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Marketing: An Introduction Second Canadian Edition
Armstrong, Kotler, Cunningham, Mitchell and Buchwitz
Chapter SevenSegmentation, Targeting and
Positioning: Building the Right Relationships with the Right
Customers
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Looking Ahead• Define the three steps of target marketing: market
segmentation, market targeting and market positioning.
• List and discuss the major bases for segmenting consumer and business markets.
• Explain how companies identify attractive market segments and choose a target marketing strategy.
• Discuss how companies position their products for maximum competitive advantage in the marketplace.
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Segmentation/Positioning• Segment markets.
– Identify bases for segmentation.– Develop segmentation profiles.
• Target segment(s).– Measure of segment attractiveness.– Select the target segment(s).
• Position for target segment(s).– Develop positioning for each segment.– Develop appropriate marketing mix.
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Segmentation Variables• Geographic.
– Area, population density, climate etc.
• Demographic.– Age, sex, lifecycle, income, job, etc
• Psychographic.– Lifestyle, personality.
• Behavioural.– Benefits sought, status, usage rate,
loyalty, attitudes, etc.
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Geographic Segmentation• World region or country.
• Region of country.
• City or metro size.
• Density or climate.
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Demographic Segmentation
• Age, gender, family size, income, occupation, etc.
• The most popular bases for segmenting customer groups.
• Easier to measure than most other types of variables.
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Demographic Segmentation
• Gender.– Women make 90% of home improvement decisions.– Women influence 80% of all household consumer
purchases.
• Income.– Identifies and targets the affluent for luxury goods.– People with low annual incomes can be a lucrative
market.– Some manufacturers have different grades of
products for different markets.
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Demographic Segmentation
• Age and life-cycle.– Do not necessarily match.
• Middle aged people starting new families.• Seniors going back to university or college .
– Products targeted at age or life-cycle stages.• P&G has different toothpastes for different age
groups.
– Avoid stereotypes in promotions.– Promote positive messages.
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Psychographic Segmentation• Dividing a market into different groups
based on: – Social class.– Lifestyle.– Personality characteristics.
• Targeting whitening toothpaste at psychographic segment who are active and concerned about sexual attractiveness.
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Behavioural Segmentation• Occasions.
– Special promotions for holidays.• (e.g., Hershey Kisses).
– Special products for special occasions.• (e.g., Kodak disposable cameras).
• Benefits sought.– Different segments desire different benefits
from products.• e.g., P&G’s multiple brands of laundry detergents
to satisfy different needs in the product category.
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Behavioural Segmentation
• User status.– Nonusers, ex-users.– Potential users.– First-time users.– Regular users.
• Usage rate.– Light.– Medium.– Heavy.
• Loyalty status.– Brands.– Stores.– Companies.
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Market Segmentation
• Best to use multiple approaches in order to identify smaller, better-defined target groups.
• Start with a single base and then expand to other bases.
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Segmenting Business Markets
• Consumer and business markets use many of the same variables for segmentation.
• Business marketers can also use:– Operating characteristics.– Purchasing approaches.– Situational factors.– Personal characteristics.
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Segmenting International Markets
• Factors for segmenting foreign markets. – Geographic location.– Economic situation.– Culture.– Political and legal situation and issues.
• Intermarket segmentation.– When there is little difference across
international markets.– Teenagers all over the world tend to be the
same.
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Evaluating Market Segments• Segment size and growth.
– Analyze current segment sales, growth rates and expected profitability.
• Segment structural attractiveness.– Consider effects of: competitors, existence of
substitute products, the power of buyers/suppliers.
• Company objectives and resources.– Examine company skills and resources needed to
succeed in that segment.– Offer superior value/gain competitive advantage.
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Segment Success Criteria• Measurable - Ability to measure
numerically.• Accessible - Ability to reach segment.• Substantial – Ability to support the
business.• Differentiable – Ability to find unique
position in segment.• Actionable – Ability to pursue and
capture the segment.
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Levels of Segmentation• Mass marketing.
– No segments and single marketing mix.
• Differentiated marketing.– Large segments with specific marketing mixes.
• Niche marketing.– Small segments with specialized marketing
mixes.
• Micro-marketing.– Customized marketing to individuals.
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Undifferentiated Marketing• Focus is on common (not different)
needs of consumers.
• Product and marketing program are geared to the largest number of buyers.
• Uses mass advertising and distribution.
• Henry Ford’s Model T excellent example of undifferentiated or mass marketing.
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Differentiated Marketing• Firm targets several market segments
and designs separate offers for each.• The goal is to have higher sales and a
stronger position with each market segment.
• This approach increases the costs of doing business.
• General Motors claims to make a car for every segment.
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Niche Marketing
• The focus is acquiring a large share of one or a few segments of niches.
• Generally, there are fewer competitors.
• The Internet is ideal for targeting small niche markets.
• There is some risk in focusing on only one market.
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Micromarketing
• Tailoring products and marketing programs to suit the tastes of specific individuals and locations.– Local Marketing: Tailoring brands and promotions
to the needs and wants of local customer groups—cities, neighbourhoods, specific stores.
– Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers.
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Mass Customization
• The process of creating customer-unique value by designing products and services tailor-made to individual needs, on a large scale.
• Having your next car or sneakers built to order?
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Market Coverage Strategy
• Company resources.
• Degree of product variability.
• Product life cycle stage.
• Market viability.
• Competitors’ marketing strategies.
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Socially Responsible Target Marketing
• Smart targeting helps both companies and consumers.
• Target marketing sometimes generates controversy and concern.– Vulnerable and disadvantaged can be targeted.– Cereal, cigarette, beer and fast-food marketers
have received criticism. – Internet has raised fresh concerns about potential
targeting abuses.
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Successful Positioning• Product position.
– How a product is viewed by consumers relative to competing products.
• Three positioning steps.– Identify competitive advantages on which to
build a differentiated position.– Choose the right competitive differentiation.– Select an overall positioning strategy.
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Gaining Competitive Advantage
• Key to winning target customers is to understand their needs better than competitors do and to deliver more value.
• Competitive advantage – extent to which a company can position itself as providing superior value.
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Identifying Competitive Advantage
• Product differentiation.– Consistency, durability, reliability, reparability.
• Services differentiation.– Speed, convenience, careful delivery.
• Image differentiation.– Convey benefits and positioning.
• People differentiation.– Hiring, training better people than competition
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Successful Differentiation• Important – of value to consumers.• Distinctive – obvious and clear.• Superior – better value than
competitors.• Communicable – explainable.• Pre-emptive – defendable and unique.• Affordable – delivers value for cost.• Profitable – company can make
money.
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Positioning Errors• Under-positioning.
– Failing to really position the company at all.
• Over-positioning.– Giving buyers too narrow a picture of the
company.
• Confused positioning.– Leaving buyers with a confused image of a
company.
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Value Propositions
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Benefits
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Looking Back• Define the three steps of target marketing:
market segmentation, market targeting and market positioning.
• List and discuss the major bases for segmenting consumer and business markets.
• Explain how companies identify attractive market segments and choose a target marketing strategy.
• Discuss how companies position their products for maximum competitive advantage in the marketplace.
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