Chapter: 6

Objectives Learn the three steps of target marketing,

market segmentation, target marketing, and market positioning

Understand the major bases for segmenting consumer

Know how companies identify attractive market segments and choose target marketing strategy

Realize how companies position their products for maximum competitive advantage in the marketplace

Marketing Process

Research Research customer and customer and

the market the market placeplace

Managing Managing marketing marketing

information information and customer and customer

datadata

Select Select customer to customer to

serve: market serve: market segmentation segmentation and targetingand targeting

Decide on Decide on value value

proposition: proposition: differentiation differentiation

and positioningand positioning

Product and Product and service design: service design:

building a building a strong brandstrong brand

Price Create Price Create real value real value

DistributionDistributionmanage manage

demand and demand and supply chain supply chain

Promotion Promotion Communicating Communicating

the value the value

Customer Customer relationship relationship

management: management: build strong build strong relationship relationship with chosen with chosen customerscustomers

Partner Partner relationship relationship

management : management : build a strong build a strong relationship relationship

with marketing with marketing partners partners

Create satisfied Create satisfied loyal customer loyal customer

Capture Capture customer life customer life time value time value

Increase share Increase share of market and of market and

share of share of customer customer

What Is A Market?

‘A market consist of all the potential customers sharing particular needs and

wants who might be willing to engage in exchange to satisfy their needs and

wants.’

Steps in market segmentation, targeting and positioning

Market Segmentation

“Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing

mixes.”

Segmentation

Why segment?

Identifies opportunities and needs.

Allows firm to focus on specific needs.

Improves marketing mix for each segment.

Allows small firm to exist.

Bases For Segmenting Consumer Markets

Bases For Segmenting Consumer Markets

Consumer Products Usage Category

Heavy Heavy users users

Medium Medium usersusers

LightLight users users

Benefits Of Segmentation To The Customer: The obvious gain to customers is that they can find products

that seem to fit more closely with what they want. To The Marketing Mix: Segmentation helps companies to better understand their

customers and to better allocate their resources. To The Competition:

Segmentation helps companies to position their product toward competitors’ products.

To The Economy Allows small firm to exist.

Requirements for Effective SegmentationTo be useful, market segments should be: Measurable: The size, purchasing power, and

characteristics of the segment can be measured. Substantial: The segments are large and profitable

enough to serve. Accessible: The segments can be effectively reached

and served. Differentiable: The segments are conceptually

distinguishable and respond differently to different marketing-mix programs.

Actionable: Effective programs can be formulated for attracting and serving the segments.

Target Marketing The segmentation reveals the firms segment opportunities.

The firm now has to evaluate the various segments and diced how many and which segment it can serve best.

We now look at how companies evaluate and select target segments

Target MarketConsists of a set of buyers who share

common needs or characteristics that the company decides to serve

Evaluating Market Segments Segment size and growth (according to

company ability) Segment structural attractiveness

● Level of competition● Substitute products● Power of buyers● Powerful suppliers

Company objectives and resources

Target Marketing strategies

Targeting broadly

Targeting narrowly

Selecting Target Market Segments Undifferentiated (mass) marketing The seller engages in the mass production, mass

distribution, and mass promotion of one product for all buyers.

Focuses on what is common in the needs of consumer rather then what is different

Henry Ford epitomised this marketing strategy when he offered the Model T-Ford “in any colours, as long as it is black.”

Selecting Target Market Segments Differentiated (segmented) marketing A firm decides to target several market segments

and design separate offers for each. Developing a stronger position within several

segments creates more total sales then undifferentiated marketing across all segments.

Differentiated marketing increases the cost of doing business.

Vodafone target several segments with different offers and services

Selecting Target Market Segments Concentrated (niche) marketing Niche marketing is especially appealing when company

resources are limited. Instead of going after small share of a large market, then

firms goes after a large share of smaller segments or niche.

A niche is a more narrowly defined group, typically a small market whose needs are not well served.

The customers in the niche have a distinct set of needs and they will pay a premium to the firm that best satisfies their needs.

Selecting Target Market Segments Micromarketing (local or individual)

● The practice of tailoring products and marketing programs to the need and wants of specific individuals and local customer groups – includes local marketing and individual marketing.

● Local marketing: Tailoring brands and promotions to the needs and wants

of local customer groups – cities, neighborhood, and even specific stores.

● Individual marketing: tailoring products and marketing programs to needs and

preferences of individual customers – also labeled “markets-of-one marketing”, “customized marketing”, “one-to-one marketing”, and “mass customization”

Selecting Target Market Segments Product specialization- the firm specializes in a particular product and

tailors it to different market segments.

Market specializationthe firm specializes in serving a particular market

segment and offers that segment an array of different products.

Selecting Target Market Segments

CompanyMarketing

MixMarket

Segment 1

Segment 2

Segment 3

Company Mix 1

Company Mix 2

Company Mix 3

Segment 1Segment 2Segment 3

CompanyMarketing

Mix

(mass marketing) Undifferentiated Marketing

(segmented marketing) Differentiated Marketing

(niche marketing) Concentrated Marketing

Buyer Preference Patterns

Homogeneous preferences: The figure shows a market where all the consumers

have roughly the same preference. The market shows no natural segments.

SWEETNESSSWEETNESS

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-no natural segments-no natural segments-all buyers have same -all buyers have same preferencepreference- Mass marketing is - Mass marketing is more suitable more suitable

Buyer Preference Patterns

Clustered preferences: The figure shows a market where with distinct

preference clusters, called natural market segments.

SWEETNESSSWEETNESS

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-natural segments-natural segments-increases as number of -increases as number of competitors increasescompetitors increases--segmented marketing is more proper

Buyer Preference Patterns

Diffused preferences: The figure shows a market where consumers preferences

are scattered throughout the space, indicating that consumers vary greatly in their preferences.

SWEETNESSSWEETNESS

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-no pattern (or poor -no pattern (or poor research)research)-take center position-take center position- - niche marketing is more appropriate

Choosing Target Market Strategy Considerations include:

Company resources○ Concentrated marketing makes the most since with

limited resources.The degree of product variability

○ Undifferentiated marketing more suited for uniform products

○ Differentiated marketing suited products that vary in design more.

Market variability○ If most buyers have the same tastes, and react the same

way to marketing effort undifferentiated marketing is appropriate.

Choosing Target Market Strategy Considerations include:

Product’s life-cycle stage○ New products with only one version,

undifferentiated marketing or concentrated marketing make the most sense

○ In the mature phase of the product life cycle differentiated marketing begin to make more sense.

Competitors’ marketing strategies○ When competitors use differentiated or

concentrated marketing undifferentiated marketing can be suicidal.

Product Life – Cycle D

olla

rsD

olla

rs

Time in yearsTime in yearsLossLoss

00

ProfitProfit

Sales VolumeSales Volume

INTRODUCTIONINTRODUCTION GROWTHGROWTH MATURITYMATURITY DECLINEDECLINE

Positioning

“The place the product occupies in consumers’ minds relative to competing products.”

Typically defined by consumers on the basis of important attributes.

Involves implanting the brand’s unique benefits and differentiation (the complex set of perceptions, impressions, services and the tangible product) in the customer’s mind.

“products are created in the factory, but brands are created in the mind”

Choosing a positioning strategy Each firm must differentiate its offer by building

a unique bundle of benefits that appeals to substantial group within the segment.

The positioning steps:

Identifying possible competitive advantage “competitive advantage is an advantage over competitors

gained by offering consumers greater value, either through lower price or by providing more benefits that justify higher price”

Marketers must think throw the customer’s entire experience with the company’s products or service

Differentiation can be based on Products Services Channels People Image

Choosing the right competitive advantage

How many differences to promote?Unique selling propositionSeveral benefits

Which differences to promote? Criteria include:ImportantDistinctiveSuperiorCommunicablePreemptiveAffordableProfitable

Selecting an overall positioning strategyThe full positioning of a brand - the full mix of

benefits upon which it is positioned, called the brand’s value proposition.value proposition.

It is the answer to the customer question

“why should I buy your brand”

Selecting an overall positioning strategy Possible value proposition

Be

nefit

s B

ene

fits

Price Price

Selecting an overall positioning strategy

More for More More for the Same More for Less The Same for Less Less for Much Less

Communicating the Positioning Companies must be certain to DELIVER

their value propositions.

Positions must be monitored and adapted over time.