MGT252F L0301 Week3: Segmentation, Targeting, and Positioning1 Week3 Market Segmentation, Target Market Selection, and Product Positioning

MGT252F L0301 Week3: Segmentation, Targeting, and Positioning

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Week3

Market Segmentation,Target Market Selection,and Product Positioning


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Topic 4

Market Segmentation


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Marketing management and STP

Develop Marketing Objectives

Marketing Mix

Market Segmentation, Target Market Selection, and Product Positioning

Situational Analysis

Market Segmentation

Target Market Selection

Product Positioning


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Steps in market segmentation, targeting, and positioning

Market Segmentation1. Identify bases for market segmentation2. Develop profiles of resulting segments

Target market selection3. Develop measures of segment attractiveness4. Select the target segment(s)

Product positioning5. Develop positioning for each target segment6. Develop marketing mix for each target market


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Heterogeneity of market: A motivation for market segmentation

The total market (consumers) for most products is too heterogeneous to be considered a single, uniform entity

Consumers are heterogeneous in their needs, preferences, perceptions, and behaviors

It’s getting more and more difficult for a firm to satisfy all customers

Answer: market segmentation


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Definition: Market segmentation

Market segmentation is the process of dividing the total heterogeneous market for a product or service into several segments, each of which tend to be homogeneous


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Bases for Market Segmentation

Geographic Region, city size, density, climate

Demographic Age, gender, family size, family life cycle, income,

occupation, education, religion, ethnic group

Psychographic personality, lifestyle

Behavior usage rate, benefit desired


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Requirement for Effective Segmentation Bases

The basis for segmentation be measurable with accessible data size, purchasing power, and profiles

The segments themselves be accessible to existing marketing institutions

The segments be large enough to be profitable


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Seg. Bases: GeographicDividing market into different

geographical units such as nations, provinces, regions, counties, cities, or neighborhoods.

(e.g.) National Post vs Toronto StarMeasurable and AccessibleGeodemographic clustering

clustering postal code areas into similar groups


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Seg. Bases: Geographic

Geodemographic clustering examplePostal code group: H3RLocation: MontrealPopulation: 8.868 (3,659 households)Average income (hh): $90,900Family structure: mainly 1 or 2 children per familyConsumption Profile (compared to national average)

More total spendingMore spending on recreation, housing, insurance, educationLess spending on tobacco and lotteries


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Segmentation Bases: Demographic(1)

Dividing market on the basis of demographic variables such as age, family size, family life cycle, gender, income, occupation, education, religion, or ethnic origin

Most widely usedMeasurable and accessible


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Ageyouth market (aged 5 to 13)teenage (13 to 20)young adult (20 to 35)early middle age (35 to 50) ... Baby boomersmiddle age (50 to 65)older age (65 and over)

Example: McDonaldHappy meal : for youth marketBig Mac : teenagers and young adultsArch Deluxe : adults


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Gender Traditionally used in clothing,

cosmetics, and magazine Traditional buying patterns are

increasingly breaking down Recently gender segmentation is widely

adopted in many industries


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Example: segmentation by gender


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Family Life Cycle Six traditional family life cycle stages

+ Three alternative (non traditional) stages Change of demand by family life cycle

Bachelor: basic kitchen equipmentNewly married: durable furnitureFull nest 1: baby foodFull nest 2: educationEmpty nest: luxuriesOlder single: medical care


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Income Spending patterns vary by income Traditionally used in automobiles,

clothing, and travel Ethnic origin

English, French, other immigrantsOther demographic bases such as

occupation, education, and religion


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Segmentation Bases: Psychographic(1)

Types Personality

Not effective basis for segmentation

Life Styleconsumers tend to buy products and services

that are consistent with their lifestyleLifestyle = f(activities, interests, opinions)

less measurable and less accessible than demographic segmentation


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Example: Segmentation by lifestyle


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Segmentation Bases: Behavior(1)

Segmentation based on how consumers interact with the product

Two types of behavioral segmentation bases Benefit desired Usage rate


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Benefit Desired Highly related to the purchase behavior Haley’s (1968) toothpaste exampleBenefitt Segment Demographic Behavior Psychographic

Favored brands

Economy (low price) Men Heavy Users Value oriented

Brands on sale

Medical (decay prevention) Large families Heavy Users Conservertive CrestCosmetic (white teeth)

Teens, young adults Smokers Active

Aqua-Fresh

Taste (good tasting) Children

Separment lovers Hedonistic Colgate


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Usage Rate Dividing market into nonusers, light

users, medium users, and heavy users Heavy users usually account for 80 - 90

% of total sales Heavy and light users

0% 20% 40% 60% 80% 100%

Soaps and Detergents

Toilet tissue

Shampoo

Cola

Beer

Bourbon

Heavy-user half Light-user half


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“There are so many segmentation bases, so which one should I use?”

Select segmentation basis that most appropriate for your product

When there are two or more appropriate and applicable bases, combine them (e.g.) active young male consumers

Check whether your basis is measurable, accessible, and profitable


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Topic 5

Target Market Selection


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How to Select Target Markets

The target markets should be compatible with the organization’s goals and image

Match between target market opportunity and the company’s resource

Attractiveness of segments low competition segment size and growth rate


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Target Marketing

Based on the market aggregation level, a company’s target marketing can be one of followings Market aggregation (=mass marketing,

undifferentiated marketing) Multiple-segment targeting

(=differentiated marketing) Single-segment targeting (=concentrated

marketing)


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Market Aggregation(=undifferentiated marketing)

Single Marketing Mix

One mass, undifferentiated

market

A company ignores segment difference

A product and a marketing program appealing to the whole market

(e.g.) CokeFocusing on the

common customer need


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Multiple segment targeting(=Differentiated marketing)

Marketing Mix A

Marketing Mix B

Marketing Mix C

Market Segment A

Market Segment B

Market Segment C

A company targets several market segments with different marketing mix for each

Product differentiation is necessary

Examples Nike shoes for different

sports Automobile companies


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Example: Multiple segment targeting


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Single-Segment Targeting(=concentrated marketing)

Single Marketing Mix

Market Segment A

Market Segment B

Market Segment C

A company focuses on one or a few segments

When a company’s resources are limited

(e.g.) Jaguar Niche Marketing

When a company focus a small segment that is not served by other competitors

(e.g.) a magazine for gay


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Topic 6

Product Positioning


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Positioning: Overview

Definition: A strategy to create a particular brand image in consumers’ minds

Examples : Store positioning Wal-mart: Everyday low

price, convenient shopping Holt Renfrew: luxurious,

prestigious, expensive

Segmentation

Positioning

Targeting

4 p’s


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Positioning: Overview

Positioning Strategy should consider: the characteristics of

the target segments brand’s strength competition

Positioning is implemented by 4p’s (product, price, place, and promotion)

Segmentation

Positioning

Targeting

4 p’s


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Positioning Strategies

POSITIONING BY ATTRIBUTES

POSITIONING BY BENEFIT POSITIONING BY USAGE

SITUATION POSITIONING BY USERS POSITIONING BY

COMPETITORS POSITIONING BY

PRODUCT CLASS


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PRODUCT CLASS

Positioning one’s product on specific product attributes


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PRODUCT CLASS


Examples Hyundai Accent:

low Price BMW: performance

-- “ultimate driving machine”


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Examples Hyundai: Price BMW: performance

-- “ultimate driving machine”

Volvo: Safety


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PRODUCT CLASS

Positioning one’s product on specific benefit the product delivers

Examples Crest: cavity

prevention Aim: good taste


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Example: positioning by benefit


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SITUAITON POSITIONING BY USERS POSITIONING BY


PRODUCT CLASS

Positioning one’s product for a certain usage situation

Examples NyQuil : Nighttime

cold medicine


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PRODUCT CLASS

Positioning one’s product for a certain class of users

Examples Johnson & Johnson

baby shampoo positioned for

BabiesAdults who are seeking

for a mild shampoo


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PRODUCT CLASS

Positioning one’s product either against competitors or away from competitors

Examples Margarine (Against

competitors): “It tastes so good that I can’t

tell the difference”I can’t believe it’s not butter

Butter (Away from competitors): “Only butter is butter”


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competitors): “It tastes so good that I can’t tell

the difference”I can’t believe it’s not butter



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PRODUCT CLASS



competitors): “It tastes so good that I can’t

tell the difference”I can’t believe it’s not butter



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PRODUCT CLASS

Positioning one’s product for different product class

Examples Arms & Hammer

baking soda to refrigerator deodorizer and cat litter deodorizer


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Positioning Map: Overview

Positioning maps visualize the positioning of brands on important dimensions

Positioning maps can be used for Identifying brand perception Identifying competition and market

opportunity Developing product strategy for new or

existing brands


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Positioning maps are usually derived from similarity judgment among brands

Analyze the similarity data using MDS (multi-dimensional scaling) method

Positioning Map: Input and Analysis (MDS)

Ford Taurus

Mercury Sable

Lincoln Continen.

Ford Escort

Cadillac Eldorado Jaguar XJ Mazda 626

Dodge Intrepid

Ford Taurus 7 24 8 23 17 2 5Mercury Sable 18 15 17 9 6 4Lincoln Cont. 27 1 10 21 20Ford Escort 26 25 14 12Cadillac Eld. 11 22 19Jaguar XJ 13 16Mazda 626 3Dodge Intrepid


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Positioning Map: Interpretation

Positioning map informs marketers how people perceive each product on important dimensions

The map requires the interpretation of axes X: luxuriousness Y: sportiness

Positioning Map

Jaguar

Lincoln Cont.

Cadillac

Mercury Sable

Dodge Intrepid

Mazda 626

Ford Taurus

Ford Escort

Low Luxurious

High Luxurious

Low Sporty

High Sporty


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Each brand is perceived on luxuriousness-sportiness dimensions (e.g.) Cadillac is

perceived as highly luxurious and moderately sporty

Positioning Map

Jaguar

Lincoln Cont.

Cadillac

Mercury Sable

Dodge Intrepid

Mazda 626

Ford Taurus

Ford Escort

Low Luxurious

High Luxurious

Low Sporty

High Sporty


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Each brand is perceived on luxuriousness-sportiness dimensions (e.g.) Cadillac is perceived

as high luxurious and low sporty

Clusters of brands indicate high competition among them (e.g.) 626, Sable, Taurus,

and Intrepid

Positioning Map

Jaguar

Lincoln Cont.

Cadillac

Mercury Sable

Dodge Intrepid

Mazda 626

Ford Taurus

Ford Escort

Low Luxurious

High Luxurious

Low Sporty

High Sporty


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Niches can be identified in the map (e.g.) Jaguar

Positioning Map

Jaguar

Lincoln Cont.

Cadillac

Mercury Sable

Dodge Intrepid

Mazda 626

Ford Taurus

Ford Escort

Low Luxurious

High Luxurious

Low Sporty

High Sporty


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Niches can be identified in the map (e.g.) Jaguar

The map can also show ideal points of each segment

Positioning Map

Jaguar

Lincoln Cont.

Cadillac

Mercury Sable

Dodge Intrepid

Mazda 626

Ford Taurus

Ford Escort

Low Luxurious

High Luxurious

Low Sporty

High Sporty

S1

S3

S2


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Positioning Map: Marketing Implications

The map provides market opportunity for new products Market gap Ideal point

Positioning Map

Jaguar

Lincoln Cont.

Cadillac

Mercury Sable

Dodge Intrepid

Mazda 626

Ford Taurus

Ford Escort

Low Luxurious

High Luxurious

Low Sporty

High Sporty

S1

S3

S2


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Positioning Map: Marketing Implications

The map provides market opportunity for new products Market gap Ideal point

The map also helps repositioning existing brands (e.g.) Ford Escort

Positioning Map

Jaguar

Lincoln Cont.

Cadillac

Mercury Sable

Dodge Intrepid

Mazda 626

Ford Taurus

Ford Escort

Low Luxurious

High Luxurious

Low Sporty

High Sporty

S1

S3

S2


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“How to draw a positioning map for your group project”

1. Select most important dimensions(e.g.) cell phone: weight and price

2. Ask people about how they evaluate each brands on the important dimensions

3. Draw a map based on the responses

Documents

MGT252F L0301 Week3: Segmentation, Targeting, and Positioning1 Week3 Market Segmentation, Target Market Selection, and Product Positioning