring products & mkt programs tailoring products & mkt programs to specific individuals & local groupsto specific individuals & local groups

Levels of Market Segmentation

Micro-Market Segmentation

Local marketing: tailoring

brands and promotions to

the needs and wants of

local customer groups-

cities, neighbourhoods,

and even specific stores

Individual marketing:

tailoring products and

marketing programs to the

needs and preferences of

individual customers

Mass customization: the process of creating customer-unique value by designing products and services tailor-made to individual needs, on a large scale

Discussion Question #1

Describe how the Ford Motor Company has moved from mass marketing to segment marketing. Do you think the company will be able to move toward niche marketing or micromarketing? If so, how? How is the company using the Internet (see www.ford.ca to change its marketing segmentation approach?

Discussion Question #2

Several years ago Sleeman’s led a charge of “microbreweries” in an attack on the established Canadian brewers. What is “micromarketing” and how might it have been used by these “microbreweries?” Do you see evidence that breweries such as Sleeman’s have moved to “local” or “individual” marketing? Evaluate the “micromarketing” strategies used by this industry. (For more information see www.samadams.com )

Market Segmentation Variables

Geographic: dividing a market into different geographical units, such as national, regional, local, city size, density of population, and climate

Demographic: dividing the market into groups based on demographic variables such as age, sex, family size/ life cycle, income, occupation, education, religion, and ethnic origin

Psychographic: dividing a market into different groups based on social class, lifestyle, or personality characteristics

Behavioural: dividing a market into groups based on purchase occasion, benefits sought, user status, usage rate, loyalty status, readiness state, and attitude towards the product

Segmenting Business Markets

Consumer and business marketers use many of the same variables to segment their markets.

Business buyers can be segmented geographically or by benefits sought, user status, usage rate, or loyalty status.

Additional variables unique to this market would be:– business customer demographics (industry, company size)– operating characteristics– purchasing approaches– situational factors, and – personal characteristics.

Effective Segmentation

To be useful, market segments must be: – Measurable: size, purchasing power, and profile– Accessible: can be reached and served– Substantial: large enough to profitably serve– Differentiable: respond differently to a marketing mix– Actionable: effective programs can be designed

Segments should be evaluated for:– Size– Growth characteristics– Structural attractiveness– Compatibility with company objectives and resources

Discussion Question #3

There are many ways to segment a market. Using the four segmentation variables shown in Table 7-1, discuss which variables would be most important for segmenting (a) Internet users, (b) drivers of a proposed new sports car, and (c) the adult student who returns to college to get an undergraduate degree. Explain your choices. What assumptions did you make? In each case, where would you find the information needed to segment the markets? Be creative with your research thoughts.

Market Targeting

Market targeting:– The process of

evaluating each market segment’s attractiveness, and selecting one or more segments to enter

Target market: a set of buyers sharing common needs or characteristics that the company decides to serve

– May not be the largest segment

– The segment (s) that the company can most profitably serve

Selecting Market Segments

CompanyMarketing Mix

Market

Undifferentiated marketing

CompanyMarketing Mix 1

CompanyMarketing Mix 2

CompanyMarketing Mix 3

Segment 1

Segment 2

Segment 3

Differentiated marketing

CompanyMarketing Mix

Segment 1Segment 2Segment 3

Concentrated marketing

Figure 7-3

Choosing a Market Coverage Strategy

Depends on: Company resources Degree of product variability Product life cycle stage Market viability Competitors’ marketing strategies

Market Positioning

Market positioning:– Arranging for a product

to occupy a clear, distinctive, and desirable place relative to competing products,

– In the minds of target consumers,

– Formulating competitive positioning for a product, and creating a detailed marketing mix

Product position: the way the product is defined by consumers on important attributes, relative to competing products

– The “quicker-picker-upper?”

– The “uncola?”– “Great taste, less filling?”

Positioning for Competitive Advantage

Competitive advantage: an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices

Three Important Steps:– Identifying a set of possibly competitive advantages upon

which to build a position– Choosing the right competitive advantages– Selecting an overall positioning strategy

Choosing a Positioning Strategy

Differences need to be:– Important– Distinctive– Superior– Communicable– Pre-emptive– Affordable– Profitable

Unique Selling Proposition: – choosing one attribute and aggressively promoting itself as

being the best on that benefit Value Proposition:

– The full mix of benefits on which a product/brand is positioned

Next Class

Chapter 8: Product and Service Strategy Complete Question #4 Page 340 Read Golden X Inn. Given the facts of the

situation, how would you proceed? Be sure to have some jot notes for discussion.

Review for Mid-term

TERM PROJECT – Due April 3rd, 2006 at the beginning of class

This project requires you use your creative abilities to develop a new product. You are to assume that your product development team of (maximum of four individuals) is part of a large company like Proctor & Gamble, Philip Morris, 3M, or Johnson and Johnson with unlimited resources at your disposal. After your product development team has come up with an idea, your task has just begun. You now have to develop a marketing strategy for this new product. After considering market segments and clearly identifying the target market you have to establish a clear position for the product with a sound strategy that includes specific plans for product features, pricing, distribution and integrated marketing communications.

Your finished report should include:

An introduction of your idea, product concept, etc. A detailed target market analysis – including segmentation if necessary. An analysis of the broader/macro environment. Possible marketing research activities that should/will be conducted. The use of marketing mix variables to create a plausible marketing strategy (a

product, price, place, and promotion strategy). Exhibits (i.e., prototype sample/model, sample ads, sales projections, estimated

costs of production and promotion, figures, sample surveys, etc.). Proper sentence, grammar and paragraph structure. Page numbers and be double spaced.

There is no minimum or maximum length to this assignment, however it is not believed that this assignment can be completed in less than 10 – 12 pages double spaced.

Your report will be graded in the following manner:

Report 20% (grammar, style, spelling, organizations, professionalism)

Content 80% (idea, explanation, clarity, relating real concepts to your idea, creativity, and analysis)

Term Project Proposal

You MUST submit a proposal for your term project by the beginning of class on February 23rd, 2006. The proposal should be one to two pages in length and clearly identify the following:

– The names and student ID numbers of each of the group members– A brief description of the product or service you are developing– An action plan of who will do what by when– Criteria for “firing” a group member (discussed in class)

Your proposals will not receive a grade. They will be reviewed to ensure that you are on the right track for your project. However, groups submitting proposals late (past the deadline of February 23rd, 2006) will receive deductions from their term project grade at a rate of 5 percent per day.