CHAPTER SEVENMarket Segmentation, Targeting and Positioning for Competitive Advantage

Procter and Gamble (P&G)Sells 8 different brands of laundry detergent, 5 different hand soap, 5 brands of shampoo, 4 brands of dishwashing detergent, 3 brands of tissues, 3 brands of floor cleaners, 2 brands of deodorant, 3 brands of cosmetics, 3 brands of skin care products, 2 brands of fabric softener and 2 brands of diapers. And thats in the United States alone.

They even have other in the international markets. For example, 16 different brands of detergent are in Asia, 19 in Europe, 19 in Middle East and 19 in Africa. These different brands in the market are competing with each other. But why would P&G introduce so many different categories of brands of the same type of product in the same area?

The answer is that different people want different benefits from the products they buy. Let us consider the shampoo, examples would be: straightening, softening, anti-dandruff, cooling, shine, anti-hairfall, keratin, smoothness, etc. Everyone wants some of every one of these benefits but we have different priorities of each benefit. To some, anti-dandruff and smoothness is important but prefers anti-hairfall and shine.

Examples of shampoo segments:

MARKETING SEGEMENTATIONDividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who might require separate products or marketing mixes.

MARKET TARGETINGThe process of evaluating each market segments attractiveness and selecting one or more segments to enter.

MARKETING POSITIONINGArranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

MARKET SEGMENTATION

Markets have buyers and they are different in more than one thing. They may differ in wants, resources, location, buying attitudes and buying practices. Companies can divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs.

Levels of Marketing Segmentation

Mass Marketing this was used by many companies in the past. Its the belief that one-fits-all. However, this is no longer acceptable in this age. With so many diversity and incredible changes in environment, it is highly impossible to provide one product that fits the market. Many companies are retreating from this part of marketing. Segment Marketing isolating broad segments that make up a market and adapting the marketing offer to match the needs of one or more segments. By using segment marketing, you can be more efficient in targeting the products and services, channels and communication and effective at matching the product, price and etc. to the needs of the consumer market and the company can face fewer competitors Niche Marketing focusing on subsegments or niches with distinct traits that may seek a special combination of benefits. (e.g. cars; luxury buyers, performance buyers, utility buyers and economy buyers). These are normally smaller than segments it is a more narrow approach from segment marketing and dividing the already divided segment into subsegment. Micromarketing the practice of tailoring products and marketing programs to the needs and wants of specific individuals and local customer groups. Local Marketing tailoring brands and products based on areas Individual Marketing tailoring products and marketing programs to the needs and preferences of individual customers.

SEGMENTING CUSTOMER MARKETSGeographicDemographicPsychographicBehavioral

Region (world/country)CountryCityDensityClimateAgeGenderFamily SizeFamily Life CycleIncomeOccupationEducationReligionRaceGenerationNationalitySocial ClassLifestylePersonalityOccasionsBenefitsUser statusUser ratesLoyalty statusReadiness StageAttitude at product

Geographic Segmentation dividing the market into different geographical units such as nations, states, regions, countries, cities or neighborhood Demographic Segmentation dividing the marketing into demographic variables like age, gender, family size, income, occupation, education, religion, race and nationality. Age and Life Cycle Segmentation Income Segmentation Gender Segmentation Psychographic Segmentation dividing the market into different groups based on social class, lifestyle or personality characteristics. Behavioral Segmentation dividing a market into groups based on consumer knowledge, attitude, use or response to the product. Occasion Segmentation how they got the idea to buy, when they buy and when the use the product Benefits Sought quality, service, economy, convenience, speed User Status nonuse, ex-user, prospect, first time, regular user User Rates light, medium and heavy Loyalty status none, medium, strong and absolute Readiness stage unaware, aware, informed, interested, desirous, intending to buy Attitude enthusiastic, positive, indifferent, negative, hostile

Some companies use more than one segment. E.g. Geodemographic segmentation

SEGMENTING BUSINESS MARKETS

Business buyers can also be segmented using all those types of segmenting levels mentioned above, however, they will require additional variables: Operating characteristics Purchasing approaches Situational factors Personal characteristics Customer Size Geographic location/s

International Segmentation forming segments of consumers who have similar needs and buying behavior even though they are located in another country Geographic Location Economic Factors Political/Legal Factors Cultural Factors

REQUIREMENTS FOR EFFECTIVE SEGMENTATION

1. Measurable size, purchasing power and profiles2. Accessible effectively reached and served3. Substantial large or profitable enough to serve.4. Differentiable conceptualized and respond differently on the marketing mix elements and programs.5. Actionable effective programs that can be designed for attracting and serving the segments

MARKET TARGETING

When you have your segment it will reveal what opportunities that can be seen in that segment. The firm will have to evaluate the various segments and decide how many and which ones to target. We look at how companies evaluate and select target segments.

EVALUATING TARGET SEGMENTS1. Must look first at three factors: segment size and growth, segment structural attractiveness and company objectives and resources.2. Must collect and analyze data on current segments sales, growth rates and expected profitability for various segments. Companies usually choose the right size and growth for the segment but it is not usually the case. The fastest growing and largest segment doesnt usually work out. Smaller companies dont have enough resources to give the needs of larger segments. Some companies choose smaller and less attractive segments but can be profitable for them.3. Must also examine the companies major structural factors that affect long term segment attractiveness Competitors (strong) Substitutes (many) Relative power of buyers (bargaining, force prices down, demand more services, set competitors at each other at the companies expense) Powerful suppliers (control prices, quality and quantity of products)

SELECTING MARKET SEGMENTS

Once there is a segment, the problem would be how many segments to serve.

TARGET MARKET A set of buyers sharing common needs or characteristics that the company decides to serve.

You can use three of the market coverage strategies: Differentiated Marketing, Undifferentiated marketing and concentrated marketing.

UNDIFFERENTIATED MARKETING A strategy where a firm decides to ignore the market segment differences and go after the whole market. Focusing on the common needs of the consumers and not on the differences It is also known as mass marketing Design a product and marketing tool that will appeal to a large number of buyers. Rely more on mass distribution and mass advertising

DIFFERENTIATED MARKETING A strategy where a firm decides to target several segments/niches and designs different and separate offers for each (e.g. Avon) Nike (shoes for the basketball, running, fencing, baseball, soccer and aerobics) You get total share with more brands of the same product. But can increase cost

CONCENTRATED MARKETING A strategy where a firm goes after a large share of one or a few submarkets. (e.g. Amazon) This is mostly used for smaller businesses Wal-Mart provides low prices to the small towns and rural areas. High rate of investment if successful.

CHOOSING A MARKET COVERAGE STRATEGY1. Company Resources2. Product Variability (steel undifferentiated, cameras & phones can be either differentiated or concentrated)3. Products Life Cycle4. Market Variability5. Competitors strategySOCIALLY RESPONSIBLE TARGET MARKETING

Smart targeting helps companies to be more efficient and effective by focusing on the segments that they can satisfy best and most profitability. Targeting helps consumers satisfying their needs Sometimes generate controversy and concern. Issues usually involved targeting vulnerable or disadvantaged consumers with controversial or potentially harmful products. Targeting the children (Toys, cereals) Adult products spilling over the children or younger market or conservative market intentionally or unintentionally. (R-rated movies and video games, cigarettes, beer and fast food) Controversial products towards Low income social classes or minorities. Product result to society The internet is the platform that shows companies who are abusing their ability to target Not all targeting that involves children and minorities and special segments that draw attention. Most of the companies provide positive and benefits to them. In market targeting it is not the who you are targeting but the how and for what Controversies usually arise when marketers attempt to profit at the expense of the targeted segments unfairly target vulnerable segments or target them with questionable products and services.POSITIONING FOR COMPETITIVE ADVANTAGE

PRODUCT POSITION the way the product is defined by the consumers on important attributes the place the product occupies in the consumers minds relative to competing products. (similar to Branding) Tide detergent that can bleach and whitens clothes Surf detergent that is targeted through families Ariel detergent that can remove dirt and stains on clothes without too much work or effort. Rejoice long and straight hair Creamsilk conditioner Head & Shoulder anti-dandruff shampoo Dove healthy hair Pantene anti-hairfall

Consumers are overloaded with information about products and services. They cant reevaluate products every time they make a buying decision. To simplify the buying process consumers organize them into categories in their minds position the products, services and companies in their heads.

Positioning is a very complex set of perception, impressions and feelings that consumers have for the product compared to competing products. They position it without the help of marketers but marketers have to plan position to give their products a better position in the consumers or the target market and then design the marketing mix and create planned positions.

CHOOSING A POSITION STRATEGY To some firms it is easy to choose their positioning strategy. But in many cases two or more companies will position in their products in the same position (Head & Shoulders and Clear) Each brand must differentiate each other when to go the same position to set them apart. Positioning takes three steps1. Identify possible competitive Advantage2. Choose the right competitive advantage3. Select overall positioning strategy

Identify Possible Competitive Advantage

COMPETITVE ADVANTAGE An advantage over competitors gained by offering consumers greater value, either by lowering prices or providing many benefits that justify the high price.

Winning and keeping customers is to understand their needs and buying processes than competitors do and deliver more value to the extent that a company can position itself as providing superior value to selected target markets.

It is not about empty promises its always about the delivery of the value of the products and services better than the competitors

You can differentiate your company through products, services, channels, people and image.

1. Product Differentiation some products may have little variation than others but can still be differentiated. You can differentiate the product through consistency, durability, reliability or reparability.2. Service Differentiation speed, convenient and careful delivery; installation and repair companies; customer training services and consulting services.3. Channel Differentiation channels coverage, expertise and performance. (e.g. Magnum)4. People Differentiation hiring and training people better than competitors (e.g. Disney, hotels and airlines)5. Image Differentiation the brand and image should convey to the products benefits and positioning. You cannot differentiate your company through just a few advertisements. (e.g. logo, symbols and colors)CHOOSING THE RIGHT COMPETITIVE ADVANTAGEIt is deciding how many differences to promote and which one.

1. HOW MANY DIFFERENCES TO PROMOTE? A lot of markets think that companies should give only one benefit to the target market. USP Unique Selling Proposition; for each brand and stick to it. You can see it on their tagline. Each brand should pick an attribute and tout itself as number one In out overcommunicated society, buyers tend to remember number one better. (e.g. Colgate is all about fighting cavities, while Some marketers are claiming more than one differentiated factor especially when there are more companies claiming to be number one.

Avoid the three (3) positioning errors: Underpositioning failing to position the company at all. Overpositioning giving the buyers too narrow picture of the company. Confused positioning leaving buyers confused on the brand or image.

2. WHICH DIFFERENCES TO PROMOTE? Not all brand differences are meaningful and worthwhile and not all difference makes a good differentiator. Each difference can give benefits to the consumer but can incur cost for the company. So it is very important to be very careful to choose which differentiating factor that can separate you from your competitors

The following are criteria when that differentiating factor is worth establishing to the extent that it satisfies: Important delivering high value benefit to the consumers Distinctive competitors do not offer the difference or the company can deliver a more distinct way. Superior the difference is that it is superior to others that customers can obtain and offer the same benefit. Communicable able to communicate and visible to the buyers Preemptive competitors cannot easily copy that difference Affordable buyers can afford to pay that difference Profitability the difference can give profit

Many companies introduced difference but failed on more than one test. Westin Hotel in Singapore claims to be the tallest hotel in the world but clients dont care about if you are the tallest. Crystal Pepsi made the customers unimpressed because they do not see clarity as a factor when choosing a soft drink.

Choosing a competitive advantage on the product and services are difficult but the choices can also be the companys success.

SELECTING AN OVERALL POSITIONING STRATEGY

VALUE PROPOSITION the full positioning of the brand the full mix of benefits upon which it is positioned.

Consumers typically choose products that give them the most value Markets wanted to position their brands on the key benefits that they offer relative to competing brands. It answers the question of Why should we buy your brand? Volvo for example, is all about safety but it also offers reliability, roominess and styling. The price may be higher but it seems fair for the mix of benefits.

The cells with the statements represent winning value propositions something the company can take competitive advantage. The center represent the marginal proposition while the rest of the cells represent losing value propositions.

MORE FOR MORE Providing upscale product and services and charging a higher price to cover the higher cost. Mercedez-Benz, Parker, Ritz Carlton Hotels use this. They each claim that they are superior in quality, craftsmanship, durability, performance and style and the charges match with the price. It is not focus on the high quality but also prestige of the buyer. It represents status and higher or loftier lifestyle. Most of the time consumers are delighted when a new company enters the market even though they are a high priced brand (e.g. Starbucks). They can be a little vulnerable like they might be copied by imitators who claim the same quality at a lower price. Luxury goods sell well during good times but worst during economic down times.MORE FOR SAME Its like giving a better quality at a lesser price. Like Lexus of Toyota. ($72k car can be sold for $36k) Providing better customer sales and services with a high repurchase rate.

SAME FOR LESS Can be a powerful proposition Everyone likes a good deal E.g. Amazon selling books at a lower price than the brick & mortar companies They dont claim to provide better or different products They offer many of the same brands at other stores at a lower price or higher discount

LESS FOR LESS There will always be companies who offer less quality at a lower price Not everyone of us can afford the best In some cases, consumers are willing to settle for less performance

MORE FOR LESS Better products at lower prices Usually for short term for this type is not fit to sustain for the long-run. E.g. Dell, Samsung, etc.

COMMUNICATING AND DELIVERING PERFORMANCE

Once there is a position, the company must take steps to deliver and communicate the desired position to target market, Marketing Mix must support the positioning strategy Concrete action not talk Usually it is easy to plan for a strategy than to implement it and it takes a long time. Once establish the company must maintain consistent performance and communication. Must closely monitor and adapt the position over time to match changes in consumer needs and competitors strategies. But the changes must not be sudden for this will confuse the customers. Its gradual in an ever-changing market.