Chapter 7
Market Segmentation, Targeting,
and Positioning for Competitive
Advantage: Creating Value for
Target customers
1
Why market segmentation?
Consumers differ according to their needs, preferences and consumption
patterns
The differences among the customers create market segments
Through market segmentation, companies divide large, diverse markets into
smaller segments
Segments are reached more efficiently and effectively with products and
services that match their unique needs
2
Steps in Market Segmentation,
Targeting, and Positioning
Market Segmentation
1. Identify bases for
segmenting the market
2. Develop segment profiles
Market Targeting
3. Develop measure of
segment attractiveness
4. Select target segments
Market positioning
5. Develop positioning for
target segments
6. Develop a marketing
mix for each segment
3
Markets can be divided based on geographic
factors
World Region or Country
City or Metro Size
Density or Climate
4
Step 1. Market Segmentation
Demographic Segmentation
Dividing the market into groups based
on variables such as:
◼ Age
◼ Gender
◼ Family size or life cycle
◼ Income
◼ Occupation
◼ Education
◼ Religion
◼ Race
◼ Generation
◼ Nationality
Demographic segmentation is the most popula
segmentation method because consumer needs
wants, and usage often vary closely with
demographic variables and are easier to measu
than other types of variables
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examples
NIVEA Sun divides the market as men/women and adults with
children. Because there is a
Huge difference between awareness and usage of sun care
products between men and women
Men prefer convenience (spray form)
Women enjoy more luxurious sun care products
Adults with children are another broad segment with
differing needs.
Levis-16-24 age group in A, B, C1 socio-economic group
Journey working women(18-40 age group)
Vestel targets the Jewish market with special owens
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Gender segmentation
Embracing the design-for-women-only trend, Japanese
automaker Honda has released a new car model designed
especially for women.
The ‘Honda Fit She’s’ has a “Plasmacluster” air-conditioning
system that the company claims can improve the driver’s skin
quality, and a special windshield glass that blocks out 99% of
UV rays—all aimed at lessening the chances of wrinkles.
It sports a pink exterior, pink stitching for its seats, steering
wheel and floor mats, and metallic pink bezels around the shift
and dashboard.
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Segmentation by age
8
9
Segmentation by Occupation
Targeting the low income consumers
Hindustan Unilever Limited sells 5
billion pieces of penny candy every
year, 50 gr. Tea pockets
Renault is planning an automobile
priced at 3.000 dollars for Indian
market,
Tata
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Mini Cooper Countryman
Age: 20 to 30 years old
Gender: Women and Men
Occupation: Professionals and careers involving advanced
degrees
Income: $80,000+
Marital Status: Single or young couples
Geography: National coverage With emphasis on Location
within 100 miles of a dealership
First Time Buyers: Yes, for new vehicles
Lifestyle: Adventurous,
Goal-oriented
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Burger King
For years Burger King had been primarily focused on appealing to
young men, but the chain had been struggling in recent years, and its
target market was hit hard by tough economic times.
"a key element of our strategy is to broaden the appeal of our
advertising and bring a more diverse customer mix back into our
restaurants."
"the changing marketing strategy has been successful and Burger
King's mix of both women and customers age 50 or older increased."
Burger king’s recent advertising, which focused on taste and promoted
limited-time barbecue and chicken items, with differentiating Burger
King from its competitors and helping increase sales through more
premium products.
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Step 1. Market Segmentation
Psychographic Segmentation
Divides Buyers Into Different Groups Based on:
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Segmentation by life style
15
Psychographic Segmentation
Personality
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Step 1. Market Segmentation
Behavioral Segmentation
Dividing the market into
groups based on variables
such as:
◼ Occasions
◼ Benefits
◼ User status
◼ Usage rate
◼ Loyalty status
◼ Readiness stage
◼ Attitude toward product
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Market Segmentation
Segmenting Consumer Markets
Occasion segmentation divides buyers into groups
according to occasions when they get the idea to buy,
actually make purchases, or respond to a product
For example for sun care products ocassion may be holiday,
outdoor, sports, gardening, working etc. This relates to the
Sun Protection Factor (SPF) required, SPF required for a
holiday in Antalya differs greatly to outdoor work in the
Eskişehir
◼
Benefit segmentation requires finding the major benefits
people look for in the product class, the kinds of people
who look for each benefit, and the major brands that
deliver each benefit (for sun care products; major benefits
protection and convenience)
7-15
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Market Segmentation
Segmenting Consumer Markets
User status divides buyers into ex-users, potential
users, first-time users, and regular users of a
product
Usage rate divides buyers into light, medium, and
heavy product users
Loyalty status divides buyers into groups
according to their degree of loyalty
7-16
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Example of segmentation through consumers’ attitudes (for Nivea sun care
products)
Concerned Consumers – ‘a good tan is not
important’. conscious of the harmful effects of the sun and purchase sun
protection products that are most likely to offer
high sun protection factors.
• Sun Avoiders - avoid sunbathing and using sun
protection when in the sun - it is seen as a chore.
These are unlikely to purchase a sun care product.
• Conscientious Sun Lovers - adore sunshine
and like to use a trustworthy brand with suitable protection factors.
• Careless Tanners - adore the sun but don’t
protect against harmful dangers.
• Naive Beauty Conscious - like to have a good
sun tan. They recognise that sun protection is
important but fail to understand about Sun
Protection Factors (SPFs).
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Segmenting Business Markets
Demographics
Operating Variables
Purchasing Approaches
Business
Marketers Use
Many of the Same
Consumer
Variables, Plus:
Situational Factors
Personal Characteristics
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Segmenting International
Markets
Geographic
Location
Cultural
Factors
Factors Used
to Segment
International
Markets
Political and
Legal Factors
Economic
Factors
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Step 1: Market Segmentation: 5 Criteria for
EffectiveSegmentation
Measurable: The variables such as the size, purchasing power or the profiles of the
segments can be measured.
Accessible: It must be possible to identify, reach and serve the market segments.
Substantial: The market segments must be financially attractive and should be
large or profitable enough to serve
Differentiable: The variables used to segment the market should create subgroups
that give different responses to different marketing actions of the company
Actionable: Company must be able to design effective programs to attract and
serve for each segment
Step 2. Market Targeting
(Target marketing)
Evaluating Market Segments
Segment Size and Growth
◼
Analyze current sales, growth rates and expected
profitability for various segments.
Segment Structural Attractiveness
◼
Consider effects of: competitors, availability of
substitute products and, the power of buyers &
suppliers.
Company Objectives and Resources
◼
◼
Company skills & resources needed to succeed in
that segment(s).
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Look for Competitive Advantages.
Target marketing strategies
(Levels of Market Segmentation)
Through Market Segmentation, Companies Divide Large,
Heterogeneous Markets into Smaller Segments that Can be
Reached More Efficiently And Effectively With Products and
Services That Match Their Unique Needs.
Mass Marketing(undifferentiated marketing)
Same product to all consumers
(no segmentation, i.e Coca-Cola)
Segmented Marketing(differentiated marketing)
Different products to one or more segments
(some segmentation, i.e. Marriott)
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(Selecting Target Markets)
Concentrated marketing(Niche Marketing)
Different products to subgroups within segments
(more segmentation, i.e. Standard or Luxury SUV’s)
Micromarketing
Products to suit the tastes of individuals and locations
(complete segmentation)
Local Marketing
Individual Marketing
Tailoring brands/ promotions to
local customer groups, i.e Sears
Tailoring products and programs to
the needs of individual customers,
i.e. Dell
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Step 2. Market
Targeting(targetmarketing)
Selecting Target Market Segments
Company
Marketing
Mix
Market
A. Undifferentiated Marketing
Company
Marketing Mix 1
Company
Marketing Mix 2
Company
Marketing Mix 3
Segment 1
Segment 2
Segment 3
B. Differentiated Marketing
Segment 1
Company
Marketing
Mix
Segment 2
Segment 3
C.
Concentrated Marketing D. Micromarketing
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Undifferentiated marketing targets the whole market with one offer
•
Mass marketing
•
Focuses on common needs rather than what’s different
Differentiated marketing targets several different market segments and designs
separate offers for each
•
Goal is to achieve higher sales and stronger position
•
More expensive than undifferentiated marketing
Concentrated marketing targets a large share of a small market
•
Limited company resources
•
Knowledge of the market
•
More effective and efficient
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Differentitated marketing: different products
and marketing mix for different market
segments
Niche
marketing(concentrated)
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Niche
marketing(concentrated)
32
Niche
marketing(concentrated)
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Local marketing
involves tailoring brands and promotion to the needs and wants of
local customer groups
•
Cities
•
Neighborhoods
•
Stores
Benefits:
•
Increased marketing effectiveness in competitive markets
•
More customer-specific offerings
Challenges:
•
Increased manufacturing and marketing costs
•
Less economy of scale
•
Logistics
•
Dilution of company image
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Individual marketing
involves tailoring products and marketing programs to
the needs and preferences of individual customers
•
Also known as:
• One-to-one marketing
• Mass customization
• Markets-of-one marketing
Mass customization is the process through which firms
interact one-to-one with masses of customers to design
products and services tailor-made to meet individual needs.
Has made relationships with customers important in the new
economy.
•
Provides a way to distinguish the company against
competitors
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Mass customization
Hazırlayan: F.Zeynep Özata
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Step 2. Market
Targeting(target marketing)
Choosing a Target Marketing Strategy
Company Resources
Product Variability
Product’s Stage in the Life Cycle
Market Variability
Competitor’s Marketing Strategies
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Socially Responsible Target
Marketing
Smart targeting helps companies and
consumers alike.
Target marketing sometimes generates
controversy and concern.
◼
◼
◼
Disadvantaged and vulnerable can be targeted.
Cigarette, beer, and fast-food marketers have
received criticism in the past.
Internet has come under attack because of the
loose boundaries and lack of control in
marketing practices.
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Step 3. Choosing a Positioning
Strategy
Positioning is differentiating the brand from other
brands in consumer minds.
Positioning is not what you produce in the factory but
it is all about what you do in the minds of prospects.
Product’s Position - the way the product is defined by
consumers on important attributes - the place the
product occupies in consumers’ minds relative to
competing products.
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Step 3. Choosing a Positioning
Strategy
Step 1. Identifying
Possible Competitive
Advantages
Step 2. Selecting the
Right Competitive
Advantage
Step 3. Communicating
and Delivering the
Chosen Position
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Step 3. Choosing a
Positioning Strategy
Marketers must:
◼
◼
Plan positions to give their products the greatest
advantage in selected target markets,
Design marketing mixes to create these planned
positions.
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Positioning maps
Key to the efective positioning is to learn the perceptions of
consumers.
Perceptual Positioning maps show consumer perceptions of their
brands versus competing products on important buying
dimensions for ex: Price and quality
We need three types of data to develop positioning maps;
1.
2.
3.
Evaluations of important atrributes for a product
class(quality-price)
Judgement of existing brands with the important
atrributes
Rating of an ideal brand’s attributes
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Identifying Possible
Competitive Advantages
Key to winning and keeping customers is to
understand their needs and buying
processes better than competitors do and
deliver more value.
Competitive advantage is an advantage
over competitors gained by offering
consumers greater value, either through
lower prices or by providing more benefits,
that justify competitive advantage,
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Identifying Possible
Competitive Advantages
Product
Differentiation
i.e. Features,
Performance, Style &
Design, or Attributes
Image
Differentiation
i.e. Symbols,
Atmospheres, Events
Services
Differentiation
i.e. Delivery, Installation,
Repair Services, Customer
Training Services
Personnel
Differentiation
i.e. Hiring, Training
Better People Than
Competitors Do
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Choosing the Right Competitive
Advantages
Important
Profitable
Criteria
For Determining
Which Differences
To Promote
Affordable
Preemptive
Distinctive
Superior
Communicable
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Choosing the Right Competitive
Advantages
Important: The difference must deliver an important and
valuable benefit.
Distinctive: Competitors do not offer the same difference.
Superior: The difference must offer a superior way of
satisfying a need.
Communicable: The difference must be visible and
explainable.
Preemptive: Cannot be coped easily.
Affordable: Buyers can afford to pay for the difference.
Profitable: The company can introduce the difference
profitably.
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Positioning statement for Mini
Cooper Countryman
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Selecting an Overall Positioning Strategy
(the full positioning of a brand is called value proposition)
Price
More
More
The same
More
for
More
More
for the
same
Less
More
for
Less
The Same
The same
for
less
Less
Less for
much
less
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Communicating and Delivering
the Chosen Position
Once position is chosen, company must
take strong steps to deliver and
communicate the desired position to target
consumers.
All the company’s marketing mix must
support the positioning strategy.
Positioning strategy must be monitored and
adapted over time to match changes in
consumer needs and competitor’s
strategies.
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