Segmenting and targeting marketsModule 3Chapter 4

Lecture Overviewwhat is market segmentation?why do marketing organisations segment the market for their product?market segmentation processsegmenting consumer marketspositioningsegmenting business markets

Milk?? what type of milk do you drink?do you drink more than one type?why do you drink the type/(s) of milk that you do?

The milk story Once upon a time . there was full-fat cream milk that was sold in one pint glass milk bottles with silver foil tops, one inch of cream sat on the top the milkman delivered the fresh milk to the door each morning and collected the empty bottlesbut kiddies thought it was yucky and would not drink it, so they developed flavoured milkbut flavoured milk and full cream milk was considered to be fattening, so many women would not drink it, so they developed low fat milk

Milk story cont..now there is a milk to meet the needs of just about everyone cream top/froth topextra creamylactose freehigh calciumgoats milkcheck out so everybody drank milk and lived happily every after

What is market segmentation?process of dividing a market into meaningful, relatively similar and identifiable segments or groups (Summers et al. 2005, p.111).market segmenta sub-group of people or organisations that share one or more characteristics that cause them to have similar product needs (Summers et al. 2005, p.111).

Why do firms segment the market?people have diverse needs, wants, buying behaviours & lifestylesone firm cannot satisfy everyones needsmarket segmentation allows:marketing organisations to define their customers needs and wants more precisely better estimation of market size and potentialdevelopment of more specific, focussed marketing objectivesbetter allocation of resourcesperformance can be better evaluated when marketing objectives are more precise

Why do firms segment the market? contfirms have different strengthsdifferent areas of competitive advantagefirm should focus on who they can serve bestsegmenting can be a more profitable strategy, if segments have unique needs and are prepared to pay for a differentiated offeringdanger of over-segmentation

Target marketing Marketing mixMarket segmentationSelect a market or product categoryChoose bases for segmenting the marketSelect segmentation descriptors (variables)Profile and analyse segments5. Select target markets6. Develop marketingmix for each target segmentSteps in market segmentation(Exhibit 4.2, p. 113)

Step 1: Select a market or product category for studycurrent market or existing product related, but new market or product totally new market or product

Product classConvenienceProduct categoryMilkBrandPauls goats milk

Step 2: Choose your bases for segmentationpsychographicbehaviouraldemographicgeographic

Geographic Segmentationregion or locationdefine the regionmarket size market densityclimatewhat types of goods are segmented by geographic bases?

Demographic Segmentationagegenderincomefamily life-cycleage, marital status, childrenrefer to Exhibit 4.3, p.116other demographic descriptorsoccupationeducationreligion, ethnicity, nationalityABS data

Psychographic Segmentationpersonalitytraits, attitudes, habitsrefer to Exhibit 4.4, p. 117 Porsche buyersmotivesrational (functional) or emotional (psychological)lifestyleactivities, opinions, interestsrefer to Exhibit 4.5, p. 118 and Exhibit 4.6, p. 119 value segmentsgeo-demographicsneighbourhood lifestyle categoriesMorgan target mapping

Behavioural basesbenefits soughtusage rateother behavioural descriptors

Benefits soughtwhat benefits are the market seeking?example: carstechnical excellence BMW the ultimate driving machinesafety and excitement Volvo Volvo for life.economy Daewooprestige Mercedesspeed Mazda - zoom-zoom

Usage rateusage rate lightmediumheavyuser statusregularnon-usersex-users

Other behavioural descriptorspurchase occasion loyalty statusbuyer readiness stageawareness, interest, liking, preference, conviction, purchaseattitude toward the productbrand loyalty

Vermont Teddy BearsExample a teddy for every occasion

Step 3: Selecting segmentation descriptors refer to table 2.1, study guidenot every descriptor (variable) is relevant for every productwhat descriptors (variables) actually create distinct and meaningful segments for this product category?high cost and time of over-segmentingConsumer Segmentation and Targeting - Nielsen Spectra refer to Exhibit 4.7, p.120 for segmentation of snack-food market.

Useful segmentationis the segment substantial?large enough to be profitablegrowing segmentis the segment identifiable and measurable?can we easily identify members and thus measure the size of the segment?can the purchasing power of the segment be estimated?

Useful segmentation cont.is the segment accessible?can the segment be reached with a specific marketing mix and through established media and marketing channels?is the segment responsive?will the segment respond differently than other segments to a specific marketing mix? are the needs of the segment unique enough to warrant the development of a different marketing mix?

Who are your main target markets?a target market isa group of people or organisations for which an organisation designs, implements and maintains a marketing mix intended to meet the needs of that group.. (Summers et al. 2005, p. 125).

Market coverage strategiesshould we mass-market (undifferentiated) or target market (differentiated)?if target marketing, then how many target markets should we select?what are the advantages and disadvantages of each strategy?refer to Exhibit 4.8, p. 125

Market coverage strategies

Undifferentiated targeting (mass marketing)Advantagesmass production, mass distribution and one promotional strategy yield economies of scalelower costslower pricesDisadvantagessterile, unimaginative product offering that does not really meet anyones needssusceptible to competitors who differentiate

Concentrated targetingAdvantagesfocus on specific needs of niche marketallows small organisations to compete effectively in niche marketsstrong position in an attractive market segmente.g. Rolls RoyceDisadvantagesrisky strategy narrow focusall eggs in one basketstereotyping prevents growth into other segments

Multi-segment targeting(target marketing)Advantagesaccess more marketsclosely meet the needs of each marketgreater satisfaction leads to loyaltycan be very profitable if done welle.g. FostersDisadvantagesdeveloping multiple marketing mixes is costlycost of over-segmentationproduct proliferation and cannibalisation

Positioningposition isthe place a product occupies in consumers minds relative to competing offerings (Summers et al. 2005, p. 129).positioning involvesdeveloping a specific marketing mix to influence a potential customers overall perception of a brand, product line or organisation.. (Summers et al. 2005, p.129).bases of differentiationrepositioningperceptual mapping

My perceptual map for chocolateHigh qualityLow priceLow qualityI thinkHigh priceGeneric brand

Positioning strategies may be based on

Positioning Strategiesproduct attributes or benefitsVolvo Volvo for lifeprice/qualityLindt Chocolate connoisseur qualityapplication or usebaking soda cooking, cleaning, bathingproduct classcork flooring product userVegemite folate for pregnant ladiesCompetitorAvis we try hardercultural symbolsi.e. Louie the Fly

In this lecture, we coveredwhy marketing organisations segment their marketmarket segmentationbases for segmenting the consumer marketvarious descriptors for each basefour characteristics of useful segmentsthree targeting strategiesundifferentiated, multi-segment, concentratedpositioningpositioning strategies

Steps in Segmentation, Targeting, and PositioningMarket Segmentation. Market segmentation is the process of dividing a market into distinct groups of buyers who might require separate products or marketing mixes. All buyers have unique needs and wants. Still it is usually possible in consumer markets to identify relatively homogeneous portions or segments of the total market according to shared preferences, attitudes, or behaviours that distinguish them from the rest of the market. These segments may require different products and/or separate mixes.Market Targeting. Market targeting is the process of evaluating each market segment's attractiveness and selecting one or more segments to enter. Given effective market segmentation, the firm must choose which markets to serve and how to serve them. Discussion Note: In targeting markets to serve the firm must consider its resources and objectives in setting strategy. Market Positioning. Market positioning he process of formulating competitive positioning for a product and a detailed marketing mix. Marketers must plan how to present the product to the consumer. Discussion Note: The product's position is defined by how consumers view it on important attributes. Steps in Segmentation, Targeting, and PositioningThis CTR corresponds to Figure 9-1 on p. 297 and relates to the material on pp. 297-299.Market Coverage StrategiesThis CTR corresponds to Figure 9-5 on p. 313 relates to the discussion on pp. 313-315Market Coverage StrategiesUndifferentiated Marketing. This strategy uses the same marketing mix for the entire market. This strategy focuses on the common needs of the market rather than differences in it. Undifferentiated marketing provides economies of scale on product costs but may be limited in application.Differentiated Marketing. This strategy targets several market segments and designs separate marketing mixes for each of them. Product and marketing variation also helps company image and may produce loyalty in consumers as they change segments.Concentrated Marketing. This strategy commits a company to pursue a large share of one or more submarkets. Economies and segment knowledge and service are strengths of this approach but risk due to smaller market size is greater.Product PositioningThis CTR relates to the material on pp. 315-324.Market Positioning StrategiesA product's position is the way the product is defined by consumers on important attributes. More directly, product position is the place the product occupies in the consumers minds relative to competing products. Discussion Note: Students may need prompting to realise that marketers dont control the products position, consumers do. The strategies discussed below represent the inputs marketers make to influence how the consumer ultimately determine the products position.A product's position can be based on a number of variables including:Product Attributes. This positions the product on unique or distinguishing features it possesses such as a low price, unique technology, versatility or other features.Benefits Offered. Positioning can be based upon the specific value provided.Usage Occasions. The product usage associated can with special occasions or values ("Andre for the Holidays")Users. A product can be positioned to its most important users (Miller Beer's heavy user positioning, "Tastes Great Less Filling")Against a Competitor. This strategy is appropriate for substitutes that cost less.Away from Competitors. This positions the product as unique in some respect and/or worth it.Product Class. The company may vary positioning as needed in relation to one or more competitors.