MARK1012 - Lecture 5

MARK1012: Lecture 5: Razzaque

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Lecture objectives

1. Explain market segmentation, and identify various possible bases for segmenting markets.

2. Explain the requirements for effective segmentation: measurability, accessibility, substantiality, actionability.

3. Outline the process of evaluating market segments and t th d f l ti k t t

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suggest some methods for selecting market segments.

4. Illustrate the concept of positioning for competitive advantage by offering specific examples.

5. Discuss choosing and implementing a positioning strategy, and contrast positioning based on product, service, personnel and image differentiation.

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Some truths about ‘Markets’‘Markets’

All marketers – both B2C and B2B ‐ recognise that they cannot (i) appeal to all buyers in those markets, or (ii) appeal in the same way.

Buyers are too numerous, too widely scattered and t i d i th i d

Different companies vary

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Rather than trying to compete in an entire market, often against superior competitors, each company must identify the parts of the market that it can serve best.

too varied in their needs and buying practices.

p ywidely in their abilities to serve different segments

of the market.


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Designing a customer driven marketing strategy

SegmentationSegmentationDivide the total market into smaller segments

DifferentiationDifferentiationDifferentiate the market

offering to create superior customer value

Select customers to serve Decide on a value proposition

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TargetingTargetingSelect the segment or

segments to enter

PositioningPositioningPosition the market offering

in the minds of target customers

Create value Create value for targeted for targeted customers customers

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… the process of dividing the total market for a good or service into several smaller groups

Evaluates each segment’s attractiveness and selects one or more segments to enter

Segmenting Target Marketing

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groups

such that the members of each group are similar with respect to the factors that influence demand.

enter. A target market is a group of

customers ( people or organisations) for whom a seller designs a particular marketing mix.

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Segmentation is necessary because customers in a market have:

• Differences in buying h bit

Segmentation

Markets are segmented by:

• Intuition based on experience and judgment

• Mimicking competitors and earlier market entrants

Performing a structured

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habits

• Differences in the way the good or service is used

• Different motives for buying.

Copyright © 1997 by The McGraw-Hill Companies, Inc.

• Performing a structured analysis that includes—

– Identifying the current and potential wants that exist within a market

– Identifying the characteristics that distinguish segments

– Finally, determining who has each want.


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6. Develop Marketing Mix for Each Segment Market

Steps in Segmentation, Targeting, Positioning and DifferentiationSteps in Segmentation, Targeting, Positioning and Differentiation

ProductDifferentiation

7. Decide on a value proposition

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1. Identify Bases for Segmentation

2. Develop Profiles of Segments

3. Develop Measures of Attractiveness

4. Select Target Segment(s)

6. Develop Marketing Mix for Each Segment MarketPositioning

Market Market TargetingTargeting

Market Segmentation

5. Develop Positioning for Each Segment

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Geographic

• country,

• region

• population

Demographic

• Age and life cycle

• Gender

Psychographic

• Socio-economic

• Status• Values AIO

Bases for Segmenting Consumer MarketsBases for Segmenting Consumer Markets

Behavioural

• Purchase occasion

• Benefits sought

U h

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• population density

• population size,

• climate

• Income

• Education

• Occupation

• Religion

• Nationality

• Values - AIO• Personality

• User sought

• User rate

• Loyalty status

• Readiness stage• Attitude towards

product

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Colgate offers benefits to consumers

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Geo-demographic Segmentation

GeographicSegmentation Variables

(e.g., SE Asia, City, Kensington)

Geo‐demographicS t ti V i bl

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DemographicSegmentation Variables

(e.g., Male, Low Income, senior citizens)

Segmentation Variable(e.g., SE Asian Males; Low

income City dwellers; SE Asian Low Income earners; Senior Citizens of Kensington etc.)

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• Colour discrimination —Older people have difficulty distinguishing pastels and the green‐blue‐violet part of the colour spectrum. This have impact on packaging, brochures and displays.

• Glare —Glare in packaging, posters and floors in retail stores should be toned down or eliminated.

• Hearing —25% of people over 65 experience hearing loss; marketers

Why Use Age to Segment?Why Use Age to Segment?

Consider these bodily changes that accompany ageing:

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• Hearing 25% of people over 65 experience hearing loss; marketers using audio communicators should select spokespersons who have deeper tones.

• Taste sensitivity — By age 80, two‐third’s of our taste sensitivity is lost (most for sweet tastes, least for sour tastes). Marketers should consider odour amplification to enhance the palatability of foods and beverages.

• Touch — At age 65, a 5 degree change in temperature is needed to equal the sensitivity a 30‐year‐old would have for a 1degree change.

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• 1. Fashion Statements—most affluent and educated, use credit cards, expect to be treated well by retail personnel.

• 2. Wanna‐buys—similar to Fashion Statements but with less income.

A SEGMENTATION EXAMPLEA SEGMENTATION EXAMPLE

Female department store shoppers have been classified into 5 types, based on demographics, values and attitudes. The groups and their descriptive names are:

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yEnjoy buying on impulse.

• 3. Family Values—represent large families, often are professionals, buying focuses on children or the home.

• 4. Down to Basics—most likely to have children, not college educated, careful spenders, prefer not to use credit, like coupons.

• 5. Matriarchs—older, often retired, they like department stores but are risk averse and have few purchase plans.


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Identifying and Analysing Business Market Segments

• Demographic

Operating variables Bases

DemographicsPersonalCharacteristics

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• Operating variables

• Purchasing approaches

• Situational factors

• Personal characteristics

for SegmentingBases

for SegmentingBusinessMarkets

SituationalFactors

OperatingVariables

PurchasingApproaches

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SignodeSignode Corporation’s Four SegmentsCorporation’s Four Segments

Programmed Buyers. This group buys products as a routine purchase, pays full price, and accepts below average service. This segment is highly profitable.

Relationship Buyers. This group views Signode’s packaging as moderately important. They are knowledgeable about competitor’s offerings. They remain loyal if prices are competitive. Typically, they receive a small discount and a modest level of service

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discount and a modest level of service.

Transaction Buyers. This group sees Signode’s products as very important to their business. They are price and service sensitive. They receive above average service and a 10% discount. They will switch for a better price.

Bargain Hunters. This group sees Signode’s products as very important to their business and demand the deepest discount and highest level of service. They know their suppliers and bargain hard. Their large volume is needed but they are not very profitable.L

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Segmenting International Markets

Intermarket Geographic

Factorsfor

S ti

South AsiaMiddle EastAustralasia

NIE

Segmenting consumers with similar needs and buying behavior even though they are located in different geographical Locations.

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Political/Legal

Cultural Economic

SegmentingInternationalMarkets

NIEOECDECM

Politically volatile

Common LanguageReligionCustoms


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Requirements for effective segmentation

R i tActionable

The market segment can be effectively reached

Organization must be able to identify and

measure each segment

Marketers should be able to design

effective programs

Measurable

Actionable Accessible

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RequirementsFor effective segmentation

Should be large enough to be profitable

effectively reached and served

Organization must be able to distinguish the segment and respond to its needs differently

effective programs to serve the market

Differentiable Substantial

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Evaluating Market Evaluating Market Segments ISegments I

Size andGrowth

Segmentation reveals the market segment opportunities facing a firm.The firm has to evaluate the various segments and choose the ones to serve.

Select the segment with the ‘right size growth”.

[e.g., go for the Niche

Desirable size and growth does not ensure high profitability. Structural factors [competition, substitutes, power of

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Structural

Attractiveness

Company

Objectives and

Resources

g g fmarket] buyer/sellers] are important

Company must evaluate its own objectives, resources, constraints, strengths and weaknesses

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Evaluating Evaluating Market Market Segments IISegments II

• Segment size and growth

– collect and analyse data on current dollar sales, projected sales growth rates and expected profit margins for the various segments to select segments that have the right size and growth characteristics, but ‘right size growth’ is a relative matter. but ‘right size growth’ is a relative matter.

• Segment structural attractiveness

d i bl i d th t id tt ti

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– desirable size and growth may not provide attractive profitability. The company must examine several major structural factors that affect long‐run segment attractiveness.

• Marketing organisation objectives and resources

– positive size growth and structural attractiveness must match the company’s own objectives and resources in relation to that segment. Some attractive segments could be quickly dismissed Some attractive segments could be quickly dismissed because they do not mesh with the company’s longbecause they do not mesh with the company’s long‐‐run run objectives. objectives.


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Market Targeting Strategies I

Mass Marketing

SegmentedMarketing

Niche Marketing

Local orIndividual Marketing

After evaluating different segments, the company must decide which and how many segments it will target. A target market consists of a set of buyers who share common needs that the company decides to serve.

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Undifferentiated marketing

Differentiatedmarketing

Concentratedmarketing

Micro-marketing

Targeting Targeting broadly narrowly

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Market Targeting Strategies II

Segment 1

Segment 2

CompanyMarketing

Mix

CCompany Mix 1

CCompany Mix 2

Market

A. Undifferentiated Marketing

Ignore market segmentation; focuson what is common rather than what is different. Design a product and marketing program that appeals to largest number of buyers. Steel, Apples are examples.

Target several markets and design separate offer for each. Cater for every

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Segment 2

Segment 3

Segment 1

Segment 2

Segment 3

CompanyMarketing

Mix

CCompany Mix 2

CCompany Mix 3

B. Differentiated Marketing

C. Concentrated Marketing

p ff f f ypurse, price, and personality (Toyota).Examples : Coles Myer Supermarket, Bi‐lo, Myer stores

Go for large share of one or few sub‐markets rather than for small shares of many markets. DELL[PC], CRAY[Mainframe], APOLLO [Workstation]

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Choosing a Market‐Coverage Strategy

FactorsF t

CompanyResources

Competitors’Strategies

Limited resource?Go for concentrated

Uniform products?Buyers have the

Competitor uses segmentation?Cannot use undifferentiated.

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Decisions

FactorsAffectingStrategy

DecisionsMarket

VariabilityProduct

Variability

Stage inLife Cycle

Uniform products?Undifferentiated.Many products?Differentiated.

A new product introduced in the market?Go for undifferentiated or concentrated

Buyers have thesame taste?Go for undifferentiated


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Market Positioning of the Product

• After deciding which segment or segments) of the market to enter, the firm must decide which “position” it wants to occupy in those segments.– Positioning is customer perceptions of a product image or benefits customer perceptions of a product image or benefits versus competitions’ productsversus competitions’ products.

•• Product positionProduct position is the way the product is defined by is the way the product is defined by consumers on important attributesconsumers on important attributes

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consumers on important attributesconsumers on important attributes. – Drive is positioned as an all purpose family washing detergent; Softly as a washing detergent for delicate fabrics such as wool.

• Positioning is different from product differentiation.– Differentiated value is created by the ‘value proposition’ used by marketers for the segmented market.

– Value proposition refers to the features that differentiate a product from competitors’ offerings

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Choosing a Differentiation and Positioning Strategy

A three step processA three step process1. Identifying a set of differentiating competitive advantages upon

which to build a position

2. Identifying and choosing the right competitive advantages

3. Selecting an overall positioning strategy.

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Step 1: Step 1: Identifying a set of differentiating competitive advantages upon which to build a position– Can be done though perceptual mapping analysisperceptual mapping analysis.

– Perceptual map is a multidimensional map which identifies factors that

discriminate between brands.

– It is a useful tool for plotting moves over time by competitors as well as the

results of a firm’s own brand positioning strategy.

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Perceptual Mapping

A perceptual map is a graphic representation of how consumers in a market perceive a competing set of products relative to each other. It is a multidimensional map which identifies factors that discriminates between brands.

Based upon research using existing or prospective consumers, management determines those dimensions

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, gmost important to consumers in evaluating brands and how consumers see competitive products in terms of their performance on these dimensions.

Not only are perceptual maps valuable in determining consumer perceptions of existing products, they may offer insights to new product opportunities. Gaps in the perceptual space may suggest positions for new offerings in the market.


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Perceptual Mapping and Positioning DecisionsPerceptual Mapping and Positioning Decisions

Upscale, ClassyUpscale, Classy

••MercedesMercedes

••CadillacCadillac••LincolnLincoln

••PorschePorsche••VolvoVolvo

••SaabSaab••ChryslerChrysler••BuickBuick

••BMWBMW

••HondaHonda

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ConservativeConservative SportySporty

Practical, AffordablePractical, Affordable

••FordFord

••DodgeDodge

••ChevroletChevrolet

••ToyotaToyota CostCost--PerformancePerformance

GapGap

••NissanNissan

••PlymouthPlymouth

••HyundaiHyundai

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Brand position of department stores

High perceived quality and status

David Jones

Myer

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Extensive personalised service

Low perceived quality and status

Limited service

Less personal

y

Target

Kmart

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Step 2. Step 2. Identifying and choosing the right competitive advantage Identifying and choosing the right competitive advantage II

• Consumers typically choose products and services that give them the greatest value. Competitive advantage can be provided by

• Product differentiation– Highly standardised products (chicken, steel, aspirin) vs.

highly differentiated, such as motorcars, commercial

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g y d e e t ated, suc as oto ca s, co e c abuildings and furniture. Features, performance, style, design, consistency, durability, reliability and reparability are all areas of possible differentiation.

• Services differentiation– differentiate the services that accompany the product. Many

possibilities exist such as delivery, installation, repair and customer training services.


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Step 2. Step 2. Identifying and choosing the right competitive advantage Identifying and choosing the right competitive advantage IIII

• Personnel differentiation– By hiring and training better people than their competitors. Personnel differentiation requires a company to select its customer‐contact people carefully and train them well.

• Image differentiation– Work to establish images that differentiate them from competitors.

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g p

– A company or brand image should convey a singular and distinctive message that communicates the product’s major benefits and positioning.

– Symbols can provide strong company or brand recognition and image differentiation.

– A company can also create an image through the types of event it sponsors.

.

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Step 2. Step 2. Identifying and choosing the right competitive advantage Identifying and choosing the right competitive advantage IIIIII

• In general, a company needs to avoid three major positioning errors:

U d i i i f iliCriteriaProfitable DDistinctive

Important

How many differences to promote? Which differences to promote?

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– Underpositioning – failing to position the company at all.

– Overpositioning – giving buyers too narrow a picture of the company.

– Confused positioning –leaving buyers with a confused image of the company.

forDetermining

WhichDifferences

toPromote

AAffordable Superior

Profitable

PPre-emptive

DDistinctive

Commun-icable

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Which Differences to Promote?

• A difference is worth establishing to the extent it satisfies the following criteria:

– Important ‐ the difference delivers a highly valued benefit.

– Distinctive ‐ competitors do not offer the difference.

– Superior ‐ the difference is superior to other ways in which the customers may obtain the same benefit.

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y f

– Communicable ‐ the difference is communicable and visible to buyers.

– Pre‐emptive ‐ competitors cannot easily copy the difference.

– Affordable ‐ the buyers can afford the difference.

– Profitable ‐ the difference can be introduce the difference profitably.


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Various Possible Positioning Strategies

Away fromCompetitors

ProductAttributes

ProductClass

BenefitsOffered

CCHH

GG

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Against aCompetitor

UsageOccasions

Users

B

A

EEDD

FF

Source: Kotler Brown Adam Armstrong

Marketing 5th Ed Ó Copyright 2001 Pearson Education Australia

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Examples of Positioning Strategies

•• Position Position on specific product attributes [Hyundai Excel>>low price]

on the benefits offered [Colgate>>cavity prevention]

according to usage occasions [Sustagen>>replaces body fluids]

for certain classes of users [Mothercare>> baby products]

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[ y p ]

against a competitor [Tandy and Compaq vis-à-vis IBM]

away from competitors [7-up, the un-cola >>vs Coke and Pepsi]

for different product classes [Margarines vs butter; margarines vs cooking oil]

using combination strategies [J&J’s affinity Brand is a hair conditioner for women over 40 >> product class and user]

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Selecting an Overall Positioning Strategy

• ‘More for more’ positioning involves providing the most

• ‘The same for less’ – a powerful value proposition

The full position of a brand is termed the brand’s value proposition.

Company and brand positioning should be summed up in a Company and brand positioning should be summed up in a positioning statement.positioning statement.

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upscale product or service and charging a higher price for higher costs.

• ‘More for the same’‐companies can attack a competitor’s ‘more for more’ positioning by introducing a brand offering of comparable quality at a lower price.

offering good deals.

• ‘Less for much less’ –meets the demand for products that offer less and cost less.

• ‘More for less’ – a winning value proposition but may be impossible to maintain in the long run.


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Possible Value Propositions

More for more

More for the same

More for less

s

More

More

The Same LessPrice

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The same for less

Less for much less

Ben

efit

s

The Same

Less

Winning value propositions

Losing value propositions

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Developing a positioning statement Product

• Company and brand positioning should be summed up in a positioning statement of the form:

––To To (target segment and need) (target segment and need) our our (brand) (brand) is is (concept) (concept) that that (point of difference)(point of difference). .

• Example: ‘To busy mobile professionals who need to be

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• Example: To busy, mobile professionals who need to be always in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to data, people and resources while on the go, easily and reliably – more so than competing technologies.’

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Step 3: Design marketing program to communicate benefits and persuade customers.

• After selecting a position, the company must take strong steps to deliver and communicate the desired position to target customers.

• The marketing mix efforts must support the positioning strategy.

D i i th k ti i i l ki t th

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• Designing the marketing mix involves working out the tactical details of the positioning strategy.

• The position must be monitored and adapted over time to match changes in consumer needs and competitors’ strategies.

• The position should evolve gradually as it adapts to the ever changing marketing environment.


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The positioning statement

addresses three key questions:

1. Who is the target

customer?

Six Questions to Ask When Applying a Positioning Strategy

1. What is our present position in the prospect’s mind?

2. What position would we like to own?

3. Which companies pose greatest challenge against this position?

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2. Why should the

customer buy?

3. What are we selling?

challenge against this position?

4. Do we have enough financial support to gain and hold this position?

5. Do we have the courage to stick with one consistent positioning concept?

6. Does our creative approach (4Ps) match our chosen positioning strategy?

Documents

MARK1012 - Lecture 5