OLC EUROPE
MARKTING PRINCIPLES
SEGMENTATION TARGETING AND POSITIONING
BE ABLE TO USE THE CONCEPTS OF
SEGMENTATION TARGETING AND POSITIONING
On successful completion of Learning Outcome, you can:
1. show macro and micro environmental factors which influence
marketing decisions
2. propose segmentation criteria to be used for products in different
markets
3. choose a targeting strategy for a selected product/service
4. demonstrate how buyer behaviour affects marketing activities in
different buying situations
5. propose new positioning for a selected product/service
ENVIRONMENTAL SCANNING AND ANALYSIS
In marketing planning process, one needs to take a look at the
organization's current situation, especially within the context of the
mission, higher-level plans and higher-level goals.
This is accomplished through environmental scanning and
analysis.
When learning about the situation inside the organization,
marketers use an internal audit, and when learning about the
situation outside the organization, they use an external audit.
All the relevant information is accumulated, evaluated and distilled
into a critique reflecting the organization's primary strengths,
weaknesses, opportunities and threats, known as the SWOT
analysis.
SWOT ANALYSIS – THE PLANNING STAGE
GOOD NOW
Maintain &
build
GOOD FUTURE
Prioritize &
optimize
BAD NOW
Remedy or
stop
BAD FUTURE
Intercept and
counter
INTERNAL AUDIT
The purpose of internal marketing audit is to identify the organisation’s
strengths and weaknesses
The internal audit covers the mission statement plus the organization's
resources and capabilities, current offerings, previous performance,
business relationships and key issues. These internal factors, individually
and in combination, are instrumental in the way a company fulfils its
mission, serves its customers and competes in the marketplace.
A strength is an internal capability or factor that can help the organization
achieve its objectives, making the most of opportunities or deflecting
threats.
A weakness is an internal capability or factor that may prevent the
organization from achieving its objectives or effectively handling
opportunities and threats, especially within the competitive context.
ANALYSING THE INTERNAL ENVIRONMENT
Conducting an internal marketing audit for an organisation will involve the
scanning and analysis of five main factors:
1. The organisation's resources and capabilities
2. The organisation’s current offerings
3. The organisation’s previous performance
4. The organisation’s business relationships; and
5. Key issues affecting the operations of the organisation
One will be looking for information that can help to understand the
organization's current situation and the strengths one can rely on when
implementing a marketing plan.
ORGANISATIONAL RESOURCES AND
CAPABILITIES
Core competencies of an organisation refers to the internal capabilities
that contribute to competitive superiority yet are not easily duplicated.
Such capabilities are traced four main areas:
1. Organization's human resources,
2. Financial resources
3. Informational resources and
4. Supply resources
When planning for marketing, Managers must balance the investment and
allocation of resources.
The organization's values, ethical standards and social responsibility
position also affect this balancing act.
CURRENT OFFERING
This part of the internal audit involves a review and analysis of the goods
and services currently on offer to establish where the organisation stands
before making plans to move ahead.
It is also important to understand how the organization's offerings relate to
the mission and to resources available.
Companies generally examine the following, looking at historic and
current trends:
1. composition, sales and market share of product mix and lines
2. customer needs satisfied by features and benefits
3. product pricing and profitability, contribution to overall performance
4. product age and position in product life cycle
5. links to other products.
PREVIOUS PERFORMANCE
Although past performance is never a guarantee of future performance,
looking at previous results can reveal insights about internal strengths
and weaknesses.
The purpose is to build on past marketing experience in planning new
marketing activities. At a minimum, the following performance indicators
will need to be analysed:
1. Previous year sales (in units and monetary terms)
2. Previous year profits and other financial results
3. Historic trends in sales and profits by product, geographic region,
customer segment, etc.
4. Results of previous marketing plans
5. Customer acquisition, retention and.loyalty trends and costs.
BUSINESS RELATIONSHIPS
Good business relationships can act as strengths, helping organizations
make the most of opportunities or defend against threats and profitably
satisfy customers. Among the areas of business relationships to be
examined during an internal audit are:

value added by suppliers, distributors and strategic alliance partners

internal relationships with other units or divisions

capacity, quality, service, commitment and costs of suppliers and
channel members

changes in business relationships over time

level of dependence on suppliers and channel members.
Close connections with internal divisions or channel members and
suppliers can be an important competitive advantage
KEY ISSUES
Questions to answer under key issues include:
1. What specific issues could interfere with the organization's ability to
move toward its mission and goals, and what are the warning signs of
potential problems?
2. What specific issues are pivotal for organizational success?
Finding answers to such questions can help organisations to develop
appropriate marketing plans to deal effectively with identified marketing
problems to move towards achieving organizational goals
Some organizations look at key issues more closely, according to
customer segment, market or product.
It may be necessary to conduct a marketing research to get a more
complete picture of certain issues.
SWOT analysis 2013
Strengths







Hardware integration with many
open source OS and software
Excellence in engineering and
producing hardware parts and
consumer electronics
Innovation and design
Focus on environment
Low production costs
Largest share in mobile phones
and 2nd place in smartphones
sales
Ability to market the brand
Weaknesses
 Patent infringement
 Too low profit margin
 Main competitors are also
largest buyers
 Lack its own OS and
software
 Focus on too many
products
EXTERNAL AUDIT
The purpose of External Audit is to identify opportunities and
threats.
The external audit covers political-legal, economic, socialcultural and technological factors (known as PEST) plus
ecological and competitive factors that may present
opportunities or pose threats.
An opportunity is an external circumstance or factor that the
organization can attempt to exploit for higher performance.
A threat is an external circumstance or factor that could
inhibit organizational performance, if not addressed.
EXTERNAL AUDIT
Sources for an external audit include internal information about:

Customers,

Partners and suppliers,

Market share,

Technical standards;

Customer feedback through surveys, complaints and suggestions,

Government,

Academic or syndicated studies of the market,

The industry groups;

Competition;

Employees,

Media and online reports;

Special interest groups.
SCOPE OF EXTERNAL AUDIT -
MARKET AGGREGATION AND
MARKET SEGMENTATION
Marketers can approach a market through either market aggregation or
market segmentation.
Market aggregation or mass marketing is where there is little or no
subdivision of the market. Even though there is diversity between
consumers, they are seen to be sufficiently alike to approach as a
homogeneous group when marketing a particular product.
Market segmentation is process of dividing a market into homogeneous
segments using one or a range of possible alternative segmentation
methods, each segment being composed of customers or consumers
sharing similar characteristics
MARKET SEGMENTATION DEFINED
“Market segmentation is the process of splitting customers into different
groups or segments, within which customers with similar characteristics
have similar needs. By doing this each one can be targeted and reached
with a distinct marketing mix”
(McDonald and Dunbar 1995 p10)
This definition has three key tasks for the market:
1. To define the market and find segments within it
2. To select the most profitable segment that can served most
effectively and efficiently by the company’s resources (Targeting)
3. To communicate to that segment to appeal to their specific wants
and needs better than competitors (Positioning)
TYPES OF SEGMENTATION
Every product or service has particular customer profile which can be
expressed in terms of likely age, occupation, sex, income, location,
among other variables,
By targeting media to specific group of consumers based on these
purchasing profiles, marketing communication can sell more productively
and profitably.
The commonly used bases for market segmentation include:
1. Demographics
2. Geographics
3. Geodemographics
4. Psychographics
5. Behavioural
DEMOGRAPHIC SEGMENTATION
Demographic segmentation tells you a little more about the customer and the
customer’s household on measurable criteria that are largely descriptive such
as:
1.
Age
2.
Sex
3.
Lifestyle
4.
Type of residence
5.
Income
6.
Occupation
7.
Education
8.
Religion
9.
Ethnic Origin
10.
Nationality
GEOGRAPHIC SEGMENTATION
Geographic segmentation defines customers according to their location.
This can usually be a useful starting point. Multinational organisations
often tend to segment geographically by dividing their global organisation
into operating units built around specific geographic markets. Criteria
may include:
1.
Post Code
2.
City, town, village or rural
3.
Coastline or Inland
4.
Region
5.
Economic or Political Union/association
6.
Country or Continent
7.
Population
8.
Climate
GEODEMOGRAPHIC SEGMENTATION
Geodemographics can be defined as:
'the analysis of people by where they live' (Sleight, 1997, p. 16)
It combines geographic information with demographic and sometimes
even lifestyle data about neighbourhoods.
This helps organisations to understand where their customers are, to
develop more detailed profiles of how those customers live, and to locate
and target similar potential customers elsewhere.
A geodemographic system, therefore, will define types of neighbourhood
and types of consumer within a neighbourhood according to their
demographic and lifestyle characteristics.
PSYCHOGRAPHIC SEGMENTATION
Psychographics, or lifestyle segmentation, is an altogether more difficult area
to define, as it involves intangible variables such as the beliefs, attitudes and
opinions of the potential customer.
It has evolved in answer to some of the shortcomings of the methods
described above as a means of getting further under the skin of the customer
as a thinking being.
The idea is that defining the lifestyle of the consumer allows the marketer to
sell the product not on superficial, functional features, but on benefits that can
be seen to enhance that lifestyle on a much more emotional level.
The term lifestyle is used in its widest sense to cover not only demographic
characteristics, but also attitudes to life, beliefs and aspirations
BEHAVIOURAL SEGMENTATION
Bhavioural segmentation relates to the individual's relationship with the product or
service on offer.
It is quite possible that people with similar demographic and/or psychographic
profiles may yet interact differently with the same product. Segmenting a market in
these terms, therefore, is useful to marketers.
Bases for behavioural segmentation will include:
1.
End Use
2.
Benefits sought
3.
Purchase occasion
4.
Purchase behaviuor
5.
Usage Rate
6.
Attitude
7.
Perceptions and beliefs
8.
Buyer readiness stage (AIDA)
MULTIVARIABLE SEGMENTATION
It is unlikely that any one segmentation variable will be used absolutely on
its own. It is more common for marketers to use a multivariable
segmentation approach, defining a `portfolio' of relevant segmentation
variables, some of which will be prosaic and descriptive while others will
tend towards the psychographic, depending on the product and market in
question.
The market for adult soft drinks includes age segmentation along with
some usage considerations (for example as a substitute for wine as a
meal accompaniment), some benefit segmentation (healthy, refreshing,
relaxing), and lifestyle elements of health consciousness, sophisticated
imagery and desire for exotic ingredients.
The emergence of geodemographics in recent years, is an indicator of
the way in which segmentation is moving, that is, towards multivariable
systems incorporating psychographics, demographics and geographics.
IMPLEMENTING SEGMENTATION
Before segmentation can take place, there has to be some definition of the
boundaries of that market.
Any such definition really has to look at the world through the consumer's eyes,
because the consumer makes decisions based on the evaluation of alternatives
and substitutes.
Thus a margarine manufacturer cannot restrict itself to thinking in terms of `the
margarine market', but has to take a wider view of `the spreading-fats market‘
including butter and vegetable oil based spreads
This whole issue of market definition and its implications for segmentation should
answer the question of 'What business are we in?’
We need to be reminded that consumers basically buy solutions to problems, not
products, and thus in defining market segments, the marketer should take into
account any type of product that will provide a solution to the consumers problems
TARGETING
After defining the boundaries of your market and dividing them into
appropriate segments, one decision that must be made is how
many segments within the market the organisation intends to
target.
There are three broad approaches available,
1.
Concentrated targeting
2.
Differentiated targeting
3.
Undifferentiated targeting
CONCENTRATED TARGETING
Marketing Mix2
Segment 2
The concentrated approach is the most focused approach of the three,
and involves specialising in serving one specific segment.
This can lead to very detailed knowledge of the target segment's needs
and wants, with the added benefit that the organisation is seen as a
specialist, giving it an advantage over more mass-market
competitors
This, however, carries a risk of complacency, leaving the organisation
vulnerable to competitive entry into the segment.
DIFFERENTIATED TARGETING
Marketing Mix1
Segment 1
Marketing Mix2
Segment 2
Marketing Mix3
Segment 3
A differentiated strategy involves the development of a number of
individual marketing mixes, each of which serves a different segment.
As with the concentrated strategy, this approach does allow the
organisation to tailor its offerings to suit the individual segments, thus
maintaining satisfaction.
It also overcomes one of the problems of concentration by spreading risk
across the market, so that if one segment declines, the organisation still
has revenue from others.
UNDIFFERENTIATED TARGETING
Marketing
The
Mix
Market
The undifferentiated approach is the least demanding of the three approaches, in
that it assumes that the market is one great homogeneous unit, with no significant
differences between individuals within that market.
Thus a single marketing mix is required that serves the needs of the entire
market. The emphasis is likely, therefore, to be on developing mass
communication, mass distribution and as wide an appeal as possible.
An undifferentiated involves relatively low costs, as there is only one marketing
mix that does not require the depth of research, fine tuning and updating that a
concentrated or differentiated strategy would entail.
It could also lead to the possible maximisation of economies of scale, because of
having a single product in a potentially large market.
CHOOSING A TARGETING STRATEGY
There are a number of factors influencing the choice of targeting strategy.
Marketing theory may well point to a particular strategy as being ideal, but if an
organization's resources cannot support and sustain that strategy, then an
alternative must be found.
A smaller organisation may, for example, need to adopt a concentrated strategy
(perhaps based on a geographic segment in a consumer market, or on a
specialist niche in a B2B market) to generate the growth required to allow a wider
coverage of the market.
A choice of strategy can also be made within the context of the product itself.
certain types of product lend themselves more readily to certain approaches.
For example a product with many potential variations that involve a high level of
psychological relationship with the customer (such as clothing or cosmetics) is
better suited to a differentiated or concentrated approach. Other products with a
more functional bias can be treated in a more undifferentiated way
The product life cycle stage might also affect the choice of strategy.
COMPETITION AND TARGETING
STRATEGY
Strategic decisions cannot be taken in isolation from the activities of the
competition.
If competitors are clearly implementing differentiated strategies, then it is
dangerous for you to adopt a more dilute, undifferentiated approach.
It may make more sense to identify the segments within which the
competition is strong and then to assess whether it would be possible to
attack them head-on in those segments or to find a different niche and
make that your own.
Thus competition is affecting not only the choice of approach, but the
actual choice of segment(s) to target.
CRITERIA FOR SUCCESSFUL
SEGMENTATION
There four absolute requirements for any successful segmentation exercise, and
unless these four conditions prevail, the exercise will either look good on paper
but be impossible to implement, or fail to deliver any marked strategic advantage:
1. Distinctiveness:
•
Significantly different from any other segment
2.
Tangibility:
•
Segment must be a sufficient size to make its pursuit worthwhile
3.
Accessibility:
1. Segment has to be accessible for the delivery of goods and services to
the customer
4.
Defendability:
1. Organisations must be able to a sufficiently strong differential advantage
to defend its presence in the segment against competitive incursions
POSITIONING
Positioning in Marketing refers to the relative perceptual position of one
brand compared with competing brands
Definition:
Positioning is the act of designing the company's offer and image so that
it offers a distinct and valued place in the target customer's mind.
Brands can be positioned in relation to competitive brands on product
maps in which relative positions are defined in terms of how buyers
perceive key characteristics.
A basic perceptual map plots brands in perceived price and perceived
quality terms.
PERCEPTUAL MAP
‘High’ price
Cowboy
Brands
PremiumBran
ds
‘Low’ quality
‘High’ quality
Bargain
Brands
EconomyBran
ds
‘Low’ Price
PRICE AND QUALITY POSITIONING
Price and quality are clearly important elements in every marketing mix.
But, in the customer's opinion, they cannot be considered independent
variables. A 'high' price will almost always be associated with high quality
and equally, low price with low quality.
Thus, while everybody would like to buy a bargain brand, there is a
problem to overcome. Will customers accept that a high quality product
can be offered at a low price?
Public concern about such promotional pricing has resulted in the
introduction of restrictions on the use of these techniques. Promotions
have to be part of a genuine 'sale', and stores must provide evidence of
this fact.
BENEFITS OF SEGMENTATION
GROUP ACTIVITY
In groups of four, identify for class discussions
the potential benefits of Segmentation to be
gained whether looking at the customer, the
marketing mix or the competition.
QUICK QUIZ
In your groups, generate answers to the following question:
1. What is market segmentation?
2. What are the main benefits of market segmentation to marketers?
3. In what ways are demographic variables used for segmentation?
4. What is the impact of status-consciousness on marketing?
5. What demographic factors determine social class?
6. What are the relevant factors within socio-economic groups that aid
segmentation?
7. What does 'psychographics' mean?
8. Why is psychographics important to marketers?