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Develop profiles ofresulting segments

MarketSegmentation

Develop measures ofsegment attractiveness

Select thetarget segment(s)

Develop positioningfor each segment

Develop marketing mixfor each segment

Identify bases forsegmenting market

MarketTargeting

MarketPositioning

Segmentation/Positioning

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Market Segmentation Market segmentation

Dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviours, who might require separate products or marketing mixes

The key is their response to a different marketing mix If all consumers respond the same way, then there should

be no need to segment a market

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Market Segmentation

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Marriott offers various brands of lodging in order to meet the needs of particular customer segments.

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Levels of Market Segmentation Micromarketing includes:

Local marketing: tailoring brands and promotions to the needs and wants of local customer groups-cities, neighbourhoods, and even specific stores

Individual marketing: tailoring products and marketing programs to the needs and preferences of individual customers

Mass customization: the process of creating customer-unique value by designing products and services tailor-made to individual needs, on a large scale

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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, life-cycle, 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 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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P&G targets kids with Crest Kid’s Cavity Protection toothpaste. It’s gentle on tooth enamel and has “fun- filled sparkles and sparkle fun flavor just for kids.”

Age and Life-Cycle

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Gender and Income

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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Psychographic Segmentation

Social Class

Lifestyle

Personality

Targeting whitening toothpaste at psychographic segment who are active and concerned about

sexual attractiveness.

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Psychographic Segmentation

When Honda markets its Reflex and Elite scooters, it appeals to the rebellious, independent kid in all of us.

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Behavioural Segmentation

Occasions.Special promotions and labels for holidays.

(e.g. Hershey Kisses)

Special products for special occasions. (e.g. Kodak

disposable cameras)

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Behavioural Segmentation

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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Multiple 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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Geodemographic Segmentation

Claritas, Inc. Based on Canadian

Census data. Profiles on 5300

Canadian neighbourhoods.

66 clusters or types based on social values.

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PRIZM Application

In marketing its Suave shampoo, Helene Curtis uses PRIZM to identify neighborhoods with high concentrations of working women. Such women respond best to advertising messages that with Suave, “looking great doesn’t have to cost a fortune.”

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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 CharacteristicsOperating Characteristics Purchasing ApproachesPurchasing Approaches

Personal CharacteristicsPersonal CharacteristicsSituational FactorsSituational Factors

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Segmenting International Markets

Geographic Location

Economic Factors

Political and Legal Factors

Cultural Factors

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Intermarket Segmentation

Teens show surprising similarity no matter where in the world they live. For instance, this teen could live almost anywhere. Thus, many companies target teenagers with worldwide marketing campaigns.

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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.

Concentrated (niche) marketing Small segments with specialized marketing

mixes.

Micromarketing Customized marketing to individuals.

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Mass marketing

Segment marketing

Niche marketing

Micromarketing

Levels of Segmentation

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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

Product Variability

Product’s Life-Cycle Stage

Market Variability

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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Global Marketing Mix Decision to adapt marketing mix to local

conditions.Standardized marketing mix uses same

product, price, promotion, place elements in all international markets.

Adapted marketing adjusts each marketing mix element to the local environment.

More costly but potential for larger market share and more financial return.

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Market Positioning Market positioning

Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products,

In the minds of target consumers, formulating competitive positioning for a product, and

creating a detailed marketing mix

Product position: the way the product is defined by consumers on important attributes, relative to competing products The “quicker-picker-upper?” The “uncola?” “Great taste, less filling?”

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Successful PositioningProduct position

How a product is viewed by consumers relative to competing products.

Three positioning stepsIdentify competitive advantages on which to

build a differentiated position.Choose the right competitive differentiation.Select an overall positioning strategy.

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Choosing a Positioning Strategy

#1 Identify aset of possible

competitive advantages onwhich to build a position

#2 Choose the rightcompetitive advantages

#3 Select an overallpositioning strategy

Must effectively communicate and deliver position to the segment.

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Positioning Map

Positioning map for large luxury SUVs.

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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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ServicesDifferentiation

(e.g., speed, convenience, careful

delivery)

Product Differentiation

(e.g., consistency, durability, reliability,

reparability)

People Differentiation

(e.g., hiring, training better people than

competitors)

ImageDifferentiation

(e.g., convey benefits and positioning)

ChannelDifferentiation

Identifying Competitive Advantages

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ProfitableProfitableDistinctiveDistinctive

ImportantImportant

AffordableAffordable

SuperiorSuperiorPreemptivePreemptive

CommunicableCommunicable

Successful Differentiation

Unique SellingProposition

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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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Which Differences to Promote?

Unilever positioned its bestselling Lever 2000 soap on three benefits in one: cleansing, deodorizing and moisturizing benefits. It’s good “for all of your 2000 parts.”

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Value Propositions

Morefor

more

Morefor thesame

Morefor

less

The samefor

less

Less formuchless

More LessThe same

More

The same

Less

Price

Benefits

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Value Proposition

“Much more for much more” value proposition: Häagen-Dazs offers its super-premium ice cream at a price never before charged.

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Positioning Statement

At Olive Garden Restaurants, “When You’re Here, You’re Family.”

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Discussion Question #1

Describe how the Ford Motor Company has moved from mass marketing to segment marketing. Do you think the company will be able to move toward niche marketing or micromarketing? If so, how? How is the company using the Internet (see www.ford.ca) to change its marketing segmentation approach?

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Discussion Question #3

There are many ways to segment a market. Using the four segmentation variables shown in Table 7-1, discuss which variables would be most important for segmenting (a) Internet users, (b) drivers of a proposed new sports car, and (c) the adult student who returns to college to get an undergraduate degree. Explain your choices. What assumptions did you make? In each case, where would you find the information needed to segment the markets? Be creative with your research thoughts.

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Example of Benefit Segmentation