Module II

1. Identify the essential components of a market. 2. Outline the role of market segmentation in developing a marketing strategy. 3. Describe the criteria necessary for effective segmentation. 4. Explain each of the four bases for segmenting consumer markets. 5. Identify the steps in the market segmentation process. 6. Discuss four basic strategies for reaching target markets. 7. Summarize the types of positioning strategies. 8. Explain the reasons for positioning and repositioning products.

Objectives

Selecting a Target Market Before a marketing mix strategy can be implemented, the marketer must identify, evaluate, and select a target market. Market: people or institutions with sufficient purchasing power, authority, and willingness to buy Target market: specific segment of consumers most likely to purchase a particular product

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Effective Targeting Requires Identify and profile distinct groups of buyers who differ in their needs and preferences Select one or more market segments to enter Establish and communicate the distinctive benefits of the market offering

Fords Model T Followed a Mass Market Approach

Four levels of Micromarketing Segments Niches

Local areas

Individuals

What is a Market Segment? A market segment consists of a group of customers who share a similar set of needs ad wants.

Market Segmentation: division of the total market into smaller, relatively homogeneous groups No single marketing mix can satisfy everyone. Therefore, separate marketing mixes should be used for different market segments.

The Role of Market Segmentation

Toms of Maine Targeting a Specific Marketing Segment Which segment?

Criteria for Effective Segmentation be used in all cases. Market segmentation cannotTo be effective, segmentation must meet the following basic requirements. The market segments must be measurable in terms of both purchasing power and size. Marketers must be able to effectively promote to and serve a market segment. Market segments must be sufficiently large to be potentially profitable. The number of segments must match the firms capabilities.

No Market Segmentation

Segmented by Gender

Segmented by Age

Preference Segments Homogeneous preferences exist when consumers want the same things Diffused preferences exist when consumers want very different things Clustered preferences reveal natural segments from groups with shared preferences

The Himalaya Drug Company serves a growing niche market by focusing on ayurvedic medicines and health supplements

Segmenting Consumer MarketsGeographic

Psychographic Behavioral

Demographic

Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locations Does not ensure that all consumers in a location will make the same buying decision. Help in identifying some general patterns.

Segmenting Consumer Markets

Pampers This ad is an example of geographic segmentation. When visiting the web site look for the different countries Pampers markets to.

Segmenting Consumer Markets Demographicsegmentation: dividing consumer groups according to characteristics such as sex, age, income, occupation, education, household size, and stage in the family life cycle

Demographic SegmentationAge and Life CycleLife Stage Gender Income Generation Social Class

Segmenting by gender

Marketers must ensure that traditional assumptions are not false Other firms start by targeting one gender and then switch to both To some companies market successfully to both genders

Segmenting by age Many firms identify market segments on the basis of age Products are often designed to meet the specific needs of certain age groups Examples: baby food and denture cream. Dole: Developing a Product Specifically for Children

Bank Al Habib targets senior citizens

Segmenting by household type The traditional family has declined over the years Single-parent families, single-person households, and non-family group households have more than doubled during the same time Non-traditional households make likely buyers of single-serving and convenience foods DINKs, dual-income childless couples, are big buyers of gourmet foods, luxury items, and travel

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Engels laws: three general statements

based on his studies on the impact of household income changes on consumer spending behavior According to Engle, as family income increases: A smaller percentage of expenditures go for food The percentage spent on housing and household operations and clothing remains constant The percentage spent on other items (such as recreation and education) increases

Jaguar Segmentation based on income

Psychographic Segmentation

Divides a population into groups that have similar psychological characteristics, values, and lifestyles Lifestyle: peoples decisions about how to live their daily lives, including family, job, social, and consumer activities The most common method for developing psychographic profiles of a population is to conduct a large-scale survey: VALS and VALS 2. Values and Lifestyles

VALS 2 - Network ACTUALIZERS 8%

Abundant Resources Oriented

Principle OrientedFULFILLED 11%

Status

Oriented Action

ACHIEVERS 13%

EXPERIENCERS 12%

BELIEVERS 16%

STRIVERS 13%

MAKERS 13%

STRUGGLERS 12%

Minimal Resources

Segmenting Consumer Markets

Product-related segmentation: dividing a consumer population into homogeneous groups based on characteristics of their relationships to the product Can take the form of segmenting based on: Benefits that people seek when they buy Usage rates for a product Consumers brand loyalty toward a product

Benefits Focuses on the attributes that people seek in a good or service and the benefits that they expect to receive from that good or service Groups consumers into segments based on what they want a product to do for them

Eclipse

Segmenting by Benefits Sought

Usage Rates

Segmenting by grouping people according to the amounts of a product that they buy and use Markets often divided into heavy-user, moderate-user, and light-user segments The 80/20 principle (Paretos Law) holds that a big percentage of a products revenues (roughly 80%) comes from a relative small, loyal percentage (around 20%) of total customers

Loyalty Status Hard-core

Split loyals Shifting loyals Switchers

Brand Loyalty Segmenting consumers grouped according to the strength of brand loyalty felt toward a product A practical example of this would be the frequent flyer programs of airlines and many hotels

The Market Segmentation Process Stage I: Identify Segmentation Process

Stage II: Develop Relevant Profile Stage III: Forecast Market Potential

Stage IV: Forecast Market Share Stage V: Select Specific Segment

Stage I: Identify Segmentation Process Marketers follow two methods to determine the bases on which to identify markets: Segments are predefined by managers based on their observation of the behavioral and demographic characteristics of likely users Segments are defined by asking customers which attributes are important and then clustering the responses

Stage II: Develop Relevant Profile Next, marketers seek further understanding of the consumer in each promising segment Must develop a profile of the typical consumer and each segment Helps to accurately match consumer needs with the firms marketing offers

Stage III: Forecast Market Potential

Market segmentation and market opportunity analysis combine to produce a forecast of market potential within each segment Defines a preliminary go or no-go decision since the sales potential in each segment must justify resources devoted to further analysis

Stage IV: Forecast Market Share

The next step is to forecast the firms probable market share Competitors positions in targeted segments must be analyzed A specific marketing strategy must be designed to serve the targeted segments The firm determines the expected level of resources it must commit to tap the potential demand in each segment

Stage V: Select Specific Segment The preceding information, analysis, and forecasts allow management to assess the potential for achieving company goals and to justify committing resources in developing one or more segments Marketers also weigh more than monetary costs and benefits at this stage

Strategies for Reaching Target Markets Undifferentiated MarketingConcentrated MarketingDifferentiated Marketing

Micromarketing

Market Coverage StrategiesCompany Marketing Mix Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 3

Market TargetingMarketA. Undifferentiated Marketing

Segment 1 Segment 2 Segment 3B. Differentiated Marketing

Company Marketing MixC. Concentrated Marketing

Segment 1 Segment 2 Segment 3

Patterns of Target Market Selection

Patterns of Target Market Selection

Patterns of Target Market Selection

Undifferentiated marketing: when a firm produces only one product or product line and promotes it to all customers with a single marketing mix Sometimes called mass marketing Much more common in the pastUndifferentiated Marketing

Differentiated marketing: when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments Tends to raise costs Firms may be forced to practice differentiated marketing to remain competitive

Differentiated Marketing

Differentiated Marketing Procter and Gamble Practicing Differentiated Marketing

Lunchables Using a Differentiated Marketing Strategy

Concentrated marketing (niche marketing): when a firm commits all of its marketing resources to serve a single market segment Attractive to small firms with limited resources and to firms offering highly specialized goods and servicesConcentrated Marketing

The Revolution brand of ready-made womens apparel successfully focuses on the niche segment of plus-size clothes.

1. Market segmentation involves aggregating prospective buyers into groups that have two key characteristics. What are they?A: The groups should (1) have common needs and (2) respond similarly to a marketing action.

2. When should a firm segment its markets? A: A firm goes to the expense of segmenting its markets when this will increase its sales, profit, and return on investment.

3. The process of segmenting and targeting markets is a bridge between what two marketing activities?

A: identifying market needs and taking marketing actions

Positioning Act of designing the companys offering and image to occupy a distinctive place in the mind of the target market.

Positioning provides synergy among 4Ps.

Choosing a Positioning Strategy Step 1. IdentifyingPossible Competitive Advantages

Step 2. Selecting the Right Competitive AdvantageStep 3. Communicating and Delivering the Chosen PositionCHP: 8&10-60

Positioning The place a product occupies in consumers minds relative to competing products.

Positioning is not what you do to a product. Positioning is what you do to the mind of the prospect. Positioning is ,how you differentiate yourself in the mind of your prospect.e.g. Mysore Sandal -Purity and natural fragrance. Margo- Herbal(neem). Lifebuoy-Hygiene.

Definition.

GOOGLE. SEARCH

BMW. DRIVING

INDIA. DIVERSITY

Positioning Example

eBays positioning: No matter what it is, you can find it on eBay!

Positioning ExampleTo (target segment and need) our (brand) is a (concept) that (point-of-difference).To busy mobile professionals who need to always be in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to people and resources while on the go more easily and reliably than the competing technologies.

How these companies positioned themselvesMercedes-Benz prestige. BMW driving. Volvo.. Safety. Starbucks high-end coffee.. Rolexhigh-end watches. Google .Search. Red bull energy drink. FedEx overnight (delivery)

Positioning Strategy Competitive advantages Points of Parity Points of Difference => Differentiation

Positioning results from differentiation and competitive advantages. Positioning may change over time.

Defining Associations Points-of-difference (PODs) Attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand

Points-of-parity (POPs) Associations that are not necessarily unique to the brand but may be shared with other brands

Consumer Desirability Criteria for PODsRelevance

DistinctivenessBelievability

Deliverability Criteria for PODs Feasibility

CommunicabilitySustainability

Product Differentiation A positioning strategy that some firms use to distinguish their products from those of competitors.

Perceptual Mapping of displaying or A meansgraphing, in two or more dimensions, the location of products, brands, or groups of products in customers minds.

POSITIONING THE PRODUCT Product Positioning Using Perceptual Maps Identify Important Attributes for a Product Class Judgments of Existing Brands on These Important Attributes Ratings of an Ideal Brands Attributes Perceptual Map

Chocolate Milk.. For Adults ??

Your challenge as a marketing manager: Try to position chocolate milk to make it more appealing to adults

POSITIONING THE PRODUCT Product Positioning Using Perceptual Maps Positioning Chocolate Milk for Adults

Finding a New Position for Chocolate Milk in the Minds of Adults: NutritionPackaging Adult Chocolate Milk

A perceptual map to suggest a strategy for positioning chocolate milk to reach adults

Perceptual Mapping--LevisHigh PriceSlates

Vintage Red Line

Classic

Dockers Premium501 Dockers Classics

Red Tab Dry Goods

Red Tab Elesco Silver Tab

Designer

Red Tab Basics

L2

Old product

Low Price

New product

Positioning Bases Attribute Price and Quality Use or Application Product UserPositioning Bases

Product Class Competitor

Repositioning Changing consumers perceptions of a brand in relation to competing brands.