Market segmentation. Targeting. Positioning.

The term market has acquired many meanings over the years in its original meaning, a market is a location where buyers and sellers meet to exchange goods and services. To an economist, a market consists of all the buyers and sellers who transact over some goods or services. To a marketer, it is the set of all actual and potential buyers of a product. Organizations that sell to consumers and industrial markets, recognize that they cannot appeal to all buyers in the same way because there are too numerous and too varied in their needs and preferences. Thus each company has to identify the parts of the market that it can serve best. Companies have not always practiced these philosophies.

The market evolution past through 3 stages:

1. Mass-MK -in mass MK the company mass produces, mass distributes and mass promotes one product to all buyers. The benefit of mass MK is that it should lead to the lowest cost and prices and create the largest potential market.

2. Product variety- during this stage the company produces two or more products that have different features, styles, quality and sizes. Products were designed to offer variety to buyers and not appealing to different market segments.

3. Target MK- during this stage the company identifies market segments, selects one or more of them and develops products and MK mixes for each segment. Nowadays companies are moving away from mass Mk and product variety MK to target MK because it can better help sellers find their MK opportunities, develop the right product for each target market and adjust their prices, distribution channels and advertising to reach the target market efficiency.

Target MK requires 3 steps:

1. Market segmentation- means dividing a market into different groups of buyers who may call for separate products and MK mixes, the company identifies different ways to segment market and develops profile of the resulting market segments.

2. Market targeting- means evaluating each segment’s attractiveness and selecting one or more of the market segments to cover.

3. Market positioning refers to setting the competitive positioning for the product in different consumers segments.

Market segmentation

- means dividing a market into different groups of buyers who may call for separate products and MK mixes, the company identifies different ways to segment market and develops profile of the resulting market segments.

There is no single way to segment a market. A marketer has to try different segmentation variables alone and in combination to find the best way to segment it s markets. A company may use the following segmentation variables:

1. Geographic variables- it includes region, city size, country size, dencity and climate, urban or rural.

2. Demographic variables- include age, gender, income, occupation, education, religion, race, family and family life cycle.

3. Phycographic variables- include life style(disco), personality (disco, cazino), and social class. (masini scumpe)

American Marketers divide modern society into following social classes:

1. Lower-lowers (average 6-7 % from society). They are usually out of work and they depend on public help or charity for their income, buy only primary goods. (nu au casa,ex. cersetori)

2. Upper lowers (appr. 9 %). These people are working but their living standards are just above poverty. They perform unskilled work for very poor payment. (au casa)

3. Working class (appr. 32%). Working class is average rate workers that depend on their salaries,buy primary goods plus some additional- cars)

4. Middle class (appr. 38%). Middle class consists of average paid consumers that have better living standards. They buy products that are popular to keep up with the trends.( buy fashion clothes, have some savings, they are traveling).

5. Upper middles ( appr. 12%). They are primarly concerned with career and they include usually independent business persons and corporate managers. They are the quality market for goods, homes, clothes, cars, and furniture. ( top managers, very educated, are influenced by brands, have investment funds).

6. Lower Uppers (appr. 2%). They have obtained high income and wealth through their profesional abilities or business. They usually rise from middle class. They include the new riche who cosume products and services that they impress both them. (exteriorizeaza bogatia, cumpara haine scumpe, masini, ex. State, fotbalisti, cantareti).

7. Upper Uppers (less than 1 %). They are the social elite that have well known family backgrounds, they give large sums to charity and they sent their children to the finance scholls and university. They are an attractive market for antiques, homes and vacations. ( high income, very educated, nu exteriorizeaza bogatia, ex. Familia Regala din Romania).

4.Behavioristic variables include:

1. Purchase occasion- regular or special occasions, ex. Halloween;

2. Usage rate- light, medium and heavy user, ex. packaging;

3. Loyalty status- non, light, medium and strong user, ex. Orange 10years discount cards;

4. Attitude toward the product- positive, negative or indifferent, ex. Tabaco, fast-food McDonalds;

5. Readiness stage- a consumer may be unaware, aware(constient), interested, desirous and intending to buy,ex. reclama de promovare; lapte, servicii turistice.

Market segmentation should have the following requirements:

1. Measurability means the degree to which the size and purchasing power of segments can be measured. ex. car manufactured, to create a new type of car to the left hand people, the purchasing power= would be difficult to know the number.

2. Accesibility refers to the degree to which segment can be reached and served. ex. people who do not hear- are more isolated, they do not hear radio.

3. Substantiality means the degree to which segments are large or profitable enough. ex. launch parfums for different social classes, middle class.

4. Actionability refers to the degree to which affective programs can be designed for attracting and serving segments. ex. well skilled personal, promotional tools; company, if it has its own distribution system.

Market targeting

A company may use the following market targeting strategies:

1. Undiferenciated Market- using this strategy, a firm may decide to ignor market segment differencies and go after the whole market with one market offer. It focuses on what is common in the needs of consumers and designes a product and a MK program that appeal to the most buyers. It relies on mass production, mass distribution and mass advertising. Undiferenciated MK provides post-economies. The norrow product line keeps down production, inventory and transportation cost.

But most modern marketers have strong doubts about this strategy because it is difficult to develop a product or brand that will satisfy all consumers. ex. chibrite, incalzire.

Product MK mix-----Market(whole market).

2. Diferenciated Market Strategy- using this strategy, the company decides to target several market segments and designes different offers for each segment. By offering product and MK variations it hopes for higher sales and a strong opportunity position within each market segment. Diferenciated MK- typically creates more total sales than undiferenciated MK, but it also increases the costs of doing business because modifing a product to meet different market segment requirements, usually involves higher research and development costs and developing different Mk plans for different segments requires higher promotion, distribution, planning and forecasting costs. ex. sampunul, produse lactate, paine.

The most profitable strategy, competitive advantage, very expensive.

Product1 ---- Segment1; Pr.2 --- segm.2; Pr.3 --- Segm.3.

3. Concetrated MK is a specially appealing when company s resources are limited. Instead of going after a small share of a large market, the company covers a large share of one or few sub-markets (niches). Through concentrated MK the company achieves a stronger market position in the segments it serves because of its greater knowledge of segment needs and the special reputation it aquires. The company enjoys many operating economies because of specialization in production, distribution and promotion. If the segment is chosen well, the firm can obtain a high rate of return on its investments. At the same time, concentrated Mk involves few risks:

1. The particular market segment can become too small;

2. Larger competitors may decide to enter the same segment.

For these reasons many companies prefer to diversify in several market segment. Ex. insulina, produse auditive.

Product MK Mix --- Subsegm Nr.1, Subsegm Nr.2, Subsegm Nr.3.

Choosing Market Targeting strategy, a company should consider the following factors:

1. The company s resources- when the company s resources are limited, concentrated MK is recomended.

2. Product variability- undiferenciated Mk is recomended for uniform goods such as vegetables, fruits or raw materials. Products that vary in designes, colours, features are more switted to differenciated MK.

3. The Products stage in the life cycle- when a firm introduces a new product, it is practical to launch only one version, so undiferenciated MK or concentrated MK make the most sense. In the maturity stage, diferenciated MK is recomended.

4. The market variability- if most buyers have the same tastes, buy the same amounts and react the same way to MK efforts- undiferenciated MK is appropiate. ( market is uniform).

5. Competitors MK strategy- when competitors use segmentation- undiferenciated MK can not be used, but when competitors are using undiferenciated MK, a firm may obtain some competitive advantages by using diferenciated or concetrated MK.

Market positioning

Once a company has decided which segments of the market it will enter it must decide what positions it wants to occupy in these segments. A product s position is the way the product is defined by consumers on important attributes. The market positioning refers to the place the product occupies in consumers minds in comparison with competing products. Consumers are over-loaded with information about products and services. A product position is the set of perceptions, impressions and feelings that consumers hold for the products. Marketers influence the product positioning when they plan their products competitive advantage and they develop MK mixes to create the planned positioning. A company may use the following positioning strategies:

1. It can position its products on specific product attributes, such as quality, performance, good price(low), safety.

2. Product can be position on the needs they feel or benefits they offer. ex. Wash and Go. the company do not specific anything about price.

3. Products can be position for special occasions. Ex. Christmas tree, wedding dress.

4. Products can be position for specific classes of users. Ex. aparate auditive, pampers, insulina.

5. Products can be position against a competitor (do not specific the name of competitor)

6. Products can be position away from competitors. Ex. Seven up against Coca-cola.