L i s a a M a n a g e m e n t Unit M o d e – 1 s t Y EA R n°3 UE 02 • Research marketing and international strategic marketing • © Segmentation, target consumers Unit n°3 1.Segmentation 1.1 - Why segment? 1.2 - How to chose a segment 1.3 - Types and levels of segmentation 1.4 - Segmentation criteria 3 7 11 15 20 2.Targeting 26 27 2.1 - Targeting strategies 3.Postioning 3.1 - Differentiation strategies 3.2 - Mapping: percpetual map for positioning 3.3 - Features of a good positioning 4. Key points • Research marketing and international strategic marketing • 31 37 41 43 45 © UE 02 3 - segmentation, target consumers > 1. segmentation 1 Segmentation The individuals constituting a market a very different: segmentation is essential to get a real impact on a business's target of consumers and to stand out among the competition. Making sense of market segmentation : a fashion retailing case A market segment is a sub-category of demand. It has a number of homogeneous relevant criteria so to create common opportunities that match a market supply. © Source : Lee Quinn, Tony Hines, David 4 - segmentation, target consumers > 1. segmentation ? Segmentation aims at creating groups of consumers sharing the same expectations and behaviour. Do not mistake strategic segmentation, which is linked to the management of the business, for marketing segmentation which is linked to the marketing department. Marketing Mix Marketing Mix : set of tools a business uses to reach its goals on a target market. BEWARE Source: Kotler & Dubois FIELD MEANS GOAL Term The term “Mix Marketing” or “Mix” is one of the most used terms in marketing. Marketing Mix is also known as "4 Ps": Product, Price, Place and Promotion. STRATEGIC Segmentation Set of the activities of a business Dividing activities into homogeneous groups (SBUs) Chosing the activities portfolio Long term MARKETING Segmentation A specific activity sector Categorizing customers in homogeneous segments Associate a mix to each segemnt Medium term © + Definitions 5 - segmentation, target consumers > 1. segmentation { Focus } What Does a Marketing Mix Consist of in Fashion? Product : The fashion industry’s product component applies to items sold by fashion designers and retailers and the various factors that go into marketing them. This includes the name of the fashion brand, such as Gap, Levi or Nine West, as well as the quality and selection of items. It may also refer to services, such as custom designs and alterations, or to the positioning, life cycle or functionality of the products. For example, products sold by Ugg Australia are marketed on the grounds of functionality and warmth equally, as well as their brand name. Price : Pricing decisions affecting the fashion industry’s products include wholesale and recommended retail prices of the clothing and accessories. The price determines the financial success and longevity of both the manufacturer and the retailer’s companies. Production and selling costs typically determine the pricing of garments, on which marketers based the positioning of the brand. Fashion products that cost more to produce usually carry a higher price based on perceived value to the customer; for example, fashion followers believe Parisian designers set the trends for each season, so clothing designed or produced by their fashion houses reflect premium prices. Place : The place where items are sold varies widely in the fashion industry and does not always refer to a physical location. Some fashion manufacturers sell their products from their own privately-owned stores or high-end boutiques, while others sell through distribution channels, including mass-market retailers such as Wal-Mart, mall clothing stores. Many fashion retailers make their products available for purchase online. Well-known design houses such as Ralph Lauren and Chanel sell made-to-order garments, crafted specially for individual customers who have the means to pay for exclusivity. © Promotion : The various methods used to market fashion products make up the promotion component. These include branding as well as online and traditional forms of advertising. Product launches, fashion shows, displays and merchandising are commonly lucrative methods of promoting new clothing lines, while publicity such as news or magazine articles, public relations and social media help to build the profile of the brand and the product range. In the fashion industry, promotion is typically a seasonal activity because each season’s fashions are often Source: yourbusiness.azcentral.com marketed as individual ranges. 6 - segmentation, target consumers > 1. segmentation Example: a possible segmentation of the t-shirt market Depending on the segment, a product can have many different features: for each segment a specific type of customer is targeted. Businesses can commit to one or severall segments. T-SHIRT MARKET Basic T-shirt Trendy T-shirt High-range T-shirt © Sports T-shirt 7 - segmentation, target consumers > 1. segmentation > 1.1 why segment? 1.1 Why segment? Developping a general marketing that isn't relevant or adapted to more or less everyone isn't realistic. To stand out, today's businesses have to make a difference and therefore define a precise supply. Describe every segment Identify and quantify Operational market Bound the market to be segmented Bibliographic research Qualitative study Quantitative study Textual analysis Multivariated analysis Group the consumers in segments Potential Discriminating characteristics Media and communication Circuits of discussion Other... © It is essential to be aware of the diversity of consumers and know when it's impossible to satisfy them all with just one type of supply. The requests of the consumers : segment and analyze … 8 - segmentation, target consumers > 1. segmentation > 1.1 why segment? Segmentation Targeting Positioning • Segmentation level • Segmentation criteria • Analysis of the segments' benefits • Evalutaion of each segment's attractiveness • Selecting targets • Positioning process • Mix establishment Segmentation means identifying the criteria needed to distribute consumers into homogeneous groups. © Targeting means evaluating the extent of each segment's benefits for the business and then chose which segments should be targeted. 9 - segmentation, target consumers > 1. segmentation > 1.1 why segment? Businesses need to find the attractive market that match its goals and resources. > market segementation is important To distribute efficiently the available resources of a business on a market. Competition can be well established on some markets and it isn't always in a business's interest to market its products everywhere. > segmentation has become a necessity © As competitors are multiplying. 10 - segmentation, target consumers > 1. segmentation > 1.1 why segment? Buyers/consumers are multiple, scattered and heterogeneous. They have different expectations, purchasing habits, methods, tastes and demands. { Focus } HOW CONSUMERS SEARCH FOR LUXURY WATCHES ONLINE – Insights from the 2013 edition of the WorldWatchReport™ > segmentation is based on A good knowledge of consumers, their habits and their references © Source : www.europastar.com 11 - segmentation, target consumers > 1. segmentation > 1.2 How to chose a segment 1.2 How to chose a segment To define an efficient segmentation, first set its basEs • Taking the business's resources into account: goals, advantages/ differences compared to competition, level of financial resources. • Deciding what is the segment's optimal size and ideal growth according to the business. • Defining the segment's attractiveness ► see UE 02, unit N°1 : Porter's forces © Each identified segment will be subjected to a thorough analysis. The segments that need work will be defined: this analysis is called targeting. 12 - segmentation, target consumers > 1. segmentation > 1.2 How to chose a segment { Focus } 'Horizon croissance ': can you define luxury for me? Stéphane Truchi : Today's luxury has been segmented. We went from a "unique" luxury, represented by some symbolic brands and bought by a homogeneous and demanding customer base, to a plural luxury, segmented on different levels: "access" luxury, premium luxury, hyper-luxury, ultra-luxury... This new segmentation fueled the emergence of new brands and the advent of new customer bases, particularly in emerging countries. The second most important development concerns the function of luxury: We went from the luxury of owning to the luxury of experiencing, from the luxury of transmitting to the one of holding. From the luxury of objects, to the luxury of people. © Source: translated from Stéphane Truchi, Chairman of the management board of the IFOP group, www.horizoncroissance.net 13 - segmentation, target consumers > 1. segmentation > 1.2 How to chose a segment an efficient segmentation is: Identifiable The various assets of the segment have to be measurable and identifiable Accessible Communication and distribution must be able to easily reach the segment Substantial The segment must be wide enough so the work it involves is profitable Relevant The segment must account for the creation of a specific type of supply The segment must be durable enough so costs are reduced © Durable 14 - segmentation, target consumers > 1. segmentation > 1.2 How to chose a segment { Focus } new Trend: Product segmentation by burton ! Burton, prêt-à-porter brand for snowboarders and extreme sports materials manufacturers, makes a breakthrough with an original product segmentation. It's an interesting concept since the product is adjusted to the weather or season. Burton therefore elaborated a marketing strategy for its efficient e-commerce website whose motto is advising and interacting. This concept isn't really new but it is refreshingly aesthetic and dynamic. Paris, New York, Hong Kong...: to each place its weather, and each weather its style. (April 15th 2011) Source: translated from blog.like-interactive.com © 15 - segmentation, target consumers > 1. segmentation > 1.3 types and levels of segmentation 1.3 Types and levels of segmentation A market can be segmented in many ways. Market segmentation by distribution channels PPR (Pinault-Printemps-Redoute) organizes all its activities according to two different distribution channels: • A luxury distribution channel for the luxury PPR division: Gucci, Bottega Veneta, Yves Saint Laurent, Balenciaga, Alexander McQueen, Boucheron, Sergio Rossi, Stella McCartney distributed in stores in sole proprietorship, in department stores. © •A distribution channel on the internet for the Redcats division: La Redoute, Daxon, Vertbaudet, Cyrillus, Somewhere, Ellos, Castaluna for European brands and Avenue, OneStopPlus. com, BrylaneHome, Woman Within, Jessica London, Roaman's, KingSize, The Sportsman's Guide, The Golf Warehouse for American brands. 16 - segmentation, target consumers > 1. segmentation > 1.3 types and levels of segmentation Segmentation by customer profiles Customer expectations are homogeneous: Use of Mass-marketing The business offers a standardized supply. The market isn't segmented. Customer expectations are regrouped: Use of Segmented Marketing Supply is adapted to the targeted consumer group. Customer expectations are specific: Use of niche Marketing Supply is adapted to a reduced number of customers. © Customer expectations are heterogeneous: Use of “one to one” Marketing Supply is customized for the consumer. It is rather a "mass customization". 17 - segmentation, target consumers > 1. segmentation > 1.3 types and levels of segmentation ? Definitions One to one Marketing One-to-one marketing is a customer relationship management (CRM) strategy emphasizing personalized interactions with customers. The personalization of interactions is thought to foster greater customer loyalty and better return on marketing investment. In the past, proprietors of a general store would naturally take a one-to-one approach, remembering details about each customer's preferences and characteristics and using that knowledge to provide better service. One-to-one marketing seeks to reinvest marketing with the personal touch absent from many modern business interactions. Another approach, customer segmentation, focuses on customizing marketing components for groups of customers rather than individuals. © Source : www.bitpipe.com 18 - segmentation, target consumers > 1. segmentation > 1.3 types and levels of segmentation Segmentation by type of product This type segmentation provides a better comprehension of the market, in the perspective of supplying new products. The Qualitative Product Evaluation Criteria © Segmentation by qualitive product 19 - segmentation, target consumers > 1. segmentation > 1.3 types and levels of segmentation { Focus } do not mistake ethnic marketing for the tribal one Ethnic marketing can easliy be mistaken for tribal marketing since the two concepts are close, but they don't use the same segmentation criteria. Ethnic marketing is based on a segmentation by ethnic group, while tribal marketing focuses on heterogeneous consumer groups, called tribes, but who adopted common habits and rites in accordance with their environment. The major users of tribal marketing are clothing and fashion accessories brands. Here are some examples of clearly identified tribes: surfers, "estate kids", hipsters, goths, teenagers... Quicksilver The brand Quicksilver essentially targets a population of young adult men with a strong purchasing power and keen on board sports, in other words "surfers". By buying the brand's products, consumers buy principles (alternative lifestyle, danger, freedom): it's a whole state of mind, not only clothes. • Read • – Appendix The Business of Fashion: Uncovering the Market Segments of the Apparel Industry Source : ezinearticles.com © Source: translated from blog-idrac.com 20 - segmentation, target consumers > 1. segmentation > 1.4 segmentation criteria 1.4 Segmentation criteria We can see two types of criteria: the ones based on objective, general measures, and those based on deduced elements. Criteria change according to the product, the country, and can be associated. © There are 4 major types of segmentation criteria. 21 - segmentation, target consumers > 1. segmentation > 1.4 segmentation criteria 1 - GEographic criteria Those criteria are often used to segment markets. Often relevant, easy to measure objectively, they can usually be found in seconday sources. The geographical criteria are used to adapt products sold to the consumers according to the region in which they live, according to the climate of this region... The marketer has to ask himself these questions: Where live the buyers? Has it an impact on their purchasing behavior? Place of residence Continent, country, region, city, e.g. Paris/countryside Climate Hot, cold, temperate... Type of residence Collective/individual, main or secondary place of residence... Popultion density Urban, rural… © TYPEs of criteria 22 - segmentation, target consumers > 1. segmentation > 1.4 segmentation criteria 2 - sociodemographic criteria Most criteria are essential to proceed to a segmentation: gender for instance often has a major role in fashion, or SPCs for labels. Gender Man or woman Age -15, 15-24, 25-34, 35-44, 45-54, 55-64, +64 y.o. Household size 1, 2, 3, 4, 5 and more Nationality French, European... Religion Chrisitan, muslim, jewish, other... Education level Primary, secondary, higher Income High, higher average, lower average, low Size, weight Standard or non-standard (high or low) SPC (soci-professional category) Executives, professionals, workers... © Types of criteria 23 - segmentation, target consumers > 1. segmentation > 1.4 segmentation criteria 3 - psychographic criteria The sole use of demographic criteria isn't always enough to establish workable segments. Individuals of a same group can have opposite psychographic profiles. Psychographic critera are defined by asking indivuals about their leisure activities, opinion, interests. And wonder: How the market perceives the current offers? What is the image conveyed by the market? Personnality Introverted, extroverted... Activities and interests Sports, shopping… Style and Behaviour Active, passive, realistic, sceptical, passionnated by fashion, trendy... Opinions Political… Principles Social, ecological... © Types of criteria 24 - segmentation, target consumers > 1. segmentation > 1.4 segmentation criteria 4 - Behavioural criteria Those criteria can be collected through the sales department, stores, consumer surveys... Quantities bought Small, medium or major user Using habits Daily (or not), regular, irregular... Advantages sought Easy usage, extra services, image, cleaning, solidity... Purchasing situtation Personal, professional, special purchase... Loyalty level Regular or occasional user, exclusive or disloyal user. Favourite distribution channel Large or medium-scale retail system, internet… © Types of criteria 25 - segmentation, target consumers > 1. segmentation > 1.4 segmentation criteria Source : iexposure.com 10 Impressive Stats About Digital Moms Source : socialmediatoday. com © • Read • – Appendix 26 - segmentation, target consumers > 2. targeting 2 Targeting It's necessary to evaluate the identified segment(s)' interest and then adopt a specific strategy for each of them. In marketing, targeting is a policy consisting in chosing the populations and products businesses must focus on. Targeting is divided into several steps: Evaluating the attractiveness of each population segment where there is a potential demand. Chose the segment(s) the business must target and focus on, in coherence with its goals, skills and resources. Create the policy needed to reach, win over or make loyal each target, and then generate the most benefits in terms of business volumes, market share and profitability. © Once the segmentation is done, a decision has to been taken. 27 - segmentation, target consumers > 2. targeting > 2.1 targeting strategies 2.1 Targeting strategies There are many possible strategic options: from an almost absent targeting to its opposite, a very precise one. Undifferentiated or Mass Marketing Market is a whole: businesses don't know the differences between customers and use a mass distribution channel, mass advertising campaigns, and display a unique image of the product. Businesses offer a standardized supply. The reasons encouraging businesses to adopt this type of targeting strategy are: the search of economies of scale, the reduction of market research costs and commercial planning. © There's a very high risk of competitive battle. One exampl e: stretch panty hose sold in supermarkets. 28 - segmentation, target consumers > 2. targeting > 2.1 targeting strategies Market is segmented, supply is adapted to a targeted consumers group, and there's a specific marketing policy. { Focus } Traditional gender stereotypes © Differentiated or segmented marketing 29 - segmentation, target consumers > 2. targeting > 2.1 targeting strategies { Focus } Concentrated Marketing Businesses can focus on a more or less important segment of the market. If the segment is small, it is called a niche. Why Niche Marketing Works for Your eCommerce Fashion Business Today, the Collégien slippers are in every outlet. It is the perfect example of a niche product that succeeded in finding its market thanks to a true marketing intelligence. Style and innovation: the ingredients of a sure success. > Advice and follow-up (chosing a domain name, providers, using decision-making support tools, forecasting reserach…). Source: translated from www.viaa.fr Source : wearenine.co More evidence the Chinese luxury consumer is all about niche brands now © • Read • – Appendix Collégien: everyday slippers 30 - segmentation, target consumers > 2. targeting > 2.1 targeting strategies Customized or “one to one” Marketing Personalization of the product Personalization of the service Personalization of the communication Every Internet user can bring his personal touch to the product, for example, put it his name, create his jewel, create his handbag... Every Internet user can choose his services, for example, insurance, home delivery, online help... Every Internet user can choose an individualized relation, for example, distribution by email, RSS feed, personalized homepage... RAYBAN KIT, FOR CUSTOMIZING © Supply is almost custom-made for the consumer. It often uses a direct communication, developped services and an important customer management or 'customer care'. 31 - segmentation, target consumers > 3. positioning 3 Positioning Positioning consists in giving a product or brand the prominent place inside the consumer's mind." — Translated from Kotler & Dubois chosing the right positioning is crucial to ensure the success of a new product or brand • Read • Occupying a unique place inside the consumers' mind – Appendix and providing the consumer with objective or symbolic reasons to pick it Zara segmentation © It leads to making the product stand out among the competition thus 32 - segmentation, target consumers > 3. positioning In order to build its positioning, a business must ask itself a series of questions. • Read • Who: who are we? For who: who is our customer? What need: What are our customers' specific expectations? Against who: who are our competitors? What makes us different: in what are we different from the competition? In conclusion: what does a customer gain by buying our product? – Appendix What Abercrombie & Fitch Can Teach Us About Brand Positioning Strategy Source : codelessinteractive.com © What: what's our activity? 33 - segmentation, target consumers > 3. positioning Positioning Identification What kinf of product is it? Differentiation To what extent is it different from equivalent products The 3 keys to define and assert your positioning Be coherent with the product's assets Product's qualities Use/technical value, objective dimension, prestige value sociological dimension, fantasmatic value, psychological dimension Be coherent with constumers' expectations © Competitors' positioning 34 - segmentation, target consumers > 3. positioning Consumers are overwhelmed with products and advertising messages: the market is overcrowded. For a brand or product to have visibility and impact, positionings must be easy to remember. The main qualities of a good positioning are to be simple, desirable, original and credible. positioning diamond WHY (advantages) Positoning AGAINST WHO (competitors) WHEN (context) © WHO (target) 35 - segmentation, target consumers > 3. positioning flood of imports = Necessity to have a good positioning { Focus } what clothes do Britons import? Also Read © Source: theguardian.com 36 - segmentation, target consumers > 3. positioning { Focus } Brazil shows the potential of its fashion industry at Who’s Next / Pret-àPorter Paris and Première Classe 2012 Diversity in prints, patterns and colors, creative design, versatility in production, sustainability and knowledge of all the chain: these are some of the characteristics which differentiate Brazilian fashion abroad and help improve the county’s image with the international public. Today the country is the world’s fifth largest producer, with a fashion industry that represents 3.5% of GDP. Furthermore stands out in many segments of the chain: it is the largest producer of denim and the third largest for knitted fabrics. Brazil’s textile and apparel industry also has significant growth numbers. In 2010, the country invoiced US$ 60 billion, a 26.1% growth as compared to 2009, and the total export value was US$ 2.6 billion (US$ 1.44 billion without cotton fiber). It is Brazil’s second largest employer among the manufacturing industries, with 30,000 companies and 1.7 million workers, 75% of which are women. This joint effort is important to show to the international market that Brazil has a knit group of companies that represent the creative spirit of Brazilian fashion. This fashion, which stands out worldwide because of the diversity of its production and the authenticity of its creations, reflects some of the spirit of Brazil: a multicultural country, exuberant by nature and which is rising economically and gaining global prominence. © Source: www.texbrasil.com.br 37 - segmentation, target consumers > 3. Le positioning > 3.1 differentiation strategies 3.1 Differentiation strategies Product performance, specificity of the target audience, the consumption context or the imaginary world created. Every asset of the product or brand has to serve recognition and differentiation. { Focus } Le Coq Sportif is working on its brand and developping its positioning towards high-end products. The brand's online presence is very strong, with its fashionable central website and specilized websites on tennis, rugby, and on its new brand 'L'ombre du zèbre' it is currently positioning. The emergence of an online store is here to complete its online positioning with a will to promote 3 lines of products: 'L'ombre du zèbre', 'Toile de Jouy' and 'rétro tennis' that seem to be at the core of the brand's strategy. Its flash website is yet another proof of the brand's intention to give its products value and to inspire want. It isn't about doing e-commerce for the sake of it, it is about affect. Source: translated from www.imazine.fr © Positioning can be performed through various strategies. 38 - segmentation, target consumers > 3. Le positioning > 3.1 differenTiation strategies Petit Bateau positioning Simplicity in its image, the brand's t-shirts send back to childhood, here on the picture it is a security blanket. Petit Bateau supplies its customers with memories: it's comforting and comfortable. © Customers cannot be wrong or wronged: they are in an environment of trust. 39 - segmentation, target consumers > 3. Le positioning > 3.1 differenciation strategies Imitation : Occupying the same place as a competitive product Differenciation : Give a product personality through performance (style, price, technology, follow-up…). Innovation : Market an original product and take a vacant spot or replace an existing product Advantages Reduced costs of differenciation and research & development. The brand image created is orginial, hard to copy. The business takes a certain lead on its competitors. drawbacks Demands substantial and regular marketing efforts. Hard to apply when one or many leaders hold a prominent place. Efforts have to be made so consumers keep the image in mind. High risks to be copied. Need to invest substantially in communication. Innovation must be managed. Selecting ideas is risky. Examples Fast fashion, copying fashion designers Longchamp and its "Le Pilage" bags Issey Miyake with A-Poc or Pleat Please © Strategy 40 - segmentation, target consumers > 3. Le positioning > 3.1 differenciation strategies Aigle positioning “At home in nature” By wearing Aigle products, customers feel at home in nature. Authenticity, comfort, nature. positioning sets forth the intrinsic qualities and advantages of a product: © Efficiency, authenticity, hard-wearing, elegance, purchasing price, durability, comfort, easy use, trend, etc. 41 - segmentation, target consumers > 3. positioning > 3.2 Mapping: perceptual map for positioning 3.2 Mapping: perceptual map for positioning Chosing the right positioning depends on the study of consumers' expectations and their perception of the positioning of competing products. { Focus } Therefore, it is necessary to first study the different competitors running, and their respective characteristics. Then, a perceptual map (mapping technique) can be drawn, using two axes which are characterized by the target consumer and the recquired qualities of the new product (various elements constituting the customer's need). © American Apparel Competitor’s analysis mapping 42 - segmentation, target consumers > 3. positioning > 3.2 Mapping: perceptual map for positioning watches Brands Mapping © Luxury Brands Mapping 43 - segmentation, target consumers > 3. positioning > 3.3 features of a good positioning 3.3 Features of a good positioning It is essential for a brand to chose its positioning on its own, so to be able to lead it towards a profitable path. If not, consumers will provide the brand with an image it can't control. A good positioning must answer to certain criteria: Be clear and easy to communicate: easy to understand and remember, the advantages are easy to prove to the consumer Match expectations of the targeted consumers Be believable and realistic regarding the actual characteristics of the product Have originality and relevance compared to the competitors positioning: the consumer must know the difference © Be durable and stand out: hard to copy, protected from the competition, it mustn't crush another equivalent product of the business or brand either. 44 - segmentation, target consumers > 3. positioning > 3.3 features of a good positioning The following table shows the comparison of three brands. In terms of differentiation, the 3 brands position themselves on specific assets. © Consumers recognize them as clearly different. 45 - segmentation, target consumers > 4. key points • Key Points • Do not mistake a business's strategic segmentation for marketing segmentation Targeting means chosing the right segments to focus on successfully. Segmenting means adpating your supply to identified consumers. A successful positioning enables consumers to recognize the good or brand with the assets the business chose to provide it. An efficient segmentation is identifiable, accesible, substantial, relevant, and durable. © Segmentation, target consumers